Local Government Finance

– in the House of Commons at 2:59 pm on 7 February 2024.

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[Relevant Documents: Third Report of the Levelling Up, Housing and Communities Committee, Financial distress in local authorities, HC 56.]

Photo of Lee Rowley Lee Rowley Minister of State (Minister for Housing) 3:06, 7 February 2024

I beg to move,

That the Local Government Finance Report (England) 2024–25 (HC 318), which was laid before this House on 5 February, be approved.

Photo of Eleanor Laing Eleanor Laing Deputy Speaker and Chairman of Ways and Means, Chair, Standing Orders Committee (Commons), Chair, Standing Orders Committee (Commons), Chair, Parliamentary Works Estimates Commission, Chair, Parliamentary Works Estimates Commission

With this we shall consider the following motions:

That the Referendums Relating to Council Tax Increases (Principles) (England) Report 2024–25 (HC 319), which was laid before this House on 5 February, be approved.

That the Referendums Relating to Council Tax Increases (Alternative Notional Amounts) (England) Report 2024–25 (HC 320), which was laid before this House on 5 February, be approved.

Photo of Lee Rowley Lee Rowley Minister of State (Minister for Housing)

Today, we are confirming the major parts of the settlement announced in December, as well as reiterating the £600 million additional funding boost announced in January. Local government has welcomed the extra money as important in offering the ability to provide further support to children, particularly those with special educational needs and disabilities, while also being mindful of the increased demand for social care. Governments always need to take tough decisions, and despite the suggestions of some in this place, there is always a balance to be struck: infinite worthy demands, but finite resources. None the less, we recognise that it is important to support local government in the face of increasing demands for services and the rising inflation and costs that are the legacy of the war in Ukraine and instability in the middle east. That is exactly what we are seeking to do.

In recognition of those challenges, I am pleased to announce a settlement totalling nearly £65 billion for local authorities in England for the next financial year. The settlement includes an increase in core spending power of up to £4.5 billion compared with 2023-24; a £1.2 billion uplift to the social care grant, which can be used for children’s or adult services subject to individual local priorities; an increase in the funding guarantee, which will ensure that all authorities see a minimum increase in core spending power of 4% before any local decisions are made on council tax rates; additional support for rural councils through a £15 million increase to the rural service delivery grant; funding worth £3 million to support authorities experiencing significant difficulties because of internal drainage board levy costs; and additional funding for the Isle of Wight and the Isles of Scilly, in recognition of their circumstances and their physical separation from the mainland. As a result, available funding for local government in England will rise by 7.5% in cash terms for 2024-25.

Photo of Bob Seely Bob Seely Conservative, Isle of Wight

I am most grateful for the Minister’s statement, and I am also grateful for the uplift in funding for the Island. As I understand it, that is higher than average—we are most grateful—and that took place after meetings between me and Ministers. I am also grateful that they have specifically mentioned and accepted the additional costs that the Isle of Wight faces by dint of being an island, and that we are in effect now catching up with other parts of or other islands in the UK. I am very keen for this uplift to be seen as permanent, and then to be built on. Will Ministers meet me to discuss ways in which we can ensure that the uplift for the Island and the recognition of island status are now fixed?

Photo of Lee Rowley Lee Rowley Minister of State (Minister for Housing)

I am grateful to my hon. Friend for, while I have been in post looking at this portfolio specifically, his invite to the Isle of Wight, his support in facilitating that and his continued work on behalf of the Island. The change, which has been brought forward today by the Under-Secretary of State for Levelling Up, Housing and Communities, my hon. Friend Simon Hoare, and the Secretary of State, is in direct recognition of the work he has done, and I am grateful for it. I know that the Under-Secretary will meet my hon. Friend to continue that discussion.

Photo of Desmond Swayne Desmond Swayne Conservative, New Forest West

Very briefly, is the Minister comfortable with our persisting in protecting our constituents from the local councils they elect with the referendum threshold? When are we going to allow local authorities to govern, and to suffer the consequences if the electorate disagrees with what they have done?

Photo of Lee Rowley Lee Rowley Minister of State (Minister for Housing)

I am grateful to my right hon. Friend for raising a very philosophical important point, which is about the balance between local and national Government, and he is absolutely right to raise it. It is a long-standing principle of our local government settlement that we allow local councils the flexibility to be able to make decisions about the finances in their local areas, while also taking a general view that there are caps in place on how far they can go. I will come on to say more about that in my speech, but he raises an important point, and I know it will have been noted by my hon. Friend the Under-Secretary.

With available funding for local government in England rising by 7.5% in cash terms for the coming financial year, that significant increase will allow councils to continue to deliver local services. Thanks to the funding guarantee, all authorities will see an increase of at least 4%, before any council tax increases are taken into account.

We continue to monitor the financial health of all councils on a regular basis, using a range of data as well as extensive direct engagement. Examples of significant financial failure in local government remain low, but we will take action where necessary. We will always be ready to speak to councils should that be necessary, and should any have concerns about their ability to manage their finances or pressures that they have not planned for.

We do not just provide funding through the settlement. Separately, we are proud that there is £15 billion of taxpayer funding in a suite of complementary levelling-up projects that will help grow local economies, create local jobs, improve local transport, provide local skills training and support local businesses, making real differences to real people’s lives in communities all across the country.

Since 2021, the levelling-up fund has been changing communities across the United Kingdom, with £4.8 billion of taxpayer funds allocated to 271 projects, kick-starting regeneration and funding vital projects across the UK. Our levelling-up partnerships are delivering regeneration, and 12 investment zones are driving innovation all across the country. In addition, there is £1.1 billion for 55 left-behind towns through the long-term plan for towns, which is reviving high streets and tackling antisocial behaviour, and more than 250 venues are to be saved through the community ownership fund.

I know I speak for the whole ministerial team when I say that we cherish our close working relationship with local government partners. Every year, we have the opportunity, through consultation on the provisional settlement, to listen to them even more keenly, along with the public and right hon. and hon. Members, on the funding proposals for the coming financial year. The number of responses was particularly high this year at 267. The Under-Secretary, who is the Minister for local government—he is sitting beside me—engaged personally with over 90 Members and local government leaders. We are grateful to all who responded, and I pay tribute to the work my hon. Friend did in listening.

It was after listening to these views that the Secretary of State announced in January an additional £500 million to bolster social care budgets, which are a key concern for councils. We have heard about and listened to councils in relation to pressures on social care services, particularly for children, which we know have increased. The £500 million uplift to the social care grant, announced on 24 January, can be used for children’s or adult services, subject to local priorities. That is on top of the £1 billion in additional grant funding for social care in 2024-25 confirmed at the provisional settlement in December.

Overall, this means that, in the next financial year, local authorities with social care responsibilities will receive £5 billion through the social care grant, £1.1 billion through the market sustainability and improvement fund, £500 million through the discharge fund and £2.1 billion through the improved better care fund, and that is on top of their local decisions about funding for social care in their area. We recognise that some councils can generate more income from council tax to fund social care, so we have equalised against the adult social care precept since it was introduced, and we will continue to do that in the coming financial year.

As my hon. Friend Bob Seely indicated, we have heard through the consultation—we know this from our constant contact with local government partners—that the sector is keen for progress across the board, not just in authorities with social care responsibilities. We will support all tiers of government, so we have announced an uplift of the funding guarantee proposed at the provisional settlement. This means that every council will see a 4% increase in its core spending power before any local decisions are made about council tax.

We have also heard about the particular impacts in rural areas, which is why we have announced a £15 million increase to the rural services delivery grant. That is making available a total of £110 million of taxpayers’ money, in the second successive year of above inflation increases. In recognition of the unique circumstances facing our island authorities and their physical separation from the mainland, we are increasing funding to the Isle of Wight and the Isles of Scilly.

However, we are clear—I do not hesitate to repeat it today—that this money is for the frontline services on which our communities rely. It is not to be put aside for later use, nor wasted on myriad council hobby-horses and schemes. Taxpayers deserve value for money. So many of those involved in the settlement—so many parts of the community and so many parts of the local government sector—do that brilliantly already. The small number that do not are on clear notice this afternoon that they must do so. To ensure that, we are asking all local authorities to produce productivity plans, which will encourage them to set out how they will improve service performance and reduce wasteful expenditure.

Turning to council tax, we continue to strike the balance between giving councils flexibility to make local decisions, to meet local pressures and support the most vulnerable, and continuing to seek to protect council tax payers from excessive increases. In any constitutional settlement that divides responsibilities between central and local government, it must follow that local government has the ability and the responsibility to raise some of its own funds, and that it is held to account for the decisions it makes to do that. So this year, as in previous years, we have set core referendum principles of up to 3%, plus 2% for the adult social care precept.

At the same time, it remains the case that some council reserves are significantly higher than prior to the pandemic. For some, that will be for good reasons, but a number of councils have reserves well in excess of 100% of their core spending power, and the latest data shows that about half of all local authorities have seen their unallocated reserves grow since the 2019-20 financial year. It is for those councils to decide the appropriate balance between council tax increases and the use of reserves to fund services, depending on their local context. However, I very much hope that they will consider their unallocated reserves, and I hope that appropriate questions are asked in each locality where that applies by those who are interested.

At the provisional local government finance settlement, in consideration of the significant failures of a number of councils—Thurrock Council, Slough Borough Council and Woking Borough Council historically—and their need for ongoing exceptional financing support, the Government proposed that bespoke council tax referendum principles should apply. We are today confirming those principles, with a core council tax referendum of 8% for Thurrock and Slough and of 10% for Woking. As councils with adult social care responsibilities, Thurrock and Slough will also be able to use the 2% adult social care precept, and the councils can make use of the additional flexibilities provided to support their financial recovery.

At the provisional local government finance settlement, the Department set out that councils could seek additional support from the Government via the exceptional support framework. As part of that process, the Government were prepared to consider representations from councils on council tax provision. In recognition of the scale and nature of the council’s failings, and its precarious financial situation, the Government have decided not to oppose a request from Birmingham City Council for the flexibility to increase council tax by an additional 5% above referendum principles, to start paying for the historic failures of the Labour council.

We have heard requests from devolved authorities about the benefits of tax being retained in the area where it is raised. The trailblazer deals with Greater Manchester and the west midlands are unprecedented in their reach, and include a significant transfer of fiscal power. Sixty per cent of England is now covered by a devolution deal, which is up 20% since the levelling-up White Paper was published. We will continue to expand and deepen local devolution in England through the devolution framework and the work of the Under-Secretary of State for Levelling Up, Housing and Communities, my hon. Friend Jacob Young.

Finally, I wish to make a general point about how local government is financed. Many right hon. and hon. Members, as well as colleagues in the sector, have emphasised the need for reform in the system—I heard that when I was covering this brief—particularly of the funding formula. We have heard those concerns loud and clear. Today we continue to restate our commitment to reform and modernise the local government finance settlement and system in the next Parliament, to deliver the most effective financial settlements for councils—[Laughter.] I hear noises from the Opposition Benches. If Opposition Members had wanted to say that at the beginning of this Parliament, when covid started and when we asked our local authorities to do the most extraordinary things, that would have been an interesting position for the Labour party had it been in government at the time. We took decisions that were necessary at the time. We are restating our commitment to reform. That is what a sensible, proportionate and reasonable Government do, and it demonstrates yet again the difference between a Labour party that is seeking to play at being a Government and will be unsuccessful, and the actual difficult decisions that are being taken every day on the Government Benches.

