Local Government Finances

Thursday 21st March 2024 Lords Chamber

Motion to Take Note

12:19

Moved by

[Lord Shipley]

That this House takes note of current local government finances and the impact on local communities.

[Lord Shipley (LD)]

My Lords, I thank all those who are taking part in this debate, and I remind the House that I am a vice-president of the Local Government Association.

We have debated local government funding and the impact of cuts in spending on essential public services on many occasions, but things are getting worse. There is a gap in funding in the face of rising costs and rising demand, and it is widening. In its commentary on the recent Budget, the OBR predicted a four-year squeeze for local government services. It said that local authority funding is due to fall from 7.4% of GDP in 2010 to 4.7% in 2028-29. Indeed, just two years ago, it was only 5.1%. The National Audit Office put it another way: between 2010-11 and 2021-22, the real spending of English councils was reduced by 29%.

Council spending has fallen in all services except social care. At the same time, council tax is having to carry a bigger burden. In 2010, council tax accounted for 40% of councils’ core spending power. It is expected to be 56% in 2024-25. We must conclude from this that the Government have passed on the burden to local council tax payers.

On 26 January, the noble Lord, Lord Markham, wrote to me after a discussion in this Chamber on the proportion of councils’ revenue spending on social care. He said that, in 2022-23, 69% of the discretionary service spending of councils with social care responsibilities was spent on social care of both adults and children. Some have a slightly higher figure than 69%; others, slightly lower. It follows that only 31% is available for everything else. It is simply not enough, and the Government have knowingly let, and are knowingly letting, it get worse. They have been forcing up council tax to meet the rising cost of social care.

Social care has two elements to it—children’s social care and adult’s social care. A few weeks ago, the Levelling Up, Housing and Communities Committee issued a report referring to local authorities’ financial distress and said that one cause was higher spending on children’s social care, with high agency costs, high placement costs and rising demand. I know well that the Government are trying to address that issue, but it needs urgent action and I hope the Government will do that. The number of looked-after children has gone up from 68,000 to 84,000 in the last 10 years. I remind the House that the Children and Families Act 2014 introduced new requirements for additional support, but that has never been properly funded and has not kept up with demand.

The Government’s White Paper on long-term reform of adult social care was published in December 2021. They said that they would set out their plans for adult social care by October 2025—four years’ delay. Meanwhile, the Public Accounts Committee recently said that adult social care demand is not being met. Sir Andrew Dilnot recently said that there has been “no serious addressing” of the problem. Many have concluded that this matter must be decided by all-party agreement, led by the Government. I am clear that that is the right approach. After consultation on an all-party basis, the Government should establish their policy for adult social care and then pay for it, rather than forcing closures of neighbourhood and community facilities and services that are used by everyone.

I was surprised to hear the Secretary of State say, when the final settlement for next year was announced in January, that:

“The Government is committed to continuing to protect local taxpayers from excessive council tax increases”.


I found that a bit rich because, since 2016, the Government have been increasing council tax by 2% a year, compounded, to help pay for rising demand in social care. He went on to say that councils should set out how they will

“improve service performance and reduce wasteful expenditure, for example on consultants or discredited equality, diversity and inclusion programmes”.

The sums involved are very minor compared to the costs of social care. Anyway, in practice, the Government have forced local councils to employ consultants to write all the competitive bids for funding on which Ministers love to adjudicate.

Council tax is regressive and out of date, and there are not enough bands. Some 46% of homes in England—46%—are now charged a higher rate of council tax than Buckingham Palace, which, on band H in the London borough of Westminster, has a comparatively low council tax rate. I was grateful for the reminder about this in the 27 January edition of the Economist. Surely, we need more bands at the top end.

