Gareth Thomas
MP for Harrow West · Labour (Co-op) · United Kingdom
“Local councils such as Harrow need to invest more in youth facilities that divert young people away from crime. Some of the CCTV projects in my constituency that Harrow council has turned down—in Wealdstone, south Harrow and central Harrow—should get funding.”
“I congratulate my hon. Friend the Member for Pendle and Clitheroe (Jonathan Hinder) on securing the debate and on the way in which he approached the subject. I join him and my hon.”
“I also want to suggest that the Metropolitan police does not get recognition across the whole of the UK for its hugely important work in tackling national and international crime, and that perhaps more recognition of that is required in the funding formula.”
“In particular, in Harrow, we recently saw enforcement teams contracted out to an organisation called Kingdom. The responsibility for that contract was with Harrow council. There was widespread criticism of the way some of the staff employed by Kingdom tried to levy fines on a number of young people in south Harrow, in my constituency.”
“One way we can further support the Metropolitan police is by allowing it to keep more of the proceeds from successful operations, such as recovering stolen funds hidden in bitcoin assets. I congratulate my hon.”
“Mayor of London Sadiq Khan has done a huge amount to try to redirect funding from other parts of his budget to minimise the impact of that cut.”
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“Let us not go down that route. As I understand it, the hon. Members for Taunton Deane and for Somerton and Frome share a local care authority, Somerset County Council, which has cut social care spending by 6.2% in real terms. Northamptonshire County Council, which I believe the hon. Member for Northampton South knows well, has cut social care spending by 10.3% in real terms. Thurrock unitary authority, which serves the hon. Member for Thurrock and her constituents, has cut social care spending by 5.8%—a real-terms cut of 13.6%. Of course, I do not want to leave out the hon. Member for Torbay. I understand that Torbay unitary authority plans to spend some £37.5 million on social care in this financial year, compared with £45.9 million in 2010-11—an 18.2% cut, or 25% in real terms.”
“I gently remind the hon. Member for Torbay that one of the areas of spending that we were very clear about was local government. We said that there would be a £30 billion extra spend for local authorities.”
“The hon. Gentleman can go and look at the evidence: it is called the Labour party manifesto 2015. It brings back sad memories when I look at it, but perhaps it will help to correct him and guide him in making future interventions.”
“I have considerable sympathy with my hon. Friend’s point. The new Prime Minister has taken up so much of our manifesto that one hopes she might want to take up that commitment as well. Certainly, that might help to deliver one other part of the long-term solution to the social care crisis, which I think everyone apart from Communities and Local Government Ministers thinks is necessary.”
“Surrey County Council’s leader, David Hodge, an experienced figure in local government, has revealed that he will call for a referendum on a proposed 15% increase in council tax. My hon. Friend the Member for Oldham West and Royton, who has significant recent experience of local government, tells me that Mr Hodge is an extremely effective and astute leader and an imaginative figure in local government.”
“My hon. Friend makes a good point. He and the rest of the Committee should look at the very particular situation facing Surrey County Council. We have heard that every councillor in Cornwall and in South Northamptonshire is an enthusiastic supporter of the current distribution of finance and of these proposals. As I hope Conservative Members recognise, however, not every Conservative-run council shares that enthusiasm for the way in which local government funding is managed. Many have serious concerns. It is important for us to consider the evidence from those councils as well as from the South Northamptonshires and Cornwalls, in the context of whether the social care crisis will continue beyond 2020 under the Bill.”
“My hon. Friend underlines my point. Mr Hodge is a figure we cannot ignore in the context of this Committee’s work. Surrey County Council covers one of those otherwise great areas of the country that sadly lacks a Labour MP. [ Interruption. ] I did not expect to be heckled on that point. I can hear the objections from Government Members.”
“A long and fascinating speech—I think you missed out some words, Mr Gapes. Returning to Mr Hodge, 11 Conservative MPs represent Surrey, including the Chancellor, the Health Secretary, the Transport Secretary and the former Justice Secretary, the right hon. Member for Surrey Heath (Michael Gove).”
“The hon. Member for Thurrock was not willing to allow the right hon. Member for Wokingham (John Redwood) to sit on this Committee, which is a tragedy because he might have been able to comment on the terrible case in January in which an elderly woman with communication difficulties was left severely malnourished in a care home that Wokingham Borough Council had put her in. A local charity, Independent Age, which commented on the case, recognised that the council faced significant problems with social care because of a lack of money and staff. That further example underlines the case for amendment 2. I hope that the Committee accepts the amendment. Ordered, That the debate be now adjourned .—(Jackie Doyle- Price .)”