In a year that has seen unprecedented increases in demand for social care, housing and other vital local government services, the Government have listened and are providing more support. The above-inflation funding increase will allow councils to carry on delivering the local services on which we all depend. Because local authorities must be accountable to local people, we are putting in place ways to ensure that they are working effectively and efficiently. We have a long-term economic plan that is working. We are supporting local councils with what is needed, and ensuring that they spend wisely. That is exactly what the Conservatives have done throughout this time and what we will continue to do, and I commend the settlement to the House.

Photo of Jim McMahon Jim McMahon Shadow Minister (Levelling Up, Housing, Communities and Local Government) 3:22, 7 February 2024

Today should and could have been the day when the Government, after 14 years in power, finally fixed the crisis in local government. After a lost decade, they could and should have used today to turn the tide on the unsustainable and growing crisis in adult social care, children’s services and homelessness services, and finally to end the postcode lottery for those vital services that create the clean, green and safe communities in which working people deserve to live in return for the now record taxes that they pay under this Conservative Government.

After six years of single-year settlements, which started well before covid, today could and should have been the day when the Government brought forward a sustained multi-year settlement, but the Government have failed on every test. Councils of all political stripes up and down the country, covering cities, towns and counties, are being forced to the edge of survival. We know that councils are the first responder, and often the last line of defence for our communities. That they have managed to keep things going for so long is testament to their duty and public service.

I thank each and every one, every councillor of every party and every council worker, for the work they do for millions of people up and down the country. We owe them a debt of gratitude. From waste management to maintaining roads and parks, from providing housing assistance to supporting local businesses, councils are at the forefront of ensuring that communities can thrive and realise their full potential. Contrast that civic responsibility with a Government who seem happier treating local government as a political scapegoat than as an equal partner.

What support are councils receiving in this settlement? Six hundred million pounds recycled from elsewhere, and a continuation of the begging-bowl culture that continues on a never-ending loop, like groundhog day. In one of the worst cost of living crises for generations, it is a shameful indictment that the council tax bill is set to top £57 billion under the Conservatives, which is more than twice than under the last Labour Government. It stands as a matter of fact that people are paying more and more for less and less. Alongside the biggest tax burden in peacetime, that adds to the struggles households already feel when managing mortgages, food and energy bills. On top of that, working people will be slapped with yet another Tory bombshell. In fact, council tax bills under the Tories are set to rise by £13 billion over the next five years. It is clear as day that councils have been hollowed out, and they are now being told once again that the only solution is to raise council tax more and more.

The Institute for Government shows that core spending power will still be 10% lower, even after today’s uplift, than before the Tories came to power. That does not even take into account the rocketing demand in social care, children’s services and homelessness services. Ad hoc injections of cash, while perhaps offering modest relief, are a painful repeat of the sticking plaster politics that have left the country, our politics, and our public services much weaker. The Government’s reckless approach is undermining the fundamentals of local public services. Stability is needed to ensure that older people get the high-quality care they deserve and that councils are in the best place to give children the protection they need, to help put an end to the crisis in homelessness that the Government are perpetuating, and to keep our public services running where this Government have hollowed them out elsewhere in the system.

This Government’s approach is short-term and reckless, and it saves nothing. In the end the cost is huge, and we can see the consequences today. It cannot be right that there were more section 114 notices last year than in the previous 30 years combined. That is not a coincidence; it is the result of a toxic mixture of the Government’s financial mismanagement, and a deep and worrying lack of accountability. To make matters worse, the early warning system that could have raised the red flag earlier has been dismantled. In 2010, the coalition Government announced the closure of the Audit Commission. It was not without its faults and certainly was not universally well received, but removing the early warning system in its entirety was clearly going to set up problems for the future. Councils were left to inspect financial risk themselves, rather than seek value for money or even address issues of what is now clearly a broken audit market. The facts speak for themselves: in 2022-23, just five of the 467 councils delivered their audited accounts on time. That is just 1% of councils submitting audited accounts before the deadline.

Photo of Chris Loder Chris Loder Conservative, West Dorset

The hon. Gentleman mentions audited accounts. Does he have an opinion on the audit of Plymouth City Council’s accounts? I was delighted to go to Plymouth on Friday, and debated the matter with the Labour leader of the council. It is clear that the Labour council’s accounts have not been able to be audited, because there is a question mark over £70 million being moved from capital spend to a pension pot. Does he have a view to share on his party’s situation in Plymouth?

Photo of Jim McMahon Jim McMahon Shadow Minister (Levelling Up, Housing, Communities and Local Government)

I thank the hon. Member for inviting me to celebrate the success of Labour in Plymouth, and the work that our councillors are doing, after taking back control, to show leadership to the city. Plymouth is a proud place, and the Labour party there is making a huge difference. He may want to consult those on his party’s Front Bench when it comes to the submission of audited accounts, because there is an issue to reconcile here. Only 1% of councils have submitted accounts; how do we break through that bottleneck, given that the market is not responding? The Government will have to respond to that sooner rather than later. I politely advise him, if I may, to withhold his criticism, and to wait to see what his Government’s approach will be. I suspect he may be slightly embarrassed.

Photo of Clive Betts Clive Betts Chair, Levelling Up, Housing and Communities Committee, Chair, Levelling Up, Housing and Communities Committee, Chairman of the House of Commons Members' Fund

The Select Committee has written a report recently on local authority audit, which is a complete mess, with only 1% of accounts done on time. This is not a party political matter, as councils right across the country are struggling with this issue. One factor is low audit fees. Another is the complication of pension fund valuations, which is holding many accounts up. The likelihood is that the only way to get through that will be to agree accounts that are qualified because it has not been possible to confirm pension fund valuations. I hope that party political points are not made about councils and the qualification of accounts.

Photo of Jim McMahon Jim McMahon Shadow Minister (Levelling Up, Housing, Communities and Local Government)

First, I thank the Select Committee for the work that it has done in this area. Last week, we received the report “Financial distress in local authorities”, and a great deal of work has been done to understand the detail and the contributing factors. There is no doubt that the accountancy regime for pension funds is a contributory factor to the delay in some cases. We need to know that councils are financially resilient, and that the financial settlement is robust. Where there are issues, an early warning system should allow them to be picked up earlier, so that if an intervention is required, it is made at the right time and in the right way, whereas now, section 114 notices are being issued at a rate not seen for the past three decades. That cannot stand, and it is not sustainable. We look forward to the Government’s response on that.

On the wider point about cross-party agreement, I think all of us and the Local Government Association, which is cross-party, would welcome with open arms the day when party politics was taken out of local government finance, and when there was consensus on how to fund local public services. I sincerely hope that after the next election, when those on the Government Front Bench are in opposition, they join us in that call, but let us wait and see.

The Government will know, as we do, that because of the financial fragility of local councils and the lack of an early warning system, it now takes only a small shock to send town halls into financial meltdown; the resilience just is not there. The Local Government Association has done a fantastic job in leading from the front and ensuring that adequate support is supplied when needed, but it cannot be expected to lead the charge on its own, nor should it be expected to. Councils need certainty and stability. They need to have the fear and anxiety of financial bankruptcy removed, so that they can continue to deliver for local communities. Councils need to be given adequate time to plan ahead for the fiscal year. Labour would support local councils where the Government have failed.

Single-year settlements do not provide the certainty or stability needed for planning ahead. We recognise that councils need something more than that to end this disjointed approach. Labour will embed transparency in the relationship between local and national Government, and move towards multi-year funding settlements for councils that allow them to plan well ahead. We will give towns and cities the tools that they need to foster local growth and deliver better public services. Should we be privileged enough to form the Government after the next election, Labour will empower councils to get on with the job that they have been elected to do.

Finally, we will see a radical transfer of power away from Westminster and into the hands of the British people through the landmark take back control Act, but we will not wait; where we can accelerate improvement, we will. We want a new relationship between central and local government as genuine partners in power. We want to see the right powers in the right places. Our communities are resilient, and so are our councils, but we need to do far more to work, hand in hand, as true partners going forward.

Photo of Chris Loder Chris Loder Conservative, West Dorset 3:34, 7 February 2024

It is a pleasure to contribute to this debate, which for me is the highlight of the parliamentary calendar. Relentlessly, year after year, I have contributed to the debate with great fondness. Last year, I remember vividly the Under-Secretary of State for Levelling Up, Housing and Communities, my hon. Friend and next-door neighbour Simon Hoare, advocating, from the Back Benches, for a great rural tsar. Of course, nowadays we have the great rural tsar sat on the Front Bench; I am pleased about that. I am also pleased that the debate has three hours of protected time, which is valuable. None the less, I will try not to take up too much time, Mr Deputy Speaker.

Each year, I stand up in this place to make the case not just for rural West Dorset, and Dorset as a whole, but rural Britain, in what I believe are some of our most important discussions and decisions about enabling the capability of local government. Most years, I have stood here and protested that we in Dorset have been in need of our fair share of government finances; indeed, in many previous years, we have not received that. But today is not D-day. Today is S-day, because my hon. Friend and neighbour—knight in shining armour that he is—is charging over Bulbarrow hill and through the Chalke valleys to Dorset Council in Dorchester, to deliver a £4 million boost to its finances. That is to be greatly welcomed. My other neighbour, my hon. Friend Richard Drax, who cannot be with us as he is away on parliamentary business with the Defence Committee, has asked me to reflect his views, so that my hon. Friend the Minister understands full well that we very much appreciate this in Dorset, after many years of campaigning for a greater and fairer share.

However, it is important to note that we still need to address the fundamental structural issues that we face in local government funding. I recognise that that is a vast task, which will take considerable work. I hope that, in winding up, my hon. Friend the Minister can give not just me but a number of colleagues who are in their places real confidence that the Government intend to achieve that in relatively short order, and that we will ensure that a fairer share of taxpayers’ money is allocated to where it is required.

The £110 million through the rural services delivery grant is much welcomed. That funding of up to £3.2 million for some areas—including Dorset—is much better, but is that enough to deal with the issues we have to face? From discussions that I have had in the House before the debate, I have a real sense that it is not. The additional £1.5 billion for social care is enormously welcome. A third of the community that I represent in West Dorset is over 65, so it has additional social care requirements. Are we in Dorset really getting our fair share of £1.5 billion, given that we are talking about a few million pounds? That is a question for us to ask.

In the wider context of making the case for rural Britain, I remind my hon. Friend and neighbour the Minister, and the Minister for Housing, Planning and Building Safety, that we have had high-energy debates, it is fair to say, about local government finances with both of them. I would like to reiterate some of the unfairness that remains in the “urban versus rural financing” debate. Rural areas still receive some 59% less per head in settlement funding than their urban counterparts; in real terms, that is about £111. Rural residents will also pay on average 20% per head more in council tax than their urban counterparts—although we should probably take Somerset to one side in that assumption. Rural residents receive on average 13% less per head in social care support overall than residents of urban areas, which is very important when it comes to providing that care in constituencies such as mine and those of my hon. Friends.