A lot has been said recently about Section 114 notices. We know that several councils face bankruptcy as they try to meet statutory demands and balance the books. One in five says that it is in danger of issuing a Section 114 notice in the next year or two. In the last six years, eight councils have issued Section 114 notices, but it is important not to confuse this issue with the few councils that have not managed their finances well or have made bad investment decisions. They are the exceptions; the real problem is the Government making decisions for local government to fulfil without making the money available to do it—hence all the cuts in a range of discretionary services, of around one-third to 40%, over recent years.

For example, a third of libraries have closed in the last 10 years. Temporary accommodation for people who are homeless now costs £1.74 billion; 104,000 households are in temporary accommodation. We have seen cuts in parks and green spaces, in culture, museums and theatres, in youth services, and in sports, leisure and swimming pools. We have also seen a drop in spending on preventive services that can save money in the medium to long term.

I heard in the news on Monday that half the local road network could fail within the next 15 years. The Local Government Association estimates that there is a £14 billion backlog in local road repairs. To take an example of the Government not funding things, the national living wage will apply in social care and that is excellent to see, but it needs to be fully funded; otherwise, council tax payers will have to make up the difference.

The question for this debate, and for this and all future Governments, is what to do. There is an urgent need for reform of local government funding, and it needs to be done with all-party agreement. We need long-term funding that is not based on competitive bidding. As we have seen, the levelling-up allocations are centrally managed with central deadlines, and only 10% have been spent so far, as the Public Accounts Committee told us last week. Not enough of the projects were “shovel-ready”, and local capacity has not been available because of cuts in funding, so there have not been enough people to do the work to deliver the outcomes. As I say, government deadlines have been far too strict.

What happens now is that we have one-off, sticking-plaster allocations of money. They are not enough, as the recent extra £500 million for adult social care has demonstrated. Local authorities are accused of having reserves that are too big. Let me say clearly that they do not. If I were a chief finance officer of a local council, I would be extremely worried about the projection that the OBR has given of finances for my council over the next four years, and I would want a healthy reserve in place. That is normal—strong reserves are normal for capital investment and for the rainy day that we may well have. Public money requires good stewardship, given the further cuts on the way.

Local authorities need greater freedoms. I have never understood why the Government are so determined not to allow local planning authorities to decide their own fees. Why on earth should they not be able to do that, and recover 100% of the cost of doing it?

We also have to encourage local authorities to invest to save. That requires a national discussion as to how you really can do that—there are things that can be done. If you invest to do something, you will save money in the long term.

We need an acknowledgement that council tax is regressive and needs reform. We need two bands at the top, and quite soon in my view, because otherwise more and more poorer people will pay a higher proportion of their income to support local services.

I have not mentioned business rates. We have had many debates on business rates in this Chamber, and perhaps that is why. It has become a national tax; it is no longer a local tax. I remember when, in my days as a councillor, business rates were managed by local authorities, which decided what the rates were, but that was a long time ago. I repeat what I said during the passing of the Non-Domestic Rating Bill: business rates have simply got too high.

The Government are failing to produce long-term settlements. For the last six years, we have had one-year settlements for local authorities. I do not understand why the Government cannot do better than that. It would really help people to plan.

The Local Government Association has told us that cost and demand pressures have now led to a £4 billion funding gap over the next two years simply to maintain the level of current services, not to increase them. That is a substantial sum of money, and local government finances will be in a precarious state unless action is taken.

I do not want us to end in a permanent state of crisis. With thinking and all-party discussion, that can be avoided, but I wish the Government would do a bit more on audit. The Audit Commission was abolished just over 10 years ago, and I have no doubt that it had suffered mission creep. Equally, I know that having a proper audit system underpinning local government, and feeding information to the Government about how things are going and where extra investment is needed, is really important. In your Lordships’ Chamber, I have previously welcomed the Office for Local Government, Oflog. It should be at the centre of all this but, to be honest, I do not know whether it is. We now have a huge gap in audit, which is starting to cause us some concern.