“It stated: “We confirm that due to severe problems in social care, Surrey’s figures are exactly as their finance officers say.” Social care costs are rising by £24 million year. One MP in Surrey will support the 15% rise, but not all Surrey MPs share that one MP’s view. It would be good to hear the Minister’s advice to Surrey County Council and the people of Surrey on whether to vote for the increase. The fact that the council’s leader, who has considerable experience and is from the Government’s party, is underlining the scale of the social care crisis ought to make the Committee think very carefully about the case for amendment 2 and for supporting using some business rates income exclusively for social care as part of the long-term solution to social care funding. Sadly, there are other examples that highlight the scale of the problem.”
“Surrey people have the right to know and I’m not going to lie.” He says he will spell out what the options are ahead of the referendum and, if he does not get permission from Surrey residents for a council tax rise, what that extra £60 million forgone will mean. He says he will have to take an axe to services unless people vote for the 15% rise. Mr Hodge is not the sort to raise the alarm unnecessarily. He has seen active service, having been in the Army for a long time. One respects his contribution, both before he became leader of Surrey and now. He has taken the arguably sensible measure of getting in the Chartered Institute of Public Finance and Accountancy to verify the figures.”
“Perhaps I foresaw the hon. Gentleman’s first intervention in this Committee. I took the liberty of quoting him earlier and paid tribute—sort of—to him for raising the issue of redistribution, which is central to the debate on this group of amendments. The one thing missing from his intervention today and his interventions on Second Reading was any recognition of needs; those in North Yorkshire are clearly different from those in Harrow, but perhaps that is a debate to be had elsewhere. Coming back to Surrey County Council, Mr Hodge explained why he was moving to a referendum. He believes that he has a duty to local people. He said: “We cut £450m already” from the county council budget, and “squeezed every efficiency and we can do no more. I am sick and tired of politicians not telling the truth.”
“In the consultation we conducted on the additional items that local government will take on, there was a question about whether the improved better care fund would be funded through the retention of business rates. That is not yet decided. It is something that we are still considering in connection with the consultation that we began last year and are due to make a response on shortly.”
“Q You will have seen overnight the concerns of the Local Government Association about the future funding of social care. Do you envisage that social care will be better funded or worse funded as a result of 100% retention of business rates by local authorities? Mr Jones: I have been quite clear all along, during the preparation of the Bill and on Second Reading, that it delivers a framework to allow local authorities to retain the business rate. In doing that, we have been extremely clear that this is a fiscally neutral exercise and that new responsibilities will therefore be brought forward for local government as a quid pro quo for the additional £12.5 billion of business rate income to which local authorities do not at the moment have access.”
“That was a very interesting answer, but it did not go anywhere close to answering what was a fairly simple question. I will ask it again to help the Minister, who may not have had a coffee or a glass of water to get him fully up to speed. Will social care be better or worse funded as a result of the measures in the Bill?”
“Q It was an interesting answer. I would be very grateful for an answer to the actual question I asked. Mr Jones: The quantum of funding for adult social care is not part of the provisions of the Bill. My Department, along with other Departments in government, continually looks at the challenges and pressures around adult social care and the future sustainability of the system. I am therefore not sure that the Chairman will be keen for me to elaborate further on items that do not relate to the detail of the Bill.”
“We are also doing further work in relation to the fair funding review, which will certainly take into account the pressures of adult social care. We will be bringing forward that work, further consultation and a response to the initial consultation alongside work that is ongoing in relation to the Bill.”
“Q The deletion of the revenue support grant, which funds social care among other things, is one of the key aspects of the Bill. I gently ask again: does the Minister expect social care to be better funded as a result of the abolition of the revenue support grant and the 100% devolution of business rates, or not? Mr Jones: Indeed, you are right, the revenue support grant will be rolled in to the quantum of the funding and the business rates retention. But I would also point out that the Bill puts in place a framework for the retention of business rates by local authorities. It does not go into the detail of what additional responsibilities local government will take on as a result of the additional funding. That is being brought forward alongside this through further work.”
“Q How do you envisage the tariff and top-up system that you intend to retain differing under 100% business rates retention from the current system under 50% business rates retention? Mr Jones: The tariff and top-up system will very much be used to deal with things like redistribution, as I am sure you are aware, Mr Thomas.”
“Q I understand how it will be used; I am asking how it will be different. Mr Jones: The point you make is not actually a direct point in relation to—”
“If you look at how the additional funding for care at the moment has been distributed, we have two lots of clear criteria and one set of criteria that nobody can find out about. In terms of the improved better care fund, the criteria take into account the ability of local authorities to generate funding locally. The social care grant, which is £240 million, is allocated on a different formula, which does not take account of the ability to raise funding locally. Then there is transitional funding, which is in part a reflection of the additional costs of providing care, and nobody knows what the formula for distributing that is because it has not been disclosed to Parliament or to the Information Commissioner.”