West Dorset constituency, which I am proud to represent, has an enormous county boundary with the county of Somerset. Many of my constituents use services and facilities in Somerset, and vice versa. It is fair to say that over the past month, many of my constituents and people in Somerset have looked with absolute horror at how the proposed council tax increases will affect them. For the benefit of the House, I would like to clarify the extent of those increases in real terms. Those living Yeovil can expect a 90% increase in the town council precept, while those living in Taunton, the county town of Somerset, can expect a 200% increase. In real terms, that is an increase of between £109 and £277 per annum in the town council precept alone.

I am well aware of this matter because a Somerset councillor, a Liberal Democrat, works in my constituency and contributes frequently to the Liberal Democrat leaflets that are shared in West Dorset. I should say that he is the head of the Somerset Council audit committee, of all committees; I can confirm that his mantra is “raise taxes and cut services”, which is definitely what is happening in Somerset. In November 2022, the Somerset Liberal Democrats said that they needed an additional £35 million because of a financial difficulty that they had experienced. There was no reporting of any finances to the council for five months, and then, all of a sudden, out of nowhere, came a black hole of £100 million.

Photo of Sarah Dyke Sarah Dyke Liberal Democrat, Somerton and Frome

I am a proud serving Somerset councillor and am fully aware of the issues Somerset is facing. However, those issues have occurred not just over the last nine months, under the new Somerset Council; they have been very long drawn out. Indeed, between 2010 and 2016, Somerset faced one of the longest council tax freezes—I think it was the longest for any council across the country—under the last Conservative administration, which led to huge pressures on funding in Somerset. Indeed, under Conservative administration, the council was nearly drawn into bankruptcy in 2019 due to pressures on adult social care. Would the hon. Member agree that the issue is not a party political stance, as he is trying to make it, but the legacy left by a previous Tory administration? The issues that we face in local government go across all colours.

Photo of Chris Loder Chris Loder Conservative, West Dorset

I thank the hon. Lady very much for her intervention. She and I are frequently in Westminster Hall debating these matters with great passion and vigour. I know that she feels as strongly as I do about these matters, but it will probably come as no surprise to her to hear that I do not agree with her conclusion. Previous Conservative administrations who ran Somerset Council left a considerable legacy in terms of reserves. Since the Liberal Democrat Council was elected and started serving last year, a number of decisions have been made across the board that have ended up in the lap of council tax payers in Somerset.I am alarmed about that, because ahead of the Dorset local elections, a number of constituents in West Dorset look with great horror at what is happening in Somerset, and wonder what is truly the case.

Photo of Chris Loder Chris Loder Conservative, West Dorset

I have not quite finished replying to the hon. Lady’s previous intervention. I would like further to put into context the contrast between the finances of Somerset and Dorset. Last year, we in Dorset received just £700,000 in revenue support grants; Somerset received £8 million. Our social care grant last year was £22 million; in Somerset, it was £39 million. The high needs block funding was just £48 million for Dorset; it was £74 million for Somerset. The schools block funding was £76 million for Dorset, but £122 million for Somerset. I could go on, but I will not. There is an enormous contrast, which has happened in relatively short order. That is what happens when the Liberal Democrats run the council in Somerset, compared with a long-standing and financially well-run Conservative council in Dorset.

Photo of Sarah Dyke Sarah Dyke Liberal Democrat, Somerton and Frome

I thank the hon. Member for allowing me to intervene again. He is making some unfair points that need some context. As a Dorset Member, he will know that the council tax in Dorset is vastly higher. In the local government reform back in the 1970s, Somerset was left with most of the rural county, and following the 1991 council tax change most of the higher banding was taken into Bath and Avon. We have fewer properties in the higher banded rates, so the council does not generate as much in council tax. He says that that is an issue for the Liberal Democrats, but he should remember that we are delivering on a plan to change to a unitary council that was implemented by the Conservative Government against the will of people in Somerset. We have delivered more than half the £18.4 million of savings within nine months, when the full savings were expected to be delivered within three years. The Liberal Democrats in Somerset are delivering.

Photo of Chris Loder Chris Loder Conservative, West Dorset

The reality is that the Liberal Democrats are not delivering on the Conservative legacy. That is clear for all to see, especially those who live in Yeovil and Taunton. It will hurt people financially, as they will see hundreds of pounds extra on their council tax because of having a Liberal Democrat administration rather than a Conservative one.

My constituency neighbour, my hon. Friend the Member for North Dorset, is saving the people of Somerset from a further 10% council tax hike that the Liberal Democrats want to pile on them. I am very grateful to him, as are a number of colleagues who are not able to be here, for saying that the Liberal Democrats have to be held accountable. They have to find solutions and carry through on what was a very good proposal several years ago. I hope that the people of Somerset will benefit from his good work and, in the mid to longer term, the people of Dorset will benefit, too.

Photo of Clive Betts Clive Betts Chair, Levelling Up, Housing and Communities Committee, Chair, Levelling Up, Housing and Communities Committee, Chairman of the House of Commons Members' Fund 3:49, 7 February 2024

Let me begin by thanking a few people. The shadow Minister, my hon. Friend Jim McMahon, referred to the report “Financial distress in local authorities”, which the Select Committee published last week and on which I made a statement in the House last Thursday. I want to thank the staff of the Committee and our special advisers for all the work that they did in helping to put the report together: it was much appreciated. I also want to thank the Local Government Association—I declare my interest as a vice-president—for all that it does for local government throughout the year, and for helping us and advising us on the challenges that local government is facing, not least with regard to finances.

The Under-Secretary of State for Levelling Up, Housing and Communities, Simon Hoare, is sitting on the Front Bench. I want to thank him as well, not for providing enough money on this occasion—I would not go as far as that—but for being genuinely helpful and open in his willingness to be approached by Members on both sides of the House and to engage with local councils across the country. He has also been open to discussion and an exchange of views with me, in my capacity as Chair of the Select Committee, so I thank him for the way in which he has approached this matter on a personal basis.

The difficulty for councils is that they are not just dealing with what is happening this year; they are also dealing with the problem of the year upon year of austerity that we have seen since 2010. There is now a funding gap of £4 billion, which £600 million goes nowhere near filling. In fact, the Institute for Fiscal Studies said the other day that the gap was £7 billion, but either way it is a much larger sum than the £600 million that the Minister has made available. I was a little disappointed when the Minister for Housing, Planning and Building Safety, Lee Rowley —who opened the debate—began referring to reserves again. When local government finance gets into difficulties, Ministers always resort to saying, “Councils have all this money, so why don’t they spend it?” I remember that when Lord Pickles was Secretary of State for Communities and Local Government, he was berating councils back then for not spending all their reserves. I think that most of them are quite grateful for not having done so, in view of what has happened subsequently.

Some councils have simply run out of money and have issued section 114 notices, while others are wary of what is coming. They can see things getting worse rather than better because that is what has happened year on year, and, rightly, they are not rushing to spend all their reserves at once. They are being prudent to a degree, but they can see those reserves running out in two or three years’ time, even if they are not facing section 114 notices immediately. We have heard from the LGA that about 20% of councils could be facing them in the next 12 months. It may not be as many as that, and everyone hopes it is not, but it could be a significant number. In the last six years eight councils have issued section 114 notices, effectively declaring bankruptcy, whereas in the previous 18 years, none did so.

It is not only individual councils that are experiencing difficulties. The whole system is now broken. That is the evidence that we were given: the Committee did not pluck the information out of thin air. We heard from councils of every kind—county councils, district councils, metropolitan councils, unitary authorities and London councils—and the problem is now widespread across all of them. Yes, individual councils have made mistakes, some of which have caused them to get into difficulties, but as we look forward, we see that it is not only the councils that make mistakes that will get into difficulties. Many will simply run out of money, and they will have no leeway to deal with any adverse consequences because their reserves will have been run down.

In fact, for the most part, councils have done brilliantly to survive this long. Credit is due to councils and councillors throughout the country who have managed to keep themselves going, and managed to make efficiency savings on a scale of which any central Government Department would be proud. Local government has seen bigger cuts in its budgets than any other part of the public sector. The temptation for Ministers is always to pick on councils, because they can blame them from the Front Bench for the difficult choices that have been made, and do not have to claim responsibility for the cuts.

My own city of Sheffield has experienced a 30% cut in its spending power, and of course it has cut services. Libraries have closed in my constituency, there has been less funding for tendered bus services, the grass is cut less often, and the planning department has fewer resources and wants more because of the number of planning applications being submitted for the redevelopment and regeneration of the city. Those are all consequences of the spending cuts. This is about the two things coming together: the cuts to resources and the pressure from all the things that everyone talks about, including social care.

Adult social care was seen as a developing problem, and it is. Another way of looking at it is as a great benefit, because people are living longer and they are here to need the care, which is absolutely wonderful, but now children in care as a demand is rising faster even than adult social care. The Select Committee looked at children with special needs, their education and the cost of transporting them, and there are things that can be done there that are not just about more money. It is about looking at the provision of care for children and looking at councils collectively providing that. We could get costs down in that way.

This is also about looking again at education, health and care plans. There is a feeling that sometimes the more well-educated, knowledgeable and affluent parents see the benefit of demanding an almost unconstrained amount of money for certain educational provision for their children. The cost of that is going up exponentially, and those plans have to be reviewed. Of course we have to give kids with special needs the education they deserve, but perhaps we ought to look at the system that is causing such a massive increase in the costs that are now occurring.

At the other end of this is the fact that the overall budgets have been constrained as demand has gone up. What about ordinary council tax payers? They are paying 5% extra every year. For the most part, those council tax payers do not receive adult social care, do not have a kid with special needs and do not require homelessness services—another area of increasing demand—yet they are being asked to pay 5% extra. They are also seeing their libraries and bus services disappearing and their streets not being swept as often. They are saying, “But I’m paying more every year and I’m getting less.” The system cannot continue in the way it is. It is a challenge to the basis of democracy, which is that people feel they are paying for something and getting it. Here, they feel they are paying more and getting less. That is not sustainable in the long term, as I think we can all see.

Another problem with the settlement is that it is for only one year. Local government has asked repeatedly for multi-year settlements, and we got there in 2016. Covid interfered with that, but there is no reason they could not have come back since then. We were also promised fair funding in 2016. What has happened to it? This settlement is based on data that goes back to the last century. That cannot be right either, can it? It really cannot be right that we are allocating money based on how many people lived in areas so many years ago that it now makes no sense because of the demographic changes that have taken place since. These are all issues that could have been addressed. They are big challenges but they could have been met.

We have not mentioned the public health grant today. When public health went over to local government, it was pretty well funded because it was linked to NHS settlement increases. Public health is really important because it looks at prevention in our most deprived communities, but there has been a 27% real-terms cut since it went over to local government. We do not use it enough. During covid, we should have used the expertise of the directors of public health for tracking and tracing, instead of the phone banks that were set up at national level at a cost of billions of pounds. The director of public health in Sheffield, Greg Fell, has sent me information about the cuts that he is dealing with. This is a fundamental issue of equality. Public health is about helping the poorest communities disproportionately, and that is now not happening because of those cuts. Yes, there is some welcome extra money for smoking cessation and for dealing with people with alcohol problems, but it does not fill the gap that has been created by the cuts.

