1 Hull City Council Fair Funding Needs Review Consultation

Hull City Council

Fair Funding Needs Review Consultation Response

Hull City Council’s responses to the individual questions are attached at Annex A. The narrative below sets out the factors the Council sees as key to both the Needs and Resources elements of any system of Fair Funding for Local Government.

In recent years the city has been very successful in drawing in additional investment into the City. Hull has experienced its highest ever levels of public and private sector investment, with developments totalling £1bn now being delivered in the city.

The Council has invested in a £100m ‘destination Hull’ programme which has begun to transform city centre streets, public spaces and cultural venues, setting the stage for a spectacular cultural programme for the city’s year as City of Culture in 2017. The work will also ensure Hull secures a lasting legacy from its year in the spotlight in the shape of increased participation in the arts, a strengthened cultural economy and a regenerated and vibrant city. Specifically the Council is funding investment in the public realm within the City Centre, major refurbishment of the New Theatre and Ferens Art Gallery as well as a new conference/music venue

However, despite this recent economic success, the city still faces economic and social challenges engrained through 30 years of economic ‘stagnation’ which present themselves through the city’s position in the Indices of Multiple Deprivation. Income levels, child poverty and health related challenges persist and those distanced from work, in the longer term, measured through Employment Support Allowance / Incapacity Benefit are at 9.5%, the highest on record. It is vital that the City receives a Fair Funding settlement reflecting both the needs of the population and available resources.

Needs Element

Measures of Deprivation

1.1 As an inner city Authority, the Council sees the level of deprivation as the key factor in assessing need and funding. Based on the proportion of Lower Layer Super Output Areas (LSOAs) which fall within the 10% most deprived nationally, Hull is ranked as the third most deprived local authority in England having been previously ranked 5th under this measure. This means that Hull is relatively more deprived in 2015, compared to other local authorities, than it was in 2010.

Table: Top 5 most deprived LA in England, IMD 2015

2015 2010 Local Authority % of LSOA in most LA % of LSOA in most LA Diff deprived10% Rank deprived 10% Rank % Middlesbrough 48.8% 1 46.6% 2 +2.2 Knowsley 45.9% 2 45.5% 4 +0.5 Kingston Upon Hull 45.2% 3 42.9% 5 +2.2 Liverpool 45.0% 4 50.9% 1 -5.9 Manchester 40.8% 5 45.6% 3 -4.8

1.2 The Council believes that the domains of deprivation used to determine the Index of Multiple Deprivation (IMD) are credible and nationally robust, and so combine to give the best available measure of local need. Deprivation needs to be recognised as a very significant driver of the need to spend and be weighted accordingly within the Fair Funding formulae.

Cost Drivers

1.3 In addition to the commentary included Appendix A relating to cost drivers the Council would highlight the following in relation to Looked After Children (LAC), Adult Social Care and the cost associated with being a regional centre.

Children’s Services

1.4 The numbers of and complexity of needs for Looked After Children with the city has increased very significantly in recent years. This is also a national picture. In consequence needs far outstrip the available resources. Included within the overall position are the most complex and expensive cases, where a relatively small, but growing unsustainably , number of children have needs that are very challenging and extremely expensive. The needs assessment system needs to include within it needs to include within it recognition of these cases where costs for one child may easily exceed £250k a year.

Adult Social Care

1.5 Adult Social Care is inextricably related with health care, but the assessment of needs and provision of resources for the whole system is artificially separated. Until that arrangement is changed any system is always going to be fractured and sub- optimal as, for instance, pressure from the Department of Health onto hospitals over freeing up beds can run counter to the ethos of enablement and independence that Councils and other partners are trying to promote with the same people.

1.6 Needs assessment has to reflect – ageing population, and so increased demand for a longer period of time from that and also – complex problems/long periods of poor health at any age. The following factors are thus very important and need to be included:

• Healthy Life Expectancy • Gap in life expectancy between local authority and England as a whole • Mortality rate from causes considered preventable

Regional Centres

1.7 There are specific needs, and hence costs, arising from being a regional centre. These are not reflected within current funding arrangements and the Council believes cost drivers such as those set out below should be included within the new needs assessment.

- ratio of travel to work area to local authority area – - ratio of non-resident to resident employees within a locality (i.e. commuter numbers) - hospital beds / acute service provision - visitor numbers to cultural / leisure / heritage facilities - University and Further Education student numbers - homelessness - air quality

1.8 These indicators provide an overview of the additional service needs placed on any regional centre, represents the economic reach of a locality, and therefore the additional services that may be require to support a sustainable wider economy (e.g. acute health and social care needs, highways and transportation, visitor attractions, mitigation against ill health and inequality).