“Councillor Jon Collins: In terms of the effectiveness of redistribution of business rates as a way of funding local government, as Nick says that is very much going to rest on the redistribution formula on the one hand, but also on the way that the headroom generated by 100% business-rate retention is dealt with and the additional responsibilities that local government may or may not get to spend that effectively. Until we are clear about those two things, it is very difficult to make a judgment on whether the move to 100% business-rate retention is going to be fair and whether it will effectively better fund care. The nature of the funding formula, whether it relates to care or to the totality of how local government funding is passed through to local authorities, is very much the key.”
“One of the things that people say across the whole range of local government is that over time, because of the way that formulas have worked and settlements have been made, there has been a distancing of assessed need from funding. It would seem sensible to start with a baseline assessment. On the point about whether social care would be better funded through this system, one of the challenges is getting right a system that is based entirely on local property taxes, but where eligibility for social care is determined through national criteria. There is a potential for the funding system not to accurately match needs, which is why, again, having some kind of national assessment of baseline needs would be a good place to start as we work through the detail of how that would operate.”
“Q Two of the concerns about the Bill that have been raised with me relate to how redistribution might work—fairly or unfairly—when 100% of business rates are retained by local government, and whether responsibilities such as social care will be better funded under the new system than they are under the current system. I wonder whether you both might reflect on those two concerns. Councillor Nick Forbes: The issue with redistribution is of concern to everyone across local government, because although collectively we sign up to the principle of localisation of business rates, we are concerned that the redistribution mechanism must be seen as fair by everyone. It would seem sensible to start with an assessment of current needs so that there is at least a level of clarity around the existing requirements to fund services in the system.”
“As you can see, the overall picture for an authority such as Nottingham—we are very typical of the core cities—is that this year’s approach helps a little bit, but that there is still massive pressure that is unfunded, and we expect the same next year. That is with an assumption that we will be increasing council tax by 5% overall.”
“If I may, I will just give you Nottingham as an example. Out of a net budget of about £260-odd million, something like £90 million is adult care. We have £11.2 million-worth of cost pressures, and that is wages, demography, additional inflation and charges from providers. The potential increase to council tax of 3% and the extra care funding we are to receive is about £5.8 million. So £5.6 million is unfunded pressures, which we will have to accommodate by making savings elsewhere in our budget, at a time when we are also seeing our revenue support grant going down from £56 million to £44 million.”
“The LGA’s assessment is that there is a £2.6 billion shortfall in funding: £1.3 billion is required to stabilise the current system as it is at the moment and a further £1.3 billion is required by the end of the Parliament to deal with the cost pressures and demographic pressures that the system faces. It is very clear from the whole of local government—this is a cross-party view from within the LGA—that funding the social care problem is our top priority. So far, what we have had is something that gets us a few months further ahead but does not solve the problem into the long term. Councillor Jon Collins: From the Core Cities’ point of view, every core city would take the view that funding for social care is very much in crisis and that the current arrangements just scratch the surface.”
“Q To follow on from that, there are clearly some in Whitehall who think that social care is now being properly funded and there is a package in place that will meet all the social care needs that have been identified. How would your two organisations respond to the idea that there is now a settled funding stream in place? Councillor Nick Forbes: I do not know a single person in DCLG and I have not spoken to a single person in Whitehall who thinks that what we have for social care is anything other than a short-term temporary fix, which gets us through a few difficult months over this particular winter. There is clear acknowledgement—even the Secretary of State acknowledged this in the settlement—that there needs to be a longer-term solution for funding for social care.”
“Councillor Jon Collins: If devolution was an option for everybody, if there was a fair and transparent process for making bids for devolution deals, if there was a very clear understanding of the rules of the game, and if people chose not to go down that route, I think there would be an argument for making that differentiation. In the current climate, in which much of that is opaque and where there are no clear rules of engagement around devolution and the prospect of moving towards combined authorities and directly elected Mayors, it would seem very unfair.”
“Q Is it fair that, under the Bill, only areas with a Mayor are going to be allowed to raise business rates up to a cap of 2p in the pound? Councillor Nick Forbes: The LGA position is that we would welcome a conversation with the Government about how we can get maximum flexibility out of the system. The challenge is that areas that do not opt for an elected Mayor will, by default, lose out in terms of infrastructure investment. It would make sense for there to be some kind of system from which, through various routes, everybody feels that they can benefit.”