Perhaps the Minister could have a word with the Chancellor. He probably cannot offer us any more than the £600 million today, but perhaps he could have a look at the household support fund, which our Select Committee has just written about. In Sheffield, the fund provides 32,000 children who have free school meals during term time with vouchers to compensate in the summer holidays. Have a look at that, as local authorities cannot compensate for it in the current crisis. It would not take a lot simply to keep the fund going from March, when it comes to an end. This is the last school holiday in which kids will get the funding. It is a small issue but, if the Minister adds his voice to those of the Select Committee and many others in this House, we might be able to get a bit of movement in the Chancellor’s upcoming statement.

Things are bad, but they could get worse and probably will. The Minister said it will be for the next Parliament and, yes, it will. The Secretary of State for Levelling Up, Housing and Communities announced more than a year ago that he would ask a Minister to review council tax, and I understand that nothing has happened yet. Council tax has not been touched for 30 years, and we cannot explain to people moving into a new build home how their council tax is calculated. It is based on the value in 1991, before their home had not been built. We can all see that it is nonsense, so we need reform. The Minister suggested the other day, and I agree, that whoever wins the election has to make local government funding, and certainly social care funding, stick for the long term. We had cross-party agreement on pension reform, and it has stuck for the long term, so let us look at both those issues. I hope we can then move on.

Finally, what on earth are the productivity plans? Does local government not have enough work to do without having to produce another set of plans for a purpose that only the Secretary of State seems to understand? I have read that councils apparently have to stop spending on “discredited” equality, diversity and inclusion programmes. Can anyone tell me what a discredited equality, diversity and inclusion programme is? Who is going to decide? Does the Minister have a little list of criteria and tick boxes? Is he going to review all these programmes, or is it just another attempt to say that councils obviously have plenty of money if they are engaged in these sorts of programmes? They have not. In my view, councils are engaged in providing proper, decent and needed services for their communities, and there are not enough of those services because of the spending cuts. I hope that in due course we can move forward to a better time for local government. Our councils deserve it and, even more importantly, our communities deserve it too.

Photo of Sally-Ann Hart Sally-Ann Hart Conservative, Hastings and Rye 4:02, 7 February 2024

I am grateful to the Under-Secretary of State for Levelling Up, Housing and Communities, my hon. Friend Simon Hoare, and to the Chancellor for listening to our concerns about significant pressures on local authorities, especially those with responsibilities for child and adult social care. I welcome the recently announced £600 million of extra funding, including £500 million for local authorities with child and adult social care responsibilities. East Sussex County Council has welcomed the extra £5.386 million it will receive.

However, despite this extra funding, East Sussex County Council, a well-run Conservative council, has reported that, due to the significant pressures arising from the current economic situation and changing demography and need, the financial position for the coming year is the most challenging it has seen in recent years. This is in direct contrast to Labour-run Hastings Borough Council, whose independent auditor, Grant Thornton, said:

“We have identified significant weaknesses arising from funding gaps and unidentified savings and the council’s approach to due diligence when undertaking commercial investments which has resulted in a failure to achieve expected financial returns.”

The borough council is teetering on the brink of bankruptcy, so the Labour leader and six Labour councillors resigned from the Labour party and set themselves up as the Hastings Independent party. Their change of name will not absolve them of their failures and their refusal to take responsibility for the mess they got the council into.

Although welcome, the additional funding does not bridge East Sussex County Council’s financial gap for 2024-25, and it is for one year only. That means that, despite previous careful budget management, the budget for the coming year will still be supported by a significant withdrawal from limited reserves and there remains considerable uncertainty about funding for future years. That is not a sustainable position, at both a national and local level, because available reserves would be depleted by the end of 2025-26.

In its budget and 2024-25 council plan, East Sussex County Council agreed proposals to spend its £538.1 million net revenue budget on services and activities that will deliver its priority outcomes, including funding to cover a range of significant demand and cost pressures being experienced by services. Those plans are supported by a 2.99% increase in council tax and 2% adult social care levy. That decision was not made lightly, given the current pressures on household budgets, but in the light of the very significant deficit the council faces in the coming year and beyond, it needs to apply those increases in order to safeguard services as far as possible.

East Sussex County Council also agreed an £837.9 million, 10-year capital programme, which includes badly needed investment in local roads and highways structures, in reducing the council’s carbon emissions and in school places, including for children with special educational needs and disabilities. Dealing with our potholes in East Sussex, especially those in Hastings and Rye, desperately needs more funding from national Government, and I must emphasise that with a view to the March Budget. So we must look at how we fund the particular needs and characteristics of East Sussex. There is an urgent requirement for sustainable, long-term funding to meet these needs, and that must be understood by the Government, so that our residents benefit from high-quality services in the future. That means reviewing, developing and implementing a fairer funding formula for local authorities, and for the police, that reflects the actual need, as well as deprivation, geography, demographics and so on. That is especially important for local authorities with coastal communities, which, due to a lack of granular data, are often left behind.

Fairer funding does not necessarily mean more Government funding—as we have heard, it has been focused on more urban areas—but a redistribution or reallocation of existing resources more equitably. It is very encouraging to hear the Minister outline the plan for a fairer funding formula to come soon, in the next Parliament. Coastal communities face unique challenges related to their geography, demographics—often they have older populations—population density and economic activities. A fair funding formula would consider those specific needs, rather than applying a one-size-fits-all approach.

Coastal areas often have diverse populations, including seasonal residents and tourists. These fluctuations have an impact on service demands, infrastructure maintenance and social services. A fair formula would account for population dynamics and deprivation levels in these regions. Coastal communities are often more isolated due to their geographical location, which affects transportation, healthcare, education and access to essential services. A fairer formula would address the challenges of sparsity and ensure adequate support. Coastal areas require investment in flood defences, coastal erosion management and environmental protection. A fair formula would allocate funds to address those critical issues. Coastal economies often rely on tourism, fishing and maritime industries. A fair funding formula would recognise the need for economic resilience and support diversification efforts.

A fairer funding formula is essential to ensure that local authorities, especially those in coastal communities, receive adequate resources to address their unique challenges, focus on actual need and serve their residents effectively.

Photo of Helen Morgan Helen Morgan Liberal Democrat Spokesperson (Levelling up, Housing and Communities), Liberal Democrat Spokesperson (Local Government) 4:09, 7 February 2024

In common with many Members of the House, including 40 Members of the Government Benches who signed a County Councils Network letter a couple of weeks ago, I can report that my local council—Shropshire Council—is cutting services because it is chronically underfunded. I declare my interest as a vice-president of the Local Government Association.

It is disappointing to try to score political points about an issue that is so important and directly affects the lives of so many people. Shropshire Council is run by the Conservatives and, while undoubtedly the Liberal Democrats would make different political choices about how money is spent, there is no getting away from the fact that the issue affects councils of all types, under all parties, because there is a chronic structural funding issue that we need to address. Most people in Shropshire are paying more for less because of our social care costs, which amount to 85% of the budget. No political party will be able to solve that issue without additional help from central Government. There must be recognition of the social care crisis that is overwhelming councils such as mine.

It is worth reflecting on the amount of central Government funding that has been awarded to councils since 2016-17. According to the House of Commons Library, there has been a £5.75 billion decrease in real-terms funding—in Shropshire, that is about £37.3 million—and compared to 2015-16 there is 51.3% less funding per person in Shropshire from central Government. How are we going to stop people paying more for less? I do not have the answer, and I know the leader of Shropshire Council does not have the answer either.

What does that mean for people across the country? Providing fewer services drives inequality of all types. Let us think about the example of swimming pools. The Government have said 276 local authority pools have been closed since 2015, including the Whitchurch swimming pool in my constituency, although we are lucky because that pool is being rebuilt. Many places are not so lucky; people in my constituency may be without a swimming pool for years, but in some places it will be forever. If they cannot get to a neighbouring town, have access to a car or pay to go to a nice private swimming pool, their children will not learn to swim. That fundamental and deep inequality, which we should avoid, is a direct consequence of poor council funding.

Another example in my constituency is that the civic centre in Whitchurch has had to close recently because of issues with reinforced autoclaved aerated concrete and asbestos. The council cannot afford to either rectify or rebuild that civic centre because of the interest on the money they would have to borrow. The amount to be borrowed would be about £7 million, so the interest would be about £750,000 a year. The council should not be in a situation where it cannot provide cultural enrichment or generate economic benefit by bringing people into the town centre because it cannot afford that relatively small amount of additional borrowing for something so basic.

As I mentioned, Shropshire Council is Conservative-run. I have had some constructive meetings with its leader, who has been very open and said that the social care requirements will overwhelm the whole budget in future years unless something urgent is done. No amount of paperclip savings will get the council to the point where it will be able to afford our social care budget in the future. Not only do we have an ageing population and an elderly demographic, but we are also a very rural area. The cost of delivering social care is much higher in such areas—a point to which other Members have alluded—as carers have to travel long distances between each person they are caring for and so pay high fuel costs. It is much more expensive to deliver that social care.

We need to look urgently at the issue of fair funding, taking into account the cost of service delivery. While the £15 million increase in the rural services delivery grant is welcome, the total budget of £120 million will not touch the sides of the social care issues that councils in rural areas face. We urgently need the Minister to work with his colleagues in the Department for Health and Social Care to fundamentally reform how we fund and deliver social care. Until we grasp that nettle, we will not solve the issue of local authority funding with the odd extra bit of money here and there. Someone could end up in crisis just so that fewer councils have to issue section 114 notices.

I wish to touch on children’s social care and special educational needs and disabilities. I had an interesting conversation with a school recently about its budget. I realise that this is not a topic for this Department, but, while the money the school gets to support a child on an education, health and care plan is woefully inadequate—it makes a loss on each child that it is trying to support—the £6,000 cost is crippling the council budget. We need to look at that, but, again I urge the Minister to consider what that means for the lives of individual people. I have a case of a young man who has just turned 16. He has a life-limiting illness and severe disability. The council had to save money and made a policy decision not to fund transport for young people over 16 with special educational needs and disabilities, so his transport funding was cut. Thankfully, we have resolved the situation for that one individual, but there will be thousands of other individuals in the same position across the country, and the impact on the family is devastating. Those young people need to go to a special place during the day for additional care or schooling, and their parents need to go to work. If the transport is not there, it has a fundamental and detrimental impact on the life of that family. We need to acknowledge that and find a way to solve the issue.

The Levelling Up, Housing and Communities Committee report, which has already been referred to by Mr Betts, has said that SEND support is an issue that will lead councils to a cliff-edge of section 144 notices, so we need to address that matter properly.

