The following Statement was made in the House of Commons on 17 December 2020.
“Today I have written to all local authorities in England thanking their councillors, officers and employees for their exceptional service this year. From carers to teachers to social workers to refuse collectors to council officers, as well as the elected members, they have worked tirelessly over the course of this pandemic to keep us safe, to provide support to the most vulnerable, to assist local businesses and to deliver public services under immense pressure. I think I speak for the whole House in saying a sincere thank you and in wishing them and their families a happy and peaceful Christmas.
From the start of the pandemic, we committed to ensuring that councils had the resources they needed to step up and support their communities. We have provided councils with more than £7.2 billion of additional funding for Covid-19 expenditure. We have ensured that councils receive support to manage associated losses in income, including from sales, fees, charges, leisure centres and local taxes, and that is expected to amount to further billions of pounds of support. That commitment remains undimmed, and the settlement we are announcing today ensures that councils have the resources they need to continue that work next year, to play their part in the recovery of their communities and to deliver first-class public services.
As we look ahead to 2021 and 2022, the annual settlement makes an extra £2.2 billion available to fund the provision of critical public services, including adult and children’s social care. Within that, we are giving authorities access to an additional £1 billion for adult and children’s social care, made up of £300 million of social care grant and the flexibility of a 3% adult social care precept. On average, English councils will see a 4.5% cash-terms increase in core spending power, which is also an increase in real terms. That is testament to the support that our local government deserves, and it comes off the back of three settlements in a row that have increased funding in real terms.
The £1 billion grant announced at last year’s spending review will continue, along with all other existing social care funding. Balancing the contributions of national and local taxpayers, we are giving councils increased flexibility through a 2% council tax referendum limit, with an extra 3% for social care authorities. Councils will, of course, want to take into account the financial circumstances of their residents and to protect households from excessive increases in bills. It is incumbent on councils to balance these competing pressures and reach the right decision for their local areas.
To help councils continue reducing council tax for those least able to pay, including households hit hard financially by the pandemic, I am making £670 million of new grant funding available outside the core settlement for local council tax support. Lower-tier councils, including districts, will benefit from a new one-off £111 million lower-tier services grant, and we are providing certainty and stability by confirming that the main funding allocations for the full range of council services will rise in line with inflation.
Our settlement also addresses the extra costs incurred by councils in rural areas, providing an extra £4 million to the rural services delivery grant—the highest contribution to date, at £85 million. We are also proposing a further £622 million of new homes bonus allocations. We will invite views on how we can reform the scheme next year to ensure that it is focused where homes are needed the most and where councils are ambitious to get on and deliver them.
Despite the arrival of vaccines, we will continue to live with Covid-19 for some months. That is why, alongside the core settlement, I am announcing comprehensive measures, including £1.55 billion of additional, un-ring-fenced grant funding for Covid expenditure. Our measures insure against funding shortfalls, and I am particularly pleased to confirm today the scope of and approach to our very well received scheme to reimburse councils for 75% of irrecoverable lost tax income from 2020-21.
As the cold weather sets in, the protection of those sleeping rough amid the pandemic continues to be one of my priorities. Our world-leading Everyone In initiative was and remains a powerful testament to what local and central government can achieve together. We are building on that work to ensure that as few of the 29,000 people who were helped off the streets under that scheme, and subsequently, return to life on the streets, spending over £750 million next year to tackle homelessness and rough sleeping—a 60% increase on the previous year spending review. In addition, we are providing £165 million of new funding to councils for the troubled families programme, underlining our continued commitment to the most vulnerable in society. Following the passage of the Domestic Abuse Bill, we will provide £125 million funding next year to enable councils to meet their duties in full to provide the support that victims of domestic abuse and their children undoubtedly deserve.
Serious challenges remain, but the start of the vaccine rollout last week offers us cause for optimism and allows us to at least begin to glimpse the world beyond the pandemic. We want to work with local councils to build a new country beyond Covid—a country that is more prosperous, greener, safer and more neighbourly. Local government will be integral to the achievement of that shared vision. We will establish a new £4 billion levelling-up fund, building on the success of our £3.6 billion towns and high streets funds. Any local area will be eligible to apply directly to this fund, which will finance the everyday infrastructure, town centre regeneration and culture that communities need and local people want. The UK shared prosperity fund will help to level up and create opportunity across the UK. A UK-wide investment framework for that will be published by my department early next year.
The Government are funding vital local infrastructure, with total capital spending at £100 billion. That will fund once-in-a-generation changes to local communities and deliver the highest sustained levels of public sector net investment since the 1970s, including the biggest hospital building programme in living memory, and £2.2 billion investment in our schools funding programme to rebuild 500 schools over the next decade. In addition, local councils will benefit from £1.7 billion for local roads maintenance and upgrades to tackle potholes, which will improve local connectivity and deliver better roads for our communities.