“Graham Soulsby: Without going over the same ground as colleagues, I would agree that one of the big things in the new system is the needs-based review and linking it to the fairer funding formula. That is a key thing in getting it right. If we move to a better position in how that works, it should give authorities a bit more power and flexibility. Obviously, the funding pot does not necessarily change, but it is about how that is distributed. I would make the additional point that it is not just about the allocation of funding to do different things. It is also about how we can promote more prevention-based spending—moving it around and spending more at the earlier end of where the pressures are, which is cheaper than spending it at the end when the costs are a lot more.”
“What has happened is that bit by bit we have moved away from that and there is a lot of unfairness in the system, both between types of councils and due to historical accidents that have exaggerated difference. The biggest danger we see—and this is obviously a Labour councillor speaking for a network that is overwhelmingly Conservative—is that we will not get what we want, which is something that fairly reflects the responsibilities that we have. We accept that there will be winners and losers, but we want a fair system that is moving away from the inequalities that have built up in the system. If the system is simply based on the existing spending patterns, that reinforces the unfairness. We need to get away completely from that.”
“Fundamentally, we are looking for a fair, transparent needs-based review that is based on the cost drivers in each area. From our point of view, the bulk of our spending is now on adult social care and we clearly need to get that properly reflected in any needs-based review of funding. The equalisation mechanism needs to go back to the theory of local government finance that I remember when I first got involved 40 years ago, which was that wherever you lived in England and Wales, the funding that was available at a fixed rate, as it was in those days, enabled the council to deliver a certain level of service. Councils may be bad or good, efficient or inefficient, and may have different priorities, such as low rates, high spending levels or high service levels. That is fundamental.”
“At the moment, we operate within a very centralised system where a number of individual policy issues are addressed through specific grant regimes, such as the improved better care fund. We would argue that that produces considerable perverse incentives and distortions, and that we would be better able to respond to the pressures in issues such as adult social care, which your previous witnesses talked about, if we were given the flexibility to raise and spend money in ways that are controlled locally. Councillor David Borrow: From a County Councils Network point of view, I think we need to take one step back. Clearly, if councillors are going to be dependent on council tax and business rates, the key issue is the equalisation mechanism. That feeds back to something that is not in this Bill: the needs-based review.”
“Q The consultation document, which Ministers put out last year with a view to this legislation coming forward, very strongly hinted that the improved better care fund, the public health grant and the rural services delivery grant, among other pots of money, would be abolished as part of the package for devolving business rates. What impact do you think that will have on the groups of councils that you represent? Guy Ware: I think the overall issue will be the degree to which local authorities—in my case, London boroughs and the Greater London Authority—are able to promote growth to increase the overall amount of money available and to flexibly spend the product of it.”
“There needs to be flexibility in how much incentive there is and in how much business rate increase you can keep for a longer period to get real economic growth.”
“If a reset comes up in a five-year period, we have argued that we need to be really careful about how that works, because there could be a disincentive to economic growth as you move towards that reset. If you did it in year four of the five-year period, you would not keep much of the additional income that comes through because it would all get redistributed. We have tried to argue that for that to work properly, there needs to be some retention of incentive in the medium term so that if you want to use some of the additional business rate income, you can go out to the market and perhaps get infrastructure funding to promote some bigger schemes, but you would have to pay it back over a longer period of time.”
“The other side of that is making sure we get the incentive side of it right. Those are the two key things in terms of how the Bill might operate. The incentive side will be key in whether the changes actually promote more economic growth at local government level. From an incentive perspective, if local authorities and their communities can keep more of the additional money that comes from business growth, there is probably more of an incentive to promote economic growth. There is an issue that we have tried to flag up through the various working groups that we have been sitting on, which have been very good, through the Department for Communities and Local Government.”
“Secondly, if the Government are looking to give further responsibilities as a result of transferring 100% business rates, the LGA has clearly identified lots of areas currently delivered by Government that promote economic growth, and it seems logical and sensible for those responsibilities to be transferred to local government where they fit in with the policy of developing economic growth at the local level. Thirdly, in many rural areas a lot of businesses are exempt from business rates as a result of the systems to promote business, and the mechanism affects the income that the council gets. You can promote small businesses, but it is different in rural areas and in more urban areas. Graham Soulsby: The last answer I gave was about making sure we get the needs-based assessment right.”
“Councillor David Borrow: Given that the County Councils Network represents large rural areas and small towns, the issue around elected Mayors causes a lot of problems because elected Mayors are a prerequisite for being able to have greater control over business rates, including increased business rates to put infrastructure in. That is a real problem in shire counties. Conservative Members here know the debates they have had on that issue. The County Councils Network wants that power to be given to combined authorities without it requiring an elected mayor.”