I also wish to touch on the issue of housing, which affects those district and unitary councils that have to deal with the problem of temporary housing. A couple of weeks ago, Eastbourne District Council organised an event in Westminster; they invited council leaders of all parties and from all parts of the country to discuss the issue of temporary housing and its impact on their budgets. It was a well-attended event, with a good deal of cross-party agreement. However, I was a little disappointed not to see a Minister there to talk to those council leaders.

Eastbourne is spending 48% of its budget on temporary housing. That is not sustainable. Even in Shropshire, which cannot be counted as one of the councils with the most critical issue of temporary housing, we have seen the numbers of those in temporary housing double since 2018. It is important that the Government grasp this issue of social housing—housing for social rent—because people are living in temporary accommodation that is often unsuitable, inadequate, and not anywhere that any of us would be satisfied to live in. The problem could be solved by investing in social housing. We have a plan to deliver 150,000 social houses a year by the end of the next Parliament. To put that into context, it would save, according to the House of Commons Library, £11 billion a year in housing benefit, which currently ends up in the hands of private landlords. Therefore, it makes economic sense to solve this problem, and I urge the Minister to consider that.

I am aware that I have repeated some of the points that other Members have made. Rural councils are struggling to meet the needs of an ageing population and the increased costs of delivering those services. They are struggling to plan not only with this single-year settlement, but with the fact that there is no certainty about what happens after next year. Shropshire Council is trying to save £50 million this year. That means £1 million of cuts every week to services that people have paid more for, and the council does not know what it will cut next year. That is the reality. Dipping into reserves, using some of its capital budget for revenue, or selling off some of its assets are one-stop solutions and do not solve the ongoing structural deficit into the years ahead. Therefore, once a council has sold the library and spent that money on adult social care, what does it do the following year? There is no library left to sell. It is so important that we do not plug these gaps with short-term fixes. We must address the structural problem affecting our councils.

In my meeting with the council leader, I was told that even after a 30% increase in council tax in Shropshire to plug the gap, people would still see a cut in services. Clearly, that is unsustainable and unacceptable.

Let me return to this point about the difference between rural and urban councils. The Rural Services Network has said that urban councils get 38% more than rural ones. However, we should not be having an argument about robbing Peter to pay Paul, because those urban councils are in crisis as well. We need to look at the overall cost of delivering services, and find a solution to deal with the fundamental drivers of increased costs.

I know that the Minister has been a councillor, as have many Members. Regardless of their political party, no councillor has got themselves elected and put themselves on the frontline in order to charge their own residents more and deliver less. We should be considerate of individuals in that situation, and address the fundamental drivers of the crisis affecting councils led by all parties and in all parts of the country. To reiterate, the issues are social care, children with special educational needs and disabilities, and housing. I urge the Minister to work with his colleagues in the relevant Departments to come up with long-term fundamental reform in those areas to solve this crisis.

Photo of David Simmonds David Simmonds Conservative, Ruislip, Northwood and Pinner 4:20, 7 February 2024

I draw the House’s attention to my entry in the Register of Members’ Financial Interests. There is an old saying that we can tell the state of a civilisation by the condition of its public toilets. It is often one of the services that the wider public and voters associate with local government, alongside potholes. However, as has been well reflected in the debate, local government finance is a huge part of overall Government and public sector expenditure. The vast majority of it—around 75% of the average local authority’s budget—goes not on public toilets, libraries or potholes, but on the care of the most vulnerable people in our society. All of it is hugely influential on the quality of life of our constituents, because it affects everything from education to the built environment, and things such as parks and sports facilities, which are incredibly important in people’s day-to-day lives.

In that context, it is important to start by recognising the positive news in the statement: the recognition by Government that on the core statutory services around adult and children’s care, cost pressures are becoming unsustainable. That has been acknowledged with a significant injection of extra cash. There will be a huge debate about whether that money is sufficient to address the concerns, but it demonstrates that the Government recognise the impact that unsustainable cost pressures are having, and are addressing them. Of course, it continues to create pressure that legislation on the setting of council tax requires local authorities to consult with residents in the autumn, around October, before council tax is set by law the following February. It is quite late in the day for us to be factoring in the additional funding announcements, welcome as they are.

I reiterate the calls from both sides of the Chamber that the earlier we can get any of these announcements into the system, and the more they can be structured into a multi-annual financial settlement, the more efficient the use of those resources and the greater the benefit to our constituents will be. It is always immensely challenging to run around trying to get road contractors to mend some extra potholes at the tail end of the financial year, but if we know that extra money is coming down the tracks we can invest in such things as jet patchers, which have been used in both Hillingdon and Harrow for many years, as a means of proactively getting out there and dealing with pothole repairs before the condition of the roads deteriorates any further.

I will pick up on a couple of issues in a little more detail, some of which have been touched on and some of which I hope will be fresh to the Chamber. The first is the impact that deficits on the dedicated schools grant high-needs block has on the funding announcement that we are debating. For many years, not just before 1991 and the setting of the council tax bands but since the earliest inception of business rates, the funding of education has been based on the business rate take from a given education authority’s area. That carries through today in the form of the dedicated schools grant, and it is why we see such differential funding rates for education from local authority area to area. However, around half of local authorities now have significant deficits on the dedicated schools grant.

While the dedicated schools grant, and the education budget generally, sits with the Department for Education, for the purposes of local government law it has to be covered by the annual balance requirement that is covered when council tax is set by the given local authority each February. If there is a substantial deficit on that budget, which is pretty much entirely under the control of the Department for Education, then significant savings have to be made in the general fund, which today’s statement covers, to make up for it. That has been dealt with in recent years by an annual renewal of a disregard, which essentially says to the accountants and monitoring officers in local authorities, “You simply have to allow the DfE to carry this forward, and don’t allow it directly to impact on your council tax every year.” However, there is no absolute certainty about the long-term position with the impact of the dedicated schools grant.

While the efforts being made by local authorities, borrowing against their own revenue budgets to fund an expansion of capital investment to create more SEND school places—the subject of a Westminster Hall debate by my constituency neighbour, hon. Friend Steve Tuckwell this afternoon—will begin to have an impact in bringing those costs down, it remains a significant financial risk to local authorities. It would be helpful to hear, from the Minister today if possible, but certainly from the Government before too long, that that will be addressed and there can be some certainty for local authorities on that long-term position, not least because of the impact it has on the balances held by local authorities around the country.

It was great to hear Mr Betts refer to public health, which remains a key responsibility of local authorities. The covid pandemic rather brought that into the light once again, and the capacity of local authority public health team test, track and trace services, which have been there for many years, was critical to the national response to covid. It also highlighted the fact that, as a country, we went into that pandemic with a population that was, on the whole, a bit less healthy than in many comparable countries. Continued investment in that public health function, to ensure that our children in particular are able to enjoy a better degree of general health in the future, will make us much more resilient as a country in the face of future such challenges.

Turning to the local government funding formula, it is important to recognise that, as all hon. Members reflect, one major challenge in its impact on our constituents is the enormous historical inequity in the way the formula operates. That has a number of different manifestations. Many Members have talked about rural versus urban and suburban impact. Having served, alongside several other hon. Members in this Chamber over the years, at the Local Government Association, that was a pretty much annual subject of lobbying to Ministers, and a number of studies were done on the rural/urban/suburban differential.

The reason that many of those studies did not see the light of day is that the conclusion was that there was not, in the end, much difference—that the challenges that arose from high degrees of density, particularly the consequences for the delivery of all kinds of public services, were pretty much in balance with the equivalent challenges that arose from a greater degree of geographical sparsity in rural areas. Those studies tended to look at the costs of a whole variety of public services.

What is also clear, however, is that the move to significant rises in council tax will raise significantly different additional amounts in different parts of the country. I represent a constituency in a relatively prosperous London suburb, covering two local authorities. However, even in London, with 33 local authorities, we see a differential. When the last calculation was done, a 2% rise in council tax would create, for the local authority that generated most of its money from council tax, which at the time was Richmond, an additional 1.8% increase in its revenue budget, or disposable money to spend. In comparison, the City of London, which was largely dependent on Government grants, would see an additional 0.02% increase in its disposable income as a consequence.

Across the country we see that effect magnified. The ability to raise money of a local authority with a large number of band A properties will be much less than that of a local authority with band G and H properties, such as the constituency I represent. While it will help, therefore, it will not be a long-term solution, and we need to find a way to address the differentials for the long term.

I want to express my strong support for Ministers in the Department and for our Prime Minister, who came in for a bit of criticism for saying he wanted to get to grips with the way the funding formula has historically divided up funds. I spent my time as a councillor during all but one year of the last Labour Government and then for most years of the coalition. Every year was challenging, but there was enormous frustration during those years of Labour government. Most additional funding was not placed, as we are debating today, within the core funding settlement; it came in the form of additional grants that were routed to local authorities based on needs that were not reflected in the statutory obligations of the local authority.

A local authority for a seaside town with lots of elderly people to whom it had a statutory obligation to deliver adult social care, or a local authority in an outer London suburb with many children with significant care needs to whom it had a statutory obligation, got no extra funding at all. However, cities in certain parts of the country—although there was perhaps genuine poverty and housing need that had to be address—often had more money than they could possibly spend.

Many local authorities would have spent every single one of those years having to make cuts to statutory services while being given additional grants for things that were less of a priority. It is enormously welcome that the Government are beginning to get to grips with that by saying that the way in which the money flows must first reflect the legal obligations that Parliament has placed on local authorities. If we in this House say that adult and children’s social care must be delivered to a certain standard and driven by certain costs, we must ensure that the money is flowing in that direction.

Let me gently push back on the couple of Members who mentioned equalities. I had the joy of being a peer reviewer for the equalities standard for local government during my time as a councillor. There has been criticism, or perhaps an implication, that councils are wasting money in that area. One reason that councils do things such as equalities impact assessments is to avoid expensive legal challenges of the kind that used to be extremely common, that cost taxpayers huge amounts, and that obstructed reform, particularly of social care services. If officials at the town hall are ensuring that contracts are tendered in a way that reflects the diverse needs of a community and means that they will not be tangled up in years of legal challenges based on the Human Rights Act 1998 or any other element of equality legislation, that increases the efficiency of service delivery by that local authority. We should be cautious about assuming that if it comes with an equalities badge, it must, in some sense, be a waste of money.

Funding reform will be enormously welcome across the country. Let me set out the key things on which I ask the Minister to reflect as he embarks on that process. First, the work that has already started, to ensure that local government funding reflects the cost drivers arising from legislation passed by this House, is critical. If we say, “This must happen and must be done by local government,” we must ensure that the resources are there for the delivery of that thing, otherwise we create an unsustainable and unbridgeable gap between our constituents’ expectations and the available funding.

As the bigger picture of reform is taken forward, I suggest that we look at the role that planning gain will play in how local authorities are funded. Despite economic development being an enormous priority for our Government and our country, most forms of development remain a net cost to local authorities. In Hillingdon, we certainly had that spelled out to us starkly in respect of Heathrow airport, the campaign for expansion and the national debate about whether that was an additional benefit to UK plc. However, it was extremely clear, especially because the business rates all went to central Government, that the expansion of Heathrow airport simply created significant additional cost to the local authority. A recent study estimated that each new citizen moving to a city represented an additional cost of £15,000 per annum to its public services, after all the benefits, including the tax that they pay, were accounted for.

