To ask His Majesty’s Government how the pressures on local authorities to deliver additional housing and employment growth are factored into the Fair Funding Review.

We have already taken important steps to ensure that local government is able to support our Government’s ambition to build 1.5 million homes in this Parliament, to tackle the housing crisis and to kick-start economic growth. The Fair Funding Review 2.0 reforms further incentivise these ambitions through an inbuilt reward in the council-tax calculation and the business rates retention scheme. We understand that local government is at the heart of delivering our growth and housing missions. More details will be published at the provisional settlement later this year.

I thank the Minister for her Answer. Additional housing and commercial property come at a cost to councils in both capital and revenue terms, and more than that raised by the additional council tax. Can the Minister explain why this Government are removing the incentive of retained business rates, which will force many councils—which have done the right thing and supported growth—to raise council tax to the maximum and cut their services?

It is very important, particularly now, that we support local government, after 14 years of successive funding cuts and the battering it came under from the last Government. Through our funding reforms local authorities will be empowered, as key partners, to meet the housing need and help deliver growth across the country. We will reward local authorities for housebuilding, as they will benefit from additional council tax rates for each new house built in their area over the course of the multi-year period. On business rates, we will keep long-standing incentives so that local authorities continue to be rewarded for growth. Through their fair funding review, the previous Government recognised the need for reform, but they did not deliver. We are making good on this commitment and introducing improvements for the first time since 2013.

My Lords, the Minister has just explained that council tax projections for new homes will not now be included in the financial assessment for council income. However, those councils with high deprivation and low economic growth are likely to have below average rates of housebuilding too. Can the Minister explain why the Government are willing to penalise those areas once again?

I do not agree with the presumption in the question from the noble Baroness, Lady Pinnock. For too long, an outdated council funding system, based on decades-old data, has entrenched the inequality of which she speaks—we all know that—with those least able to raise council tax and business rates given less favourable funding settlements. This has left some councils on a cliff edge and communities in deprived areas facing service cuts and rising Bills, as well as being unable to deliver the economic growth and housing that we know those communities need. Some councils in less deprived areas have benefited disproportionately, building up their reserves. Our reforms will reverse this injustice and make sure that councils will be funded fairly, enabling them to deliver for their communities on services and on the growth that we all want to see.

In the part of Devon where I live, there are half a dozen separate building projects. As far as I can see, almost none of them is doing much in the way of affordable housing. What are the Government doing to encourage affordable housing in all such projects?

The noble and learned Baroness, Lady Butler-Sloss, may be aware that the Government have allocated an unprecedented £39 billion of funding for a new social and affordable homes programme. Our ambition is to deliver around 300,000 social and affordable homes over the programme’s lifetime, with a target to deliver at least 60% of the homes under the programme as social rent. This is really important in both urban and rural communities to make sure that we are able to allocate social and affordable housing in those areas. We will be enabling councils to use their right-to-buy receipts to pair up with the funding from the social and affordable homes programme.

My Lords, is it not the case that government funding and support should be based on need and should take into account the ability of the local authority to raise its own resources locally? During the last 13 years, this was moved away from. Are we going back to a similar system to that which operated for many years?

I agree with my noble friend that we need to make sure we realign funding with need and deprivation so that local authorities can deliver for their communities—as I said, the services that are needed and the economic growth that they need. The vast Majority of councils with social care responsibilities will see their core spending power increase in real terms over the multi-year settlement. We will publish our response to the fair funding review and the policy statement and set out our plans for the first multi-year local government finance settlement. That is really important because it gives councils the certainty they need to plan over the medium to long term.

My Lords, while councils will benefit from increased council tax from new homes being built, the cost of providing services to those new homes will not be included in the baseline funding level unless and until there is a reset. Can the Minister tell the House how frequently the Government will undertake that reset so that the cost of providing services to homes is built into the baseline funding level?

I cannot give the noble Lord the exact answer to his question now. We have said that creating this multi-year funding settlement will help local authorities to plan for the future. We will keep in constant contact with our local government community to make sure that the changes we are making are made on up to date data—we have looked at a completely new dataset for the indices of multiple deprivation—because the data that was being used was not up to date. The Government will be working closely with local authorities as we move this forward to ensure that it is delivering the change we all want to see.

My Lords, local authorities remain the biggest funders of arts and cultural services. These are important for growth and employment growth, yet since 2010, spending on these areas, alongside heritage, tourism and libraries, has decreased by more than 50%. While recognising that there are many important pressures on local authorities, will the fair funding review allow for proper reinvestment in this significant area?

I very much agree. I have seen on the front line how cuts to local government funding have affected so much the provision of social activities, culture and leisure in our communities. It is very important that local government has the ability to make provision for local communities in those areas. What happened was that the harder it was for a local council to raise funds, the more they seemed to be penalised through the system. The more deprived a community was, the less likely they were to have the headroom to deliver the kinds of services the noble Earl speaks about. We need to change that, and we are working on reversing that.

My Lords, what assessment have the Government made of the reasons so many local authorities are failing to meet their housing delivery targets? What steps are being taken to support them in doing so?

The first thing we did was restore the mandatory housing targets because, first, it did not make any sense to us. We wanted to deliver an overall target across the country but we were not saying what part in that each local authority played. Secondly, we know there are a lot of pressures facing local planning authorities. We have invested £46 million in this year’s funding to strengthen the capacity and capability to deliver planning reform to enable local authorities to meet their housing targets. We have made a commitment to recruit 300 additional planners, alongside wider planning policy changes—we will be discussing these later this afternoon—and legislative changes. That will help us deliver the housing and economic growth our country desperately needs.

My Lords, my experience as a councillor was that builders and developers would often promise a percentage of social or affordable housing within their building projects and then somehow fail to do that. Are there enough penalties for builders who do that?

We continue to explore this. It is very important that local authorities are able to set in their local plans the targets that they think are appropriate for their local areas. We will continue to explore with local authorities, particularly as we roll out the funding for social and affordable housing, whether there is any more we need to do to make sure that housing is delivered to the targets that each local authority has set itself.