Oral answer (Lords) on Local Government - Nov 27

To ask Her Majesty’s Government what steps they are taking to ensure that the planned local government fair funding allocation will provide local authorities with the resources needed to provide sufficient and effective local services.

My Lords, I am pleased to say that we are making good progress on the development of a funding formula that aims to provide a simple, transparent and accurate link between local authority relative needs and resources and available funding. The new funding formula will sit alongside the conclusions of the planned spending review, which will settle how much money is available to local authorities.

I thank the Minister for his response. I hope he is aware—I am sure he is—that the Institute for Fiscal Studies reports that, in the last eight years, real-terms spending on council services has fallen on average by 24% per person and in more deprived communities by up to 35% per person. Simply dividing this shrunken pot in a different way will fail to address the real and serious problem of the underfunding of local services. Will fair funding ensure that the total available is significantly higher than it is now?

My Lords, the noble Baroness makes a persuasive point, but as I have just indicated, these are two separate things that are sitting alongside each other. The fair funding formula will be looking at redressing some of the imbalances that exist at the moment in a relative sense, but alongside that of course is the spending review next year, which, hopefully, will be doing some of the things that the noble Baroness and I—and, indeed, many others—would want it to do.

My Lords, as the Minister knows, this is an incredibly complex area in which there is great misunderstanding. I have an enormous amount of time for the Minister. Perhaps he would explain to the House how there is going to be a fair distribution formula when the whole system from 2020 depends on local council tax and revenue raising locally and the distribution of the business rate, which falls where it falls?

I thank the noble Lord for those comments. The formula that we are looking at is in essence about redistribution. It is in three separate phases. The first is to look at the relative needs of different areas. The consultation on that has concluded and we will be publishing its results when the second phase of the consultation, looking at relative resources, starts in December. The third stage, which will be in late spring or summer next year, will look at allocations and transitional arrangements. The noble Lord is right that the situation has its complexities; there is a simplicity about the aims, but the difficulty will be in their delivery. As I say, though, that sits alongside looking at resources and the spending review that will go alongside it, so those are two separate matters. The business rate retention scheme, at 75%, will also kick in when the fair funding formula comes in, in April 2020.

Does the Minister agree that with £15 billion of reductions for local government by 2020, the local government sector has done more than its fair share of ensuring that the burden that the country has carried since the previous Government were in power has been met, that that equates to 60p in the pound in central government funding and that a fair funding review must make sure that no council is worse off than it currently is?

My noble friend always, understandably, makes a powerful case for local authorities. He will be aware that in the Budget we added money for adult and children’s social care. As I said, the fair funding formula is not about adding to the pot—that will, I hope, be done in the spending review next year.

My Lords, we are all aware that many councils, in particular county councils, are facing serious financial problems. Within the UK, we now have devolved Administrations, combined authorities, metro mayors and city deals, all with varying tax-raising powers offering different degrees of fiscal autonomy. Does the Minister agree that the two-tier system is now the Cinderella of local government, and is it not time for the Government seriously to consider offering all councils similar powers before it is too late?

Where I agree with the noble Baroness is that the system is already quite complex. Although she referred to the devolved Administrations, these particular issues will not affect Wales or Scotland—not directly anyway—nor, indeed, Northern Ireland; they are just about England. She has a point about the need for simplicity, and that runs through the review. It is aiming to be simple and transparent. That is why we are taking our time on it and why we are doing it in this way. As I said, noble Lords and others will see the results of the first stage of that consultation when we publish it next month.

My Lords, does the Minister recognise the fundamental flaw in his argument? He says that the fair funding review will not bring any new funds and he could not assure the noble Lord, Lord Porter, that no council would lose money. If some will get increased funding and there is no new money in the pot, others will lose money. Local authorities have had a £16 billion cut in their funding, while costs have risen. How much longer can the Government keep shoving costs and responsibilities on to local authorities while not paying for them?

My Lords, as always, the noble Baroness makes a powerful point, but it is not a point on the Question. The Question is about the fair funding formula, which is about relativity, not increased spending. That is the point I was keen to make. There are issues about increased spending, but not from the fair funding formula; they are for the spending review. I also pointed out that in the Budget there were increases in spending for local authorities on adult and children’s social care. That is a fact and there is no denying it.

My Lords, I make the case on behalf of sparsely populated rural counties, such as Lincolnshire. The truth is that rural counties have never been fully funded because the sparsity factor has not fully been taken into account.

My Lords, my noble friend makes a powerful point for an area that he knows well. Sparsity and population density are very much centre stage in the fair funding review and will be taken full account of.

My Lords, an important public service that has been and continues to be cut is public health. Directors of public health tell me that they can spend money extremely cost-effectively. Are the Government doing any research into the public health interventions carried out by local authorities, to let everybody know what works?

My Lords, I can give the noble Baroness the assurance that the public health grant is to be incorporated into local spending by virtue of business rate retention. We are proceeding rather slowly on this because we are keen to ensure that the assurance arrangements are fully recognised to cover the points she makes.