As development proceeds, we must ensure that our constituents see a real benefit, so that local authorities, and Members of Parliament—instead of standing up in this House and saying, “We want more housing and more economic development,” before appearing on leaflets in the constituency opposing it all—can look their voters in the eye and say genuinely, “If we get this new factory, it will be disruptive, but the money from it will mean that we get a new bus service or an improved GP service.”

The Minister will be looking at a lot of detail, but I ask him to reflect in particular on the impact of funding temporary accommodation costs from local authorities’ general fund. The housing revenue account is ringfenced, and we know that that comprises both the rents that are paid by local authority tenants and several other funding streams. However, the fact that it is ringfenced and often significantly in profit has encouraged Governments in the past to look at it as, for example, a source of funding borrowing to invest in housing. The temporary accommodation challenge that we face—especially because of the large numbers of people arriving in the UK over fairly short periods of time, exacerbating some pre-existing challenges—is significant and acute. I urge the Minister to look at whether some additional flexibility around the housing revenue account could begin to relieve some of the pressures on the general fund referred to in the motion.

I finish my remarks by thanking the people who serve in all local authorities, in particular those who serve as councillors in my constituency and lead my two local authorities. The feedback that I receive from constituents, despite all the potential gloom and doom about local government, continues to be extremely positive and is often improving: people see that their streets are becoming cleaner and their environment is being cared for. That is incredibly important to them—often far more important than the issues we are debating in this House—and we owe those councillors a huge debt of thanks as fellow elected politicians.

Photo of Rachael Maskell Rachael Maskell Labour/Co-operative, York Central 4:35, 7 February 2024

It is always a pleasure to listen to David Simmonds, and to all hon. Members who have made the case for the real reform we are seeking from the Minister today. I appreciate his listening to the debate.

City of York Council is a small authority, but like so many, it is on its knees. The last Lib Dem-Green administration drained the reserves, and therefore real pressure has been put on the new Labour administration. I am grateful to Councillor Claire Douglas, who has taken up the leadership in York, for her work to try to address the big issues of inequality facing our city by driving through innovation—not least the already-delivered lifting of the blue badge ban, delivering free school meals into schools where there is the greatest deprivation, and reforming services.

However, it is apparent to us all that not only is local authority funding insufficient, but the funding formula itself needs addressing. It is just sad that we have had to wait 14 years to get to this point. We really need that reform to be brought forward, and I agree that if there can be cross-party talks—even at this late hour—we would welcome them, because meeting statutory requirements will clearly be incredibly challenging for all local authorities. While York, unlike other authorities, will scrape through this year and avoid a section 114 notice, we know that the starvation of funds from central Government has meant that the city is under significant stress.

If we do not address the funding formula, we are all going to struggle, and this is not just about local government. The design of the formula and how it operates crosses all areas, and therefore I ask the Minister to consider it with other colleagues. It is not working for health, education, the police, fire, or the broad rental market area, which I will turn to shortly. That puts more and more pressure on local government, as it has to integrate its services more with those of others while addressing all the challenges.

York is by no means the poorest place, but it is by no means the most affluent. We are a post-industrial city in the north and experience many challenges, yet we are the worst-funded upper-tier authority if all the services are added together. That does not ring right—and it is not right, because we have some of the deepest areas of deprivation in the country. We are the eighth lowest upper-tier local authority on a stand-alone basis. In real terms, my local authority is £33 million worse off than in 2010, but accounting for the rise in service demand in adult and children’s social care, we have lost £40 million in much-needed funding since 2010.

If we look at education—I am grateful for what was said about the dedicated schools grant—we have the 17th lowest funding in the country, which again does not meet the area’s needs, and we sit in the bottom third for pupils with special educational needs and disabilities, which causes real stress. We need the Education Secretary to step up and really invest in those children, because we are seeing a significant rise in the number of children with SEND, and in York it is higher than across the country. We need to understand why that is, but also how we can fund it. School transport falls to local authorities, and it is another area under significant stress. Children need EHCPs to get additional services from different agencies, and 98% of appeals are successful, yet the costs to local authorities, parents, children, schools and all the agencies do not add up. We therefore need reform to ensure that those children get the necessary timely support.

We also have an ageing population. Like rural areas, it happens in urban areas too, but the age is rising faster in places such as York, and the pressures falling on social care budgets are significant now. In the spirit of cross-departmental working, we know that the Health Secretary has invested heavily in emergency departments at the front door of hospitals, but it is the back door of hospitals that need the funding, and that is for social care. A quarter of the patients in York Hospital are waiting for discharge. If that can be sorted out, our NHS would be able to function. Again, that spirit of cross-party working is needed in the light of where we are today, and such a plan would take the pressure off elsewhere on the wider piece of Government funding.

The same goes for police and fire funding, and I must highlight—I had a useful conversation with a former Home Secretary about this—that if we do not fund local authorities correctly for youth services, we will be paying for that out of the police budget. All these things are interconnected, which is why I urge the Minister not just to look at local authority funding, but to look at this in the round. Of course, public health is another example, and it moved into local government for a reason, as Professor Sir Michael Marmot would highlight, to address the social determinants of poor health, ensure people can have greater equality and address issues around having longer healthy lives. However, if we are not making the crucial right investments, we will again see the fallout in other services.

I want to understand why we have this real disparity in the funding formulas. We have heard today about the council tax regime, which was introduced in 1991, but business rates are another massive challenge. I am pleased that those on our Front Bench have said they will reform that area, because we need that reform urgently.

The Minister will know that York is a place that floods. I am really grateful for the support we have had to build flood defences, but we now fall below the threshold for triggering the Bellwin scheme. Those businesses that still flood are not getting the support they would otherwise have had, so it seems as though there is almost a perverse incentive. It would be really helpful not only if he looked at that, but also if he would ensure that there is business rate relief for flooded businesses while they are not able to trade. I would be grateful if he will comment on that.

Turning to the broad rental market area, York is an incredibly expensive place to live. Bearing in mind what said about it being a post-industrial city, the costs are driving people out of our area. We do not have the supply of social housing that we need right now. As a result, the local housing allowance is just £650 for a two-bedroom property, yet the cost in the private rented sector is £1,026. The disparity is such because the broad rental market area is just too broad. As a result, people are being pushed out, which is impacting on our economy. It is a comparatively low-wage economy, with the gig economy, the hospitality sector, retail and tourism, and the disparity is putting more pressure on local authorities to find support for housing and, increasingly, to address homelessness issues as well. Again, these things are out of kilter, and we need to bring them together to ensure that the system works for local government.

I look at the inequality between York Outer and my constituency; the centre of York is where the greatest strains are felt. Those strains are clearly being felt by families right now, and I urge the Government to carry forward the household support fund. Perhaps the Minister could have a word with the Chancellor about that ahead of the forthcoming fiscal event; it would really help our city. There was a debate on the subject in Westminster Hall last week. That disparity needs addressing for people in my constituency.

It was disappointing to hear that the fair funding formula will not happen in this Parliament, and that we will have to wait for the next Parliament—my hon. Friend Jim McMahon also heard that message clearly—because that needs to be brought in across the piece. Look at health, and what happens under the primary health trusts, or the primary care groups, as they were back in the day. My predecessor, Sir Hugh Bayley, made the case that York, which was lowest funded in that arena, lost out, and that put pressures on local government. It is ironic that the Carr-Hill health funding formula was devised in the Centre for Health Economics at the University of York, yet somehow it perversely means a disadvantage for York.

In recent times, real pressure has been put on services, and I wish to highlight what that means to York. There has been a 15.8% increase in the cost of children’s social care. I congratulate our team on the council, which has cut agency spend. I met the director of children’s social care the other day, and he said that the team has two agency staff left, and that the department has cleared out agency staff to cut costs. Where will the additional headroom come from to pay for that? The cost of adult social care has risen by 12.5%. The cost of social protection housing services has risen by 26.1%, yet the minimum wage increase was 9.7% last April and 9.8% this April. It all adds up. The average rise that local authorities get is around 4%. That is squeezing resources more and more, and the disparity is taking its toll. We must protect those most in need, and certainly the voluntary and community sector to ensure that we keep its vitality. Clearly it delivers so much. We need a cushion, not a knife, and the fact that we face the challenge of cuts, rather than getting protection, is extremely worrying.

In his opening remarks, the Minister talked about other sources of revenue that local authorities have had, including levelling-up funding, the towns fund and the high street fund. York has not had any of that money. It seems that whether it is received depends more on political affiliation than need, so we have missed out on that, and additional resources have not been put in place. After 14 years, we need not only more funding in numerical terms, but a funding formula that works. If that is for the next Government to do, we will deliver it; it is so urgent and overdue. My constituents are smart; they know what is happening, and they are concerned. They are feeling the pinch. They are being stretched as far as they can, and we must ensure that they get opportunities. My constituents deserve so much better; my constituents deserve a Labour Government.

Photo of Steve Double Steve Double Conservative, St Austell and Newquay 4:48, 7 February 2024

It is a pleasure to contribute to this debate, and to follow Rachael Maskell. I was delighted when the Under-Secretary of State for Levelling Up, Housing and Communities, my great hon. Friend Simon Hoare, was appointed to his ministerial role, not just because he is a very good friend of mine—indeed, he was a friend before either of us was elected to the House in 2015—but because ever since he was first elected, he has been a warrior on the Back Benches for rural councils. It is therefore no surprise whatsoever to me that he has engaged with colleagues in recent weeks on the funding settlement for councils, and particularly the allocation for rural councils. He has worked tirelessly to secure additional funding. I place on record my thanks to him for how he has listened to colleagues, and for his work to secure additional funding from the Treasury. That has been hugely welcomed in Cornwall, including by Cornwall Council. The additional almost £6 million that we will receive does not completely fill the gap that we were facing, but it has certainly been a huge help and has gone a long way to address the funding concerns we had, going into the next financial year.

That funding, however, does not remove the long-term challenges we face in Cornwall in delivering public services. As you will know, Mr Deputy Speaker, I had an Adjournment debate two weeks ago, in which I clearly laid out the many challenges we face in Cornwall. I will not bore the House by repeating everything that I said on that occasion, but we face a perfect storm of a unique combination of factors in Cornwall. First, we have an ageing population. I believe that 24% of the population is now elderly, which is more than 6% higher than the national average in England, and that is putting pressure on social care. Cornwall Council is due to spend £256 million in the coming year on delivering social care. That is one third of its revenue budget, and that is clearly an unsustainable position for a unitary council.

Secondly, we have the challenges that come with being a rural and coastal county on a long, narrow peninsula, and that poses challenges for delivering services. Although I very much welcome the additional funding being made available through the rural services delivery grant this coming year, the position is not sustainable in the long term. We need a fair funding review to address the needs and challenges that rural councils face in delivering services in the future. We were expecting that in 2021, but for understandable reasons, in the light of the pandemic, we could not do that. However, I would not be being honest with myself if I did not say that I am disappointed that we have not yet delivered it. I urge the Government to come forward with that review as soon as possible.