Resources Element

Summary

2.1 The city of Hull, as an administrative area, has fully embraced the Government’s Economic Toolkit to deliver both economic and employment growth. By deploying those economic interventions, including Enterprise Zones, Community Infrastructure Levy and the New Homes Bonus, the city has actively responded to the wider financially incentivised economic growth strategy presented by the Government.

2.2 The relatively recent deployment of such incentives has seen the city’s economy enjoy growth with the result that in the last three years:-

• Employment in Hull has increased faster than the National average from 61.7% to 66.9%. • Percentage of people unemployed has fallen from 14.8% to 8.6% (10,700 residents). • Job Seekers allowance claimants have fallen to their lowest level to 3.2% from 8.2%.

2.3 The availability of Employment Land is both limited and undermined by the ‘offer’ in the more rural East Riding. The growing Renewable Energy industry in Hull, is, by its nature ‘land-hungry’ and the city clearly faces challenges in capturing such economic opportunity in the future, particularly when such opportunities are focused on the Port Estate in the city which is not within the Council’s ownership.

2.4 The city’s ability, based on current geographies is, therefore, compromised in terms of organic growth potential and where the benefits of agglomeration, enjoyed by ‘conurbation’ economies, are limited.

2.5 The city, not having the benefit of a Combined Authority status, yet still strongly supporting the Humber Local Enterprise Partnership in its growth ambitions, requires both a continual financial stability, capable of being grown locally , and the knowledge that its ‘needs’ based funding will not be compromised nor indeed be stretched even further over time.

2.6 Significantly, the tight boundary of the city not only restricts the availability of land for potential investment and growth in Business Rates, and provides for a concentration of deprivation, but also has resulted directly in the disproportionate impact on the Council of national reductions in Local Authority funding. Percentage reductions in grant funding strike hardest at the areas with high need and low property values, as such authorities are inevitably in receipt of high levels of grant support. The current Council funding regime also means that the Council is also dependent upon Business Rates Top Up Grant of £31m per annum and the continuation of this redistributive mechanism is absolutely critical to the financial sustainability of the Council.

3.1 Physical constraints - Sitting as ‘an entirely urban island’ surrounded by the East Riding of Yorkshire and the Humber Estuary; Hull has one of the most tightly drawn administrative boundaries in the country. The city’s natural suburban villages fall just outside this boundary; in the more affluent East Riding of Yorkshire, many of whose residents commute into the city for work and for retail / leisure activities etc. National statistics clearly show strong links between Hull and the East Riding (our Functional Economic Area) including commuting flows, internal migration, transport and economic and industrial specialism.

3.2 This ‘tight Boundary’ is demonstrated by the comparison of a sample of population densities within the region. Authority Area (Sq Km) People per square Km Hull 71 3,630 Doncaster 568 536 Wakefield 339 978 York 272 752 East Riding of Yorkshire 2,405 140 North East Lincolnshire 192 832 North Lincolnshire 846 200

4.1 Geographical and Political Isolation - It is recognised by the Northern Powerhouse, specifically the Independent Economic Review, that our contribution to the North’s economy could be enhanced. Our position is that the city does play a significant economic role but that role would be more understood and able to be supported more if the economic dynamics based on a Functional Economic Area (rather than the Primary Urban Area) were considered with the emphasis on the economic functionality of the city being supported, recognising the economic hub that is the City Centre and the fact that city centres are areas where economic and social dynamics are increasingly focused.

4.2 The issue for the city is that it cannot capitalise on the agglomeration benefits that present themselves in the larger conurbations due to the relatively large distance to other centres of significant economic activity and, therefore, needs to both attract

further investment in the locality and retain the additional economic activity this generates.

4.3 In terms of non-inclusion again, advocating the need to further the role of the economic hub that is the City Centre, there is a significant employment presence in contact/call centres (circa 5,000). With reference to engineering and manufacturing, the city’s position needs further reflection with recent investments in Research and Development aligned to indigenous manufacturing capability, e.g. RB’s investment in global R & D capability. Such commercial application of knowledge based assets will have wider economic benefits.

4.4 Hull is one of the most tightly ‘under-bounded’ cities in the UK. This submission has clearly presented both that position and the economic and social challenges from “hollowing out” that result from it is clearly evident that Hull, as a Labour run administration, is surrounded by the Conservative administration of the East Riding, a predominately rural area.

