Contribution
It is a pleasure to serve under your chairship, Mrs Barker. I congratulate my hon. Friend the Member for North Shropshire (Helen Morgan), and I declare an interest as chair of the all-party parliamentary group for rural business and the rural powerhouse.
This Government have rebuilt the local government funding formula and launched an ambitious devolution agenda, both in the name of fairness and moving power closer to the people. I question how that is working. Ministers say that the new funding formula matches money to need, and that by the end of the settlement, the most deprived places will receive 45% more funding per head than the least deprived. Nobody disputes that deprivation matters, but measuring deprivation in rural areas is not straightforward. According to the County Councils Network, county authorities will receive only £345 per head in grant funding against a national average of £526, and will therefore have to find more than 90% of any budget increase from council tax alone. That means they will receive roughly 2p of any additional Government money for every £1 of new cost pressure, while metropolitan boroughs will receive 42p. That is an enormous difference.
Although individual councils vary, the Rural Services Network shows that rural residents already pay 70% more council tax per head than urban residents, despite lower wages on average. That gap is projected to widen every year of this settlement. As others have pointed out, the Government removed the remoteness indicator from every part of the funding formula except adult social care. How does a remote child cost less to reach than a remote adult? Part of the current recovery grant is also still allocated using 2019 deprivation figures, even though updated 2025 data already exists and is used elsewhere in the very same formula. That makes no sense and perhaps the Minister can explain.
There is an unspoken assumption that needs correcting: rural does not necessarily mean rich. Research into so-called pretty poverty in Cornwall shows real deprivation hidden behind a scenic view. Measures built to track deprivation in cities simply fail to spot it. The Government’s new devolution programme has the same design fault. Evidence that I have heard this year from rural bodies and local leaders is consistent. Combined authority structures, funding pools and business rates growth incentives were all built around city region economics first and do not necessarily work in the same way in rural areas.
One flagship funding tool, full retention of business rates growth, was piloted in Greater Manchester. Will the Minister say whether that model has been tested where the business rates base is small and slow growing, as it typically is in rural England? Again, in honour of my Cornish colleagues, Cornwall tried a version of full retention in 2018, and it had to give up its rural services grant as the price of entry. I would not want rural authorities steered towards a tool that rewards growth but lacks the tax base to successfully generate it.
If the Government are serious about devolution, it has to mean something for parish and town councils, not just mayors and unitary authorities. There is no proper funding settlement and no training offer for the clerks and officers who will be increasingly asked to take on responsibilities that have been devolved down from a disappearing district tier, as in my area of Horsham. With the best will in the world, they are not properly equipped for that.
The fundamental assumption of the fair funding formula is that more deprived, mainly urban authorities have had a raw deal compared with rural shire counties, but the clear fact is that every type of council has been struggling over a long period. My county council of West Sussex is carrying almost £200 million in debt under its dedicated schools grant for special educational needs. Even with the proposed 90% reduction in SEND debts, which is welcome, that still leaves £20 million to be stripped out of a general budget that is frankly already buckling under the strain. The Government’s policy risks forcing yet more cuts on services that have already been cut too far. Two thirds of spending in West Sussex is ringfenced, which means portfolios such as highways or buses—transport—have to bear the whole burden of any savings.
The new funding formula risks condemning councils across the country to failure, but they are mostly not Labour councils and it is hard not to see a political angle. Does a pothole cost more to fix in a deprived area than in a wealthier one? No, it does not. The cost of many council services is not related at all to deprivation, so it is wrong to build an entire funding formula around that one criterion. Local councils are not the main cause of deprivation, and neither can they be the main fix. This Government promised to help working people and to devolve power. Rural authorities are still waiting. I hope the Minister will commit to using 2025 data consistently, to reinstating remoteness across the whole formula, and to properly funding and training parish and town councils so that devolution reaches the communities it is meant to serve.