I want local government to emerge stronger, more sustainable and better able to meet the needs of those it serves. That means greater openness and accountability, and in a minority of cases it means better financial management and regard for taxpayers’ money. To that end, my department is publishing today its response to Sir Tony Redmond’s excellent review of the effectiveness of external audit and transparency. We will provide councils with an additional £15 million next year to implement Sir Tony’s recommendations. We are preserving the ability of local authorities to invest in programmes to power growth by lowering Public Works Loan Board interest rates, but we must also protect taxpayers from unwise risky investments of the kind we have seen, sadly, in some councils in recent years. Those practices must now end.
When there is a clearer path ahead, we will work with the sector and Members across the House to seek a new consensus for broader reforms to local government, including the fair funding review and the business rates reset, and we will ensure that councils are set on a long-term trajectory of sustainable growth and fair resources.
This will, I hope, be viewed as a significant settlement that paves the way for a bright future for our local communities as they seek to bounce back from an exceptionally difficult year. The settlement will deliver £2.2 billion of extra funding, a 4.5% cash and real-terms increase in core spending power, and it will further fund councils to ensure that they steer the course of the remaining months of the Covid-19 pandemic with certainty and confidence. Building on last year’s settlement, which exceptionally received cross-party support, it puts councils, which were at the forefront of our response to the pandemic, at the forefront of our recovery, and I commend this Statement to the House.”
My Lords, first I draw the attention of the House to my relevant registered interest as a vice-president of the Local Government Association. Secondly, I place on record my thanks to the whole of local government, including elected mayors, councillors, officers and all staff, for the fantastic job that they have done in the most difficult of circumstances over the past year.
When our communities have been most in need, local authorities and their staff have stepped up and delivered in every field—teachers, social workers, care staff, refuse collectors and all the others doing the important jobs that must be delivered. However, this is a disappointing Statement from the Government. It will lead to job losses and cuts to key front-line services, such as adult social care, which will cause great hardship to people and communities. On top of that, the Government are proposing that councils raise additional revenue through a 5% rise in the council tax, taking money from hard-pressed people who are already struggling.
Council tax is a regressive tax. It hits people and families on lower-than-average incomes much harder than people on higher incomes. In our most deprived areas, people on lower incomes will, as a result of this Statement, see the bills that they pay rise and the services they rely on cut. “Pay more, get less for your money” seems to be the by-line of the Government—not a great deal in my opinion.
So can the noble Lord tell the House what plans the Government have to support local authorities during the year as we seek to get out of the nightmare of the pandemic? It is very likely that Covid costs will outstrip even the revenue that can be raised from the council tax increase.
What plans do the Government have to support hard-pressed families? Is the noble Lord talking to the Treasury to ensure that support packages are available after March this year? Can he say something about the support that will be available for councils to help families who find themselves homeless? Does he think that the funding system for local government is fair and fit for purpose? If he does not, what action is he taking to change it? If he does think it is fair, can he please justify that?
I draw the attention of the House to my interests as a member of Kirklees Council and as a vice-president of the Local Government Association.
This annual announcement of the funding package for vital local government services is never given the attention it merits. In the last year, it has become ever more apparent how dependent our communities are on the services provided by local councils. In March, it was local councils that ensured that nearly all rough sleepers were placed in accommodation. Contact tracing by local council officers has been over 90% successful, as compared with the approximately 60% success rate for the private sector, which has had vast resources to do the task. It is local councils that have encouraged and enabled hundreds of thousands of local volunteers to support their communities by befriending the lonely, and that have provided food and meals for families on the breadline and have continued to provide essential services, carried out by unsung heroes—the key workers in waste collection, social care and children’s services, to name just three.
The Public Services Committee of your Lordships’ House has reported that, in the nation’s efforts to combat the pandemic, it was locally delivered services, provided by local councils and the voluntary sector, that were able to rise effectively to the challenge and respond to new demands in very different circumstances. On behalf of Liberal Democrats in this House, I express thanks for the amazing effort and leadership of councillors and council staff across the country.
That is the context of this funding settlement. It is, then, disappointing to read that those sterling efforts are not to be rewarded by the provision of funding that will enable councils to provide the additional services that their communities will need in the months and years ahead. For example, all predictions are that there will be a considerable rise in unemployment and business closures.
My Lords, unfortunately I do not have the ability to declare an interest in local government as a vice-president of the Local Government Association, despite 16 years as a local councillor, six years as council leader in the London Borough of Hammersmith and Fulham, and four years in City Hall as Deputy Mayor for Policing and Crime, but that gives me the ability to talk with some confidence about why I think this settlement by the Government is particularly generous at this time.
Even when you unpack the numbers, as has been done by the noble Lord, Lord Kennedy, and the noble Baroness, Lady Pinnock, the reality is that there is a headline increase in core spending power of 4.5% but we see not a single reduction in grant income. Indeed, in some areas the grant income has increased considerably. Of course, if local town halls want to maximise their core spending power, they have a choice in how much they increase council tax. This coming financial year is not disproportionately different from the previous one in assuming increases of 2% in council tax and 3% for adult social care, as compared with 2% in the previous financial year, but, as a balancing item, that is a choice for council leaders and their Cabinets up and down the country to take, with, in some cases, elections looming. They have a choice in how much they increase council tax for their residents.