4.5 That nature of geography and differing political ideologies, however, has not stopped the city from seeking beneficial arrangements with adjacent and further afield local authorities, based on contributing to the relevant economic landscape. Despite strong and continuing support for the Humber Local Enterprise Partnership, it has not proved possible to secure any combined authority arrangements Hull has supported regional devolution from the outset based on functional economics and, ideally, scale without distraction from peripheral political agendas.

4.6 Whilst political differences can be debated and compromises reached, the city has not been offered such opportunity. Despite that clear economic case for inclusion in such arrangements, given the growth trajectory of the city, and its significance as a regional economic drive, this remains a challenge and one that the city feels may be further hindered by the ‘direction of travel’ of Business Rate policy and the inability to capture the benefits of local economic growth which is currently dissipated into the city’s rural hinterland.

5.1 A low Council Tax / NNDR Base - As a result of the tight boundary, which limits the availability of land both for new houses and industrial / commercial development, coupled with low property values, the city also suffers from a low council tax and NNDR base. In terms of council tax, this can be evidenced by the comparison of the level of funding raised for adult social care from a 3% precept. This illustrates the limited ability of Council’s like Hull to raise the additional necessary funding to meet the growing costs associated with meeting the demands of vulnerable people within the locality.

5.2 With regard to NNDR, the low base is evidenced by comparison with top ups and Tariffs (-ve) applied to comparable authorities. (Single Tier Yorkshire and Humber Authorities and CIPFA Comparators):

Authority 3% CT Precept NNDR Top per head (£) Up/Tariff (-ve) (£M) Yorkshire and Humber Hull 9.70 38.38 East Riding of Yorkshire 14.54 13.97 North East Lincolnshire 12.23 8.91 North Lincolnshire 12.75 -29.42 York 12.89 -63.38 Bradford 10.69 46.45 Calderdale 12.65 -2.70 Kirklees 11.89 -2.34 Leeds 11.83 -136.94 Wakefield 11.78 -20.04 Barnsley 11.50 31.49 Doncaster 10.56 33.53 Rotherham 11.92 28.30 Sheffield 10.72 41.58 CIPFA Comparators Stoke 9.48 29.68 Salford 12.58 43.84 Newcastle (upon Tyne) 10.53 16.88 Wolverhampton 11.64 34.24 Nottingham 10.43 27.50 Sandwell 9.37 50.62 Sunderland 10.67 42.06 Gateshead 13.44 14.77 Oldham 11.58 47.83 Rochdale 11.56 42.45 Derby32 11.11 -5.59 Middlesbrough 11.43 26.26 Tameside 11.84 36.60 Plymouth 12.27 -12.10 Bolton 11.99 29.79 Others Kingston upon Thames 16.73 -31.37 Wokingham 18.48 -51.69

5.3 Comparing the proportion of dwellings by Council Tax bandings in Hull and the surrounding East Riding also highlights the impact of the tight boundary. % of Dwellings in - Bands A and B Bands C, D and E Bands F, G and H Hull 86.5% 13.2% 0.3% East Riding of Yorkshire 49.0% 44.4% 6.6%

5.4 The Council’s low council tax base is also key to the scale of challenge faced by the Council because of the nature of how cuts to Council funding have been made. Since 2013, there has been no adjustment for needs in Council funding. Rather, the 2013 position was fixed as a starting position and the Government have sought to apply percentage reductions to RSG allocations each year. As RSG effectively made up the balance between Council funding need and council tax collectable by each authority, Councils with low council tax relied on high levels of RSG and, therefore, have suffered disproportionately as percentage cuts have been applied to RSG. Hull has suffered from reductions in RSG / Core Funding of £133M since 2010 (53%).

6.1 Business Rates - the availability of an extensive Enterprise Zone programme, whilst supporting the wider economic development agenda as agreed through the Humber LEP, with respect to future funding of the local authority through the 100% retention of Business Rates, inhibits the potential levels of funding for use on Council services.

6.2 Council’s with low levels of local business rates, like Hull, have received a Top Up Grant from a central pot to the level dictated by the 2013 Start Up funding. The Top Ups have been funded from contributions from Council’s with high levels of local business rates i.e. Tariff Authorities. Hull’s current NNDR Top Up is £38.4M and it is critical to the Council that there is a continuation of this redistribution mechanism. It is essential that Top Up Grants are maintained, and increased as necessary, to match the additional cost to authorities of the loss of direct grants and additional responsibilities that are not funded by 100% rate retention.