In Cornwall, we face the ongoing challenge of trying to meet ever-growing demand with the resources we have. That is placing more and more demand on the council tax payer. Council tax in Cornwall is now 39% higher than the English average. It is simply unfair that council tax payers in Cornwall have to pay a far bigger proportion of their income to the council to deliver local services than those in other parts of the country, particularly those in urban areas. I gently say to the shadow Minister that his proposals seemed to suggest that he thinks that funding from Government grant, rather than council tax, is not taxpayers’ money. The news is that they are both taxpayers’ money. The issue is where the balance sits.

Money for local government in the funding settlement is not free money. If we want to increase that funding, clearly we have to pay for it somehow, and I assume that the only way that the Labour party proposes paying for that is by raising taxes, so the taxpayer would pay. I am calling for a fairer distribution of the funding that is available. I am not necessarily talking about hiking the Government’s contribution to local government funding, but there should be a fairer distribution of the funding that the Government make available, to accurately reflect need, demand, and the cost of delivering services in rural areas. I massively welcome the rural services delivery grant and the uplift announced for this coming year, but it is not a long-term solution, and we need to address the fundamental issue of funding for local councils in rural areas.

I will add a final point on temporary accommodation. We face a massive issue in Cornwall. Many people see Cornwall as a wonderful place to come, but every year many people come to Cornwall who require emergency housing, which puts a huge demand on the council. The last time I saw the figures, I think we had about 1,000 people in Cornwall in temporary accommodation; that is unsustainable for the council. The cost of delivering that accommodation in a largely tourist area is astronomical because of how people who need temporary accommodation have to be housed.

We have a particular problem in St Austell; over many years, the council has sought to house a disproportionate number of people in temporary housing and supported accommodation in the town. The sheer numbers placed there by the council has had a huge impact on the community. Local residents regularly tell me that although they are happy to play their part and provide their fair share of accommodation, which is clearly needed, they are unhappy when they are expected to provide a disproportionate amount. The council really needs to look at that. It is disturbing that when I asked the council for accurate figures on how many people are placed in St Austell by various providers, it did not seem able to give an answer; we just know that it is an awful lot. That has an impact on local services, particularly GP services and the police, and the associated antisocial behaviour is getting to a point where local people are saying that they have had enough. We need the matter addressed, so that the number of people that the council places in St Austell is reduced as soon as possible.

I very much welcome the uplift announced in the funding settlement for the coming year; that is hugely important to Cornwall Council. However, I still await the fundamental review of the funding formula, and a fair funding settlement for Cornwall Council, so that, going forward, we do not rely on extra pots of money being announced.

Photo of Sarah Dyke Sarah Dyke Liberal Democrat, Somerton and Frome 4:56, 7 February 2024

I was pleased to debate local government finances in Somerset with Chris Loder at the beginning of the debate, but it would have been better if some of his Somerset colleagues had been here to do that with me.

It is easy to criticise local government and burden it with blame, but let us face it: it is the perfect scapegoat to distract us from the real-terms cuts inflicted by this Tory Government. I am proud to be an active Somerset councillor, and have had the pleasure and honour of serving my local community both on Somerset Council and in this House. I know councillors of all colours are working hard in Somerset to deliver for their residents, but the funding system for local government is simply broken. I am desperately concerned for the future of local government; it needs major reform.

I have spoken on multiple occasions about the issues facing Somerset Council, because of the national problems facing all local government. The council had to declare a financial emergency just last year owing to a £100 million funding gap for 2024-25. The Government have offered a £5 million payment to try to plug the gap, but that is woefully inadequate. While the additional support through the financial settlement is welcome, it is simply not enough. I thank the Under-Secretary of State for Levelling Up, Housing and Communities, Simon Hoare, for engaging with me and the council; that engagement has been very much appreciated across the county. However, unless the Government can provide substantially greater funds, this will not work.

Photo of Roger Gale Roger Gale Deputy Speaker and Chairman of Ways and Means

Order. Richard Foord has been in the Chamber for about five minutes. I do not expect hon. Members to walk into the Chamber and seek to support colleagues through an intervention.

Photo of Sarah Dyke Sarah Dyke Liberal Democrat, Somerton and Frome

We need fundamental change to the way we fund local government. Across the country, we have an ageing population; in Somerset specifically, it is forecast that the 75-plus age group will double over the next 25 years. The demands of adult social care are becoming more complex and the costs are rising. We can no longer fund such an important and expensive service through council tax based on house prices from more than 30 years ago.

The issue is particularly difficult in Somerset. Historically low council tax rates and a damaging six-year freeze under the previous Conservative administration have left the band D rates in Somerset almost £260 lower than in its contiguous neighbour, Dorset. The rurality of Somerset also poses specific challenges because it costs more to provide services in rural areas. The council just cannot make enough money locally to fund adult social care. When I spoke recently to the leaders of Somerset Council, they described the situation as grim. They have to explain to residents why they will be paying more in council tax but receiving less, as cuts to discretionary services are being considered.

This is a nationwide issue that requires a nationwide solution. Nine councils have essentially gone bust since 2018, and the recent report by the Levelling Up, Housing and Communities Committee portrayed the critical situation facing local government. I am thankful to the Committee for its report, which recommended urgent reform to the funding of local authorities. I know that many of my colleagues in local government share those concerns. Some think it is now impossible to solve the crisis in local government through local funding.

I want to take this opportunity to highlight what our future could look like if we fail to reform local government, provide both statutory and discretionary services and look after the communities that we hold dear. Our communities will be left with high streets full of boarded-up businesses as the outdated business rates system puts pressure on entrepreneurs without adequately funding councils. Our fields will be littered with household waste from fly-tipping as councils shut down recycling centres, our streets overflowing with rubbish from uncollected bins. Our town centres will be bereft of quality libraries, and our roads full of even more potholes. As councils struggle more year on year to fund adult and children’s social care, SEND and housing, those services will undoubtedly deteriorate. Much of what I have mentioned is already a reality for millions around the country—it is simply terrifying to think how much worse it could get.

Council leaders have told me that we need a long-term solution, but politics is a short-term game. The Government have been reluctant to approach this issue seriously with a long-term plan, as evidenced by their unwillingness to follow the recommendations of the Levelling Up, Housing and Communities Committee and to publish a 10-year plan to tackle the long-term funding of adult social care.

I conclude by calling for cross-party unity to work together to solve this issue, which we must do for our communities. I know that councillors of all colours want to continue to provide the best level of services for their residents, and that councils of all colours are aware of the specific challenges they face. We must ensure that councils are adequately funded in the long term so that essential reforms are realised.

Photo of Chris Loder Chris Loder Conservative, West Dorset

I thank the hon. Lady for giving way. I appreciate the point she makes and agree with much of what she says. I just wanted to briefly say—

Photo of Roger Gale Roger Gale Deputy Speaker and Chairman of Ways and Means

Are we saying that the hon. Lady had sat down?

Photo of Roger Gale Roger Gale Deputy Speaker and Chairman of Ways and Means

In that case, you cannot possibly have an intervention. I call Peter Aldous.

Photo of Peter Aldous Peter Aldous Conservative, Waveney 5:04, 7 February 2024

This settlement is welcome because for many councils it staves off financial armageddon. However, as we have heard, we need a far more strategic approach to the funding of local councils and to how they deliver the crucial services that they provide. Year after year we go through an annual routine of the Government issuing a provisional local government funding settlement in December, which presents many councils with significant challenges. That is followed by an intense period of lobbying by councils, their representative bodies and MPs. The Government then find some more money to solve the short-term challenge. We then agree the settlement, as we will do tonight. Life goes on, and we repeat the whole exercise again the next year. I think there is consensus across the Chamber that we must break out of that cycle.

A county such as Suffolk faces significant challenges, including an ageing population, which means that there is an ever-increasing group of vulnerable people who require care and support. It is right that my right hon. Friend the Chancellor increased the national living wage in his autumn statement but it was wrong that, in the first instance, councils such as Suffolk were asked to fund most of the increase themselves from their existing resources. We need to pay properly and support the thousands of workers going out in all weather conditions to care for and assist vulnerable people in their own homes.

Like Cornwall, Somerset and Dorset, Suffolk covers a large geographical area. In such circumstances it is expensive to deliver services, including, as we have heard, home to school transport and SEND provision. Faced with those challenges and an inadequate provisional settlement, Suffolk County Council cut its funding for arts and heritage. The latter in particular leaves the Waveney and Lowestoft area inadequately served and resourced with regard to archives and records. I am sure that I will return to that issue in due course.

My right hon. Friend the Levelling Up Secretary is right to set up an expert panel to advise on financial stability, and to ask local authorities to produce productivity plans, but more is required. As I have said, we need to move away from the current short-term approach to local government funding. To do that, I suggest the following changes should be considered. First, as many Members have said, there should be multi-year financial settlements rather than the annual settlements that we have had for the past six years. Secondly, we must recognise the added cost of delivering services over large rural and coastal areas such as Suffolk. Thirdly, working in conjunction with the Department of Health and Social Care, the Department for Levelling Up, Housing and Communities must provide a sustainable long-term plan for social care, with care workers being fairly paid and provided with proper career paths.

There should also be a review of statutory responsibilities in such areas as home to school transport, to ensure that they are properly funded. Finally, as we have heard, the Government should carry out the relative needs and resources review—the so-called fair funding review. The review should look at not only the opaque and complicated formulas used, but the data used for the assessment of relative needs, which, as we have heard, dates way back—much of it to the last century.

In his summing up, I hope that the Minister, my hon. Friend Simon Hoare, who has taken extremely well to his new role, will be able to herald in the long-term strategic approach that local government so desperately needs.

Photo of Jane Hunt Jane Hunt Conservative, Loughborough 5:09, 7 February 2024

Let me first declare an interest. Although I am no longer a borough councillor, I was until last May, and I understand that I still have to register that until 12 months have passed.

I want to thank the Department for Levelling Up, Housing and Communities and Ministers past and present, because the £600 million is a significant increase and is very welcome. I also thank Leicestershire County Council, Charnwood Borough Council, my parish and town councils, and others throughout the county. My colleagues there do wonderful work, as do the officials, and I greatly appreciate what they do.

I will not go into too much detail about the issue of fairer funding, because it has been well rehearsed. Since 2019 and, I understand, before I entered the House, all the Leicestershire MPs have lobbied Ministers continuously, including many a Secretary of State and many a Chancellor. I will say, however, that if we are talking about a fairer funding formula, the operative word is “fairer”, and that standard is not being met at present. If something could be done about this in the very near future, I would be most grateful.

The arguments about rural areas have also been well rehearsed. I thoroughly support what was said by my hon. Friend Chris Loder, and it is always worth listening to my hon. Friend David Simmonds. Many of his points were exactly the points that I was intending to make. I do not like to moan—I prefer to come up with a solution if I possibly can—so I want to suggest something along the lines of what my hon. Friend Steve Double said in the police debate earlier this afternoon. He talked about the use of police resources by other Departments, such as the Department of Health and Social Care, and I think that the same applies to the use of council resources by the Department for Levelling Up, Housing and Communities.