The Government have honoured their commitment to support local government through the pandemic. I too pay tribute to the amazing work of people in our town halls, providing services on the front line at a particularly difficult time. I commend them, and I agree with both previous speakers that they have played a phenomenal role in this pandemic. Long may that continue. As we have heard, the Government join both the noble Lord and the noble Baroness in supporting the work of people throughout the country delivering local services to their local communities.
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At the start of the pandemic, the Government said that they would provide local authorities with all the support they needed. Sadly, however, I do not think that many in local government would say that that is the case at the start of 2021—that promise has not come to fruition.
Another huge issue for local authorities is the costs associated with people who have no recourse to public funds. How does the noble Lord intend to address that with this settlement? On a more general note, does he see the practical sense, particularly in these extraordinary times, of providing a multi-year settlement for local government? It would seem to be worth considering and would certainly help local government with its long-term financial planning.
The funding settlement has a top-line figure of an increase in spending of 4.5% in what is described as “core spending power”. However, this is predicated on councils increasing council tax by the maximum amount permitted by the Government before triggering a local referendum. Unpacking this top-line increase reveals that 85% of the increase in funding comes from council tax payers—hard-pressed council tax payers. There will be a 2% council tax increase and, on top of that, a 3% increase in the social care precept, resulting in an expectation by the Government that council tax payers must pay an additional 5% this coming year.
Since the social care precept was first introduced by this Government, it has resulted in council tax payers being required to pay 15% more, over and above the 2% maximum allowed. For an average band D council tax payer, the extra imposed by this could mean a further £260 each year. Do the Government intend to pile the pressure on council tax payers every year via this social care precept? Can the Minister let the House know when proposals for social care funding reform will be published?
It is welcome that the Government have recognised the cost pressures on councils as a result of Covid. Those cost pressures come in the form of lost income for, for example, leisure services teams, but there are additional costs in tackling the pandemic. Unfortunately, the Government appear to be willing to fund only 75% of the losses, which simply puts even greater pressure on service delivery at a time when this is needed as never before. The consequences are, as the noble Lord, Lord Kennedy, has just said, inevitable job losses in local government and a reduction in vital services at a time when they are needed as never before.
If the Government’s levelling-up agenda is to be meaningful, it has to include enabling local government to extend its services—for instance, in the regeneration of local economies and improving skills to open up better-paid opportunities for local people. Can the Minister give any assurances to the House that the Government’s thinking on the levelling-up agenda includes a substantial and properly funded role for local government?
Of course, fundamental reform of local government funding and business rates is the basis of a secure future for local government when the role of public services, locally determined and delivered, has been never clearer. Therefore, can the Minister tell the House when the fair funding reform for local government is to be published and determined, and when business rates reform is to be tackled? I look forward to his answers to those questions.
So far the Government have provided—I am sorry to hesitate, but I am not seeing too well at the moment—£6.2 billion in support specifically to meet the pressures of the pandemic. Sorry, I got that figure wrong; it is £7.2 billion. I can add an extra billion for you: there has been £7.2 billion in support through the pandemic. As mentioned in the other place, the estimate of what local councils have spent is £4.4 billion. My maths is not terribly good, but that is less than the £7.2 billion given to councils. Frankly, that is putting our arms round town halls and supporting them through those inevitable pressures during a pandemic.
It is estimated, rightly, by local government itself, that that expenditure will increase and hit £6.2 billion. But again, within this settlement is £1.55 billion for Covid-related pressures. That shows a tremendous commitment from the Government, and tremendous work by my right honourable friend Robert Jenrick in negotiating with the Treasury for a great settlement for local government, and one that honours the support needed for our town halls.
It is fair to say that we face tough times. The economy has contracted, and people may be unable to pay their council tax. I can declare an interest as a council tax payer, and as a director of a business that pays business rates. Yes, businesses are struggling, and people are struggling to pay their bills. But covering 75p in the pound, without knowing the downside, is a pretty good deal from the Treasury, rather than the way in which the noble Baroness, Lady Pinnock, described it.
There is the same commitment to ending rough sleeping, and a 60% increase in funding. There is also the same commitment to people with no recourse to public funds. The derogation for London has been widened to the rest of the country, which is commendable. We have also told local town hall leaders that they have the discretion to support people without recourse to public funds who are not EEA nationals, as they see fit. That is the leadership we need to see in our town halls.
I agree with the noble Lord, Lord Kennedy, and the noble Baroness, Lady Pinnock, that we need to think about council tax, and about balancing council tax and grants. I will say more about that later, because I want to save some of my ammunition for speakers to come.