Finally, we need the fair funding review. We also need to reflect, as we used to, the needs element of local government spending, which has gradually over time been eroded. I hope we will have a helpful debate, and that this Government and any future Government will be able to take action on the things identified by noble Lords. I beg to move.

12:34

[Baroness Eaton (Con)]

My Lords, I declare my interest as a vice-president of the Local Government Association. I congratulate the noble Lord, Lord Shipley, on securing this incredibly important debate today on local government finance.

Local authorities across the nation—small and large, rural and urban—continue to deliver the very best for the communities they serve. We saw this during the coronavirus pandemic, when local authorities rose to the challenge of distributing millions of pounds-worth of grants and loans to keep businesses afloat. Upon the Kremlin’s barbaric and illegal invasion of Ukraine, it was local government that stood up to the test of supporting well over 100,000 people who were settled into this country through the Homes for Ukraine scheme.

Further to this, I hope the House will note that local government has far more trust among the public than government departments in Whitehall. Research from the Association for Public Service Excellence confirms that three times as many people trust their local councils over national government.

It is, of course, Conservative-led councils that continue to deliver more for less across England. A fine example of this is Fenland District Council, in Cambridgeshire, which has yet again cut council tax precepts for the next financial year.

The recent uplift in the local government finance settlement, published earlier this year, was welcomed by councils. In particular, the work of Ministers in DLUHC to secure an additional £500 million towards easing the pressures in adult social care should not go unnoticed. However, if local government is going to be trusted to deliver more and better on behalf of the state, the state in turn needs to award local government with the package of fiscal devolution it deserves and needs to get on with the job for our communities.

Home ownership in our country is becoming an ever-increasing topic of discussion, not just in this place but outside. Local government can turbocharge housing delivery and increase home ownership, but it needs fiscal powers from the Government to support it in doing so.

On fiscal devolution, what quick and easy wins could the Government award to councils? First, the backlog in dealing with planning applications has never really recovered post-Covid. In addition to the pandemic, the retention of staff in local government planning continues to be a challenge, as councils compete with the private sector and major infrastructure projects such as HS2.

To address this capacity gap, the Government should consider devolving the powers of planning fees directly to councils with responsibility for planning, as the noble Lord, Lord Shipley, said. While the recent increase in planning fees from the Government is welcomed, based upon figures from the 2020-21 financial year, 305 out of 343 were operating on deficits which totalled together £245 million. The ability to set planning fees internally by councils, based upon local need and demand, will help speed up the planning applications process and get spades into the ground.

While private home ownership is vital, we should not dismiss the benefits of social housing in supporting our more vulnerable communities in eventually getting on to the housing ladder. Councils have a great track record of building more social housing, yet with more fiscal devolution, local government can do an even better job at increasing social housing supply.

The Government confirmed that, with respect to the retention of right-to-buy receipts, councils would be able to keep 100% of their retentions for the 2022-23 and 2023-24 financial years. As reported in the Financial Times last week, the 100% retention of right-to-buy receipts has delivered an additional £200 million into delivering more social housing. It is therefore disappointing that, in the recent Budget Statement from the Chancellor, there was no indication of whether this initiative would be extended. I would be grateful if my noble friend the Minister could provide some details on this in her contribution to the debate.

Building more social housing is not just a massive win for our local communities, it is a financial win for government. For councils to build the next generation of social housing, they must have the fiscal powers necessary to get spades into the ground. The Government absolutely should commit to the 100% retention of right to buy receipts if they are genuinely serious about increasing housing supply in our nation.

On a completely different subject, I want to now talk about roads and highways. Many local authorities want to get back to basics and ensure that the state of our roads is vastly improved. As many local councillors—and, I am sure, Members in the other place—will testify, potholes continue to be one of the dominant subjects that constituents raise on the doorstep. My view on this is very simple: local government needs to have certainty around its funding, and multiyear financial settlements with respect to highways funding can be the answer to many of the issues we face on our roads today. National Highways is responsible for 4,500 miles of roads in England—just 2% of the road length in England—yet, unlike local government, it receives five-yearly funding allocations from the Department for Transport. Local government should be brought on a par with National Highways and treated as an equal, with multiyear financial funding settlements.