Rachael Maskell alluded to this, in the context of education, health and care plans. Last Friday evening two of the eight slots in my constituency surgery were about EHCPs, and on the previous Friday three of them were. The county council has a statutory responsibility to deliver EHCPs, but the Department of Health and Social Care can say what it wants about the “H” element without having to deliver the resources. The county council feels that it has to deliver them itself, and that puts additional cost and time pressures on the 20-week window within which it must finalise an EHCP. I should like something to be done about that, so that the Department that asks for something actually pays for it.

Exactly the same happens in my borough council in respect of supported housing benefit. Because some charities in my constituency are not registered social landlords, the council cannot claim the whole of the benefit back from the Department for Work and Pensions, and is therefore out of pocket by about £1.5 million, which is simply unsustainable on a budget of about £16 million a year. Instead of the customers of Departments such as the Department for Levelling Up, Housing and Communities—the councils—paying for those things, the Department that wants them to be done should pay.

In his opening speech, my hon. Friend the Minister for Housing, Planning and Building Safety talked about spending on frontline services. I agree entirely with what he said, but I also believe that if councils spend money on things that they want to do, they should not necessarily be unable to get money back from Departments.

Photo of Liz Twist Liz Twist Shadow Minister (Levelling Up, Housing, Communities and Local Government) 5:13, 7 February 2024

For 14 years Ministers in this Government have come to the House to lay out their plans for local government finance, and for 14 years there has been a constant theme: sticking plaster policies. Instead of providing the certainty and stability that local government is crying out for, the Government have again set out proposals that have been chopped and changed in admission of their own failure. Councils of all political stripes are left shelling out millions and communities and service users are paying the price, but I do not believe for a moment that Ministers have taken the steps necessary to end this crisis—a crisis compounded by spiralling inflation and a failure to grow our economy, where councils are spending eye-watering amounts on temporary accommodation, and where at any moment the next domino could fall and another council could be on the brink of collapse. This is not sustainable. Local authorities need a Government who will support them with a long-term plan, because we are under no illusions about the scale of the problem.

Photo of John Redwood John Redwood Conservative, Wokingham

Given the need for a long-term plan, were Labour to win the election, how much extra would local government get in the first year of a Labour Government?

Photo of Liz Twist Liz Twist Shadow Minister (Levelling Up, Housing, Communities and Local Government)

As I will come on to say shortly, we will have a review to look at the long-term plans. We understand the problems that local government is facing.

We have heard from hon. Members on this side of the House, including the Chair of the Select Committee, my hon. Friend Mr Betts, who set out a comprehensive summary of the issues facing local authorities and councils generally and thanked councils and councillors for carrying on and doing the work they need to do to run the councils. He also reminded us of the impact of the public health cuts that local authorities have seen. My hon. Friend Rachael Maskell referred to issues in her local authority and to the gap between rising need and available funding. As many other Members also mentioned, SEND funding is an issue, as is the impact of public health cuts.

We all understand that there is no magic wand and no quick fix, but if the Government are prepared to work with councils to build from the ground up and to deliver the services that taxpayers need and deserve, I truly believe that we can bring an end to this crisis. However, over this last decade the Government have abandoned any interest in this kind of co-operation and instead torn down the protections that were meant to prevent a crisis like this. As we have heard, they have ripped away any financial oversight of local council spending, scrapped the Audit Commission and pushed councils to borrow more and more. They have also left councils without a functioning early warning system, meaning that they cannot even sound the alarm when they are struggling.

We cannot go on like this, and that is why a Labour Government would instead prioritise stability and greater certainty, unlocking multi-year funding settlements to give local taxpayers better value for money, fixing our broken audit system to restore genuine oversight and partnership with local government, and prioritising certainty and stability over this Government’s narrow and short-term fixes to problems of their own making.

Photo of Simon Hoare Simon Hoare Chair, Northern Ireland Affairs Committee, Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities) 5:18, 7 February 2024

It is a pleasure to wind up for the Government in this debate. I will just say gently to one of my shadows, Liz Twist, that if the situation is as bad as she and Jim McMahon have painted it, I am surprised that with the exception of those on the Front Bench and Mr Betts—I know, as a former Select Committee Chairman, that one is obliged to take part in these debates when they relate to one’s Department—we have, against all this horror, had only one Labour Back-Bench contribution. I thank and congratulate Rachael Maskell—at least there is one Labour Member who is concerned about local government and who is not obliged to come and talk about it.

What an exciting prospect we have—the nation sits agog! After 14 years of opposition, a review to look at long-term plans is what the hon. Member for Blaydon tantalisingly holds before the House and the electorate. After 14 years of opposition, one has to ask what on earth they have been doing with the time. A review to look at long-term plans! As always, the Labour party is quick to critique and slow to deliver. What a contrast to the speeches we have heard from Conservative Members.

Photo of Clive Betts Clive Betts Chair, Levelling Up, Housing and Communities Committee, Chair, Levelling Up, Housing and Communities Committee, Chairman of the House of Commons Members' Fund

I take the Minister back to the beginning of the debate, when the Minister for Housing, Planning and Building Safety talked about doing a long-term review of local government finance in the next Parliament. The difference, of course, is that the Government have been in power for the last 14 years and could have done something about it.

Photo of Simon Hoare Simon Hoare Chair, Northern Ireland Affairs Committee, Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

The hon. Gentleman and I have discussed this on many occasions, and I know he broadly agrees with me on this point. Local council chief executives and leaders would have come at the Department with pitchforks and flaming torches if we had dumped a 200-page consultation document on their desks at a time when they were rallying to support their communities during the covid crisis.

This year, as last year, the Government have rightly set our focus on stability, certainty and security. I believe this local government finance settlement delivers on all three.

Photo of Simon Hoare Simon Hoare Chair, Northern Ireland Affairs Committee, Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

No. If the hon. Gentleman is not here for the opening, he cannot take part in the summing up. He has tried that trick before, and it did not work then.

As we heard from the hon. Members for North Shropshire (Helen Morgan), for Sheffield South East and for Blaydon, some of these issues came through in the consultation and in the engagement: support for special educational needs; a long-term view of adult social care; and reform to the funding formula, which so many hon. and right hon. Members have referenced. A reformed funding formula would provide stability and security to our local authorities, and the best way to deliver it is through cross-party working. That is what this House owes them.

When I was asked to take on this job, I had no idea of the complexity and time required to arrive at a local government finance settlement. I thank all colleagues who came along to take part in my parliamentary engagement, which was hugely helpful. I pay tribute to my private office and to officials in the Department—long hours, huge work. I pay particular tribute, not least because her note tells me I have to, to Victoria Peace for all her hard work, as well as to Kate, Nico and others. It has truly been a team effort.

I also thank the Chancellor of the Exchequer and the Prime Minister for listening to the case that the Secretary of State and I took to them on revising the formula. We said that we would listen, we did and we have acted. Those are the hallmarks of prudent, listening, caring, one-nation conservativism, and it is writ large in this local government finance settlement.

I also pay tribute, as so many others have, to the work that councillors and council officers do, day in and day out, to deliver to make the lives of some of the most vulnerable people in our society more bearable and a little better, and to create a sense of place in which people wish to live. We salute all of them. Are all of them brilliant? Of course not, but not all of us are brilliant either. But I know that, day in and day out, they focus on doing their best.

I have been called many things, but the hon. Member for Sheffield South East called me “genuinely helpful”. My hon. Friend Chris Loder called me “the great rural tsar” and a “knight in shining armour”. And my hon. Friend Steve Double called me a “warrior” for rural councils. I am grateful for those comments, and I look forward to their being carved into my headstone in due course.

Photo of Simon Hoare Simon Hoare Chair, Northern Ireland Affairs Committee, Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

Not too soon, I hope.

I could bore the House with the figures for the local authorities of each Member who has contributed, but those figures are on the public record. They are all going in a positive direction. I think we have started to make significant inroads into addressing those concerns, by turning our thinking to the common themes that have ranged through this debate. The trajectories on SEND and adult social care show no sign of abating, and we need a long-term solution. The formula does need reforming and the Government are committed to doing just that in the next Parliament.

I say to everyone that the transformation and productivity plans, which we see as a key part of the settlement, are all part of underscoring that “Agenda for Change” is a process, not an event; it has to be iterative and organic, because, as my hon. Friend the Member for St Austell and Newquay mentioned, we have no money and councils have no money save that which we raise through the taxpayer. We have a duty to ensure that we deliver the biggest bang for each and every buck.

My hon. Friends the Members for Hastings and Rye (Sally-Ann Hart) and for West Dorset, Sarah Dyke, and my hon. Friends the Members for Loughborough (Jane Hunt) and for Waveney (Peter Aldous) all made important points about how the formula review must ensure that we take into account the differentials in the demand of need in delivering services in a rural or coastal area. I do not believe that we would be right in any definition of the term to say that “need” in an urban area outranks that in a rural or coastal area, or vice versa. Need is need and our local authorities want to play their part in making a difference on that. My hon. Friend the Member for Loughborough was not the only one, but she was right to mention the need for other Departments, when they create a new burden or duty on local authorities, to take into account the budgetary impacts that those services have, and I certainly take that on board. My hon. Friend the Member for Hastings and Rye made that point as well and I agree with all who have made it.

The hon. Member for York Central asked a specific question about the flood recovery framework and business rates. I am delighted to confirm to her that 100% business rate relief is available to business for a minimum of three months where they have been flooded and that that relief can continue to an agreed date until the business is able to be reoccupied for trading. I hope that that gives some comfort to her and to her constituents who have suffered from flooding issues in the recent time.

A lot has been done, services can continue, but the need for reform, cross-party working, blue skies thinking and significant change remains. This settlement is a generous one, with more than half a billion pounds or, I should say, “just” half a billion pounds, available for children’s services and adult social care. My hon. Friend the Member for West Dorset has long advocated for the rural services delivery grant and that is up now to its highest level, at £115 million. I know that rural councils, including that of the hon. Member for North Shropshire, will have welcomed that as a useful means of supporting their services.

We understand, applaud and appreciate the important contribution that councils make across our country, and the difference they deliver for their communities. We understand and are going to work with the sector, sector leaders, council leaders and others to ensure a bright, secure and stable future for local councils. We are providing a £600 million uplift, and, on average, a 6% to 7% increase in core spending power for most councils. This is a fantastic opportunity for councils to continue to deliver and for us to support them. I close with the point that many have made: we will deliver better for our constituents when central and local government work in partnership, matched horses pulling in the same direction, serving our communities and making a vital difference for those who need it. I commend the settlement to the House.

Question put and agreed to.

Resolved,

That the Local Government Finance Report (England) 2024–25 (HC 318), which was laid before this House on 5 February, be approved.

Resolved,

That the Referendums Relating to Council Tax Increases (Principles) (England) Report 2024–25 (HC 319), which was laid before this House on 5 February, be approved.—(Simon Hoare.)

Resolved,

That the Referendums Relating to Council Tax Increases (Alternative Notional Amounts) (England) Report 2024–25 (HC 320), which was laid before this House on 5 February, be approved.—(Simon Hoare.)