“For example, on the use of the infrastructure supplements, there is a broad definition of what they can be spent on, which is anything that will promote economic development, but unfortunately, two clauses later, there are specific exclusions, the first of which is housing. If you ask businesses in London, as we have repeatedly, what the biggest barrier is to continued and sustainable growth in London, they will say the lack of housing. So we want to see the Bill go further to free up local government to use some of the products of business rates in ways that are more suitable to their particular economies.”
“We think the greater local powers over these issues would enable the capital to respond better to the threats that we currently face, particularly the uncertainty arising from Brexit and also, less topically, the threat to the sustainability of growth within the capital, which to some extent is a victim of its own success. The ability to house and transport people to keep working in London is a huge challenge. There are specific clauses in the Bill that we think would help that—for example the infrastructure supplement and designated areas—but there are others where we think it is unhelpful.”
“Another is simply the frequency with which the system will take away the growth that is delivered by any activity in a given area. There is no straightforward answer to that. The new system has to address both the needs issues that my colleagues have mentioned and also, because it is the explicit intention of the Bill, a way of retaining a significant financial incentive while recognising those needs issues. What are the barriers to growth? That is a very big question that it is perhaps beyond the scope of the Bill to resolve. From a London perspective, we have been very clear what we need.”
“Q The Minister painted a picture of 100% business rates retention leading to a new dawn of councils rushing out to encourage huge amounts of new economic growth. I wonder if that is a picture that you recognise. If not, what barriers to that economic growth can you think of? I ask that in the context of a rural area where the space for the type of warehouse facilities that you could imagine generating significant business rates will be much more limited. Guy Ware: I think that “new dawn” is an interesting phrase. There are clearly incentives built into this. In our submissions to the consultation at the end of September, we identified a number of issues that prevent those incentives working clearly. One of those, as we heard about a moment ago, is the appeals impact.”
“With something like public health, if the funding for it is reduced, that would put more pressure on adult social care and on the NHS in the longer term, however useful that may be in reducing budgets in the short term.”
“There is risk involved in that, obviously—namely, that we cannot cope with the consequences—but certainly there would be benefits in aligning the responsibility and accountability for managing those services with those who are raising the resources. Councillor David Borrow: This raises a bigger issue: local government, in terms of adult social care authorities, needs to find a way of working properly with the NHS. At the moment, there are disincentives around adult social care and the NHS. Clearly that is the direction of travel that the Government want to move in, but they need to look at what they need to do to ensure that the right partnerships between local government and the NHS can exist.”
“Q Just to follow up the ticking time bomb analogy, if the £3 billion public health grant were to be abolished, would public health become a ticking time bomb for local government? Guy Ware: I think public health is a ticking time bomb for the country as a whole. One of the comments that Graham made earlier, about the desire to shift spending into prevention and away from expensive interventions, applies fundamentally to this issue. If the grant were abolished and public health became a local authority responsibility like any others funded from council tax and business rates, the incentive to ensure that we were fulfilling the kinds of policy objectives that underpin public health would become all the stronger.”
“In the world of 100% retention, the incentive—which is really important; everyone needs incentives—is to keep growth local, but it is actually the proceeds of growth that will pay for risk and for those less well off. Those inherent tensions pull in opposite directions. My view is that this is not so much good or bad, but that a reality that has to be recognised is how success is measured. I am interested in how the Bill’s sponsoring Department will define the success of the agenda, relative to those inherent tensions that pull apart—haves and have nots; incentives versus risk.”
“Because of that, this agenda is actually not just a technical exercise about how to retain 100% of business rates locally—it is fundamentally about how vital local government services are financed. On my points about the lack of correlation and on prospects being more an accident of history and geography, there are inevitable inherent policy tensions in the agenda. Some areas feel they have good prospects for growth and can grow, and are very much interested in incentives; some areas are trying to cope with post-industrial Britain and are running hard just to stand still, in terms of growth prospects. Those two tensions—between the haves and have nots—pull apart.”
“Q 72 The Minister painted a picture this morning of a wonderful, revolutionary Bill that is going to galvanise economic growth across the country. I think that is a reasonable assessment of his performance. Do you think there is anything wrong at all with that assessment? Sean Nolan: On the basis that it is a long-term opportunity, the Bill has some significant risks and challenges in its implementation. The analogy here is horses running in different directions. Bear in mind that business rates do not correlate with service need. In my view, business rates prospects and potential are more an accident of history and geography than anything else. You cannot all live in the capital; you cannot all live atop silicon valley.”