Another issue causing no end of misery, to our rural communities in particular, is fly-tipping. I am pleased that the Government through the National Fly-Tipping Prevention Group have committed £2.2 million in grant funding so that councils can reduce fly-tipping incidents through the installation of CCTV. In addition, local government has been leading the transformation agenda in catching fly-tippers. For example, Buckinghamshire Council has proactively used artificial intelligence to catch fly-tippers in key hotspots and reduce this awful crime. That said, many local councils anecdotally report that the fines they receive from catching fly-tippers simply do not cover the costs they incur in collecting fly-tipped waste. Very simply, I hope the Government will consider giving the powers necessary to local authorities to set their own fine levels, dependent again on local need.

In conclusion, I hope that my noble friend on the Front Bench will consider the four examples of fiscal devolution I have highlighted that could be extended to local government and once again I congratulate the noble Lord, Lord Shipley, on securing the debate.

12:42

[Baroness Hamwee (LD)]

My Lords, I readily accept that I am past my sell-by date, but there are times when speaking from your own experience just feels right. I was a London borough councillor from 1978 to 1998—a much shorter time than other noble Lords have chalked up. Over 20 years and five elections, the turnout in my ward was never below 60%.

That was then. Not everything was peachy. Householders paid rates; my noble friend mentioned business rates as well. I represented a newly built council estate—those really were the days—on the borough boundary. The rates on the large houses on the other side of the boundary—the other side of the road, indeed —were much lower because of the big differences in government grants to the two authorities. I gather that the reserves which the other authority was able to build up during the many years it was so favoured now have a similar effect on council tax.

The 60% turnout did not seem unusual; if anything, I would have hoped for more, given the effort that went into keeping in touch with local residents. We were able to consult about the level of tax rates—x% more would enable the expansion of such a service, x% less would mean this or that reduction; y% would allow for reduction here and expansion there. Referendums are not the equivalent and there is an understandable reluctance, I think, to spend scarce cash on an expensive exercise.

How different it is now. The whole budget, not just the bottom line, is so divorced from local decisions about tax that taxation and representation are largely detached. This is the particular reason I wanted to speak today. What has been happening and continues to happen regarding finances puts local democracy in jeopardy. There is almost no local discretion and, I suspect, no bandwidth to think strategically. Councillors have ambitions for their local communities; they have them for various different communities, such as users of this park, travellers to that school, supporters of a certain football club and the passengers on the 8.23 to Waterloo.

It has always required agility and resilience, because politics is about balancing priorities and should be about being able to take preventive action. How soul destroying to have to keep saying, “We can’t, there’s no money”; spotting a need but knowing that there is no point in pursuing it, and knowing that local residents have decreasing confidence or trust in their local authority.

An unproductive, unedifying blame game does not foster good relationships. Residents—voters—must feel more detached: abandoned, even. In this situation, can local government attract the best candidates across a range of experiences and representatives of their local communities? There is a lot to be said about staff, too, but I will stick to my main point, save to say that the problems of recruitment and retention affect council services and contribute to the overall worrying picture. In addition, charities—the third sector—to which we have so long looked are not in a position to fill the gaps. I am now told that it is very rare to find people who work in local business among councillors. No doubt there are various reasons for this, but those informal links were so valuable.

As I have said, there is so little local discretion and so much is mandatory, the how as well as the what: how you do it, as well as what you do. Recently there has been an announcement about low-traffic neighbourhoods. Central government has said how local authorities should approach these but not said how they should pay for them or given them any more to pay for them.

My noble friend mentioned planning fees. He probably does not know that I was the chair of my local planning authority when we decided to charge all of £25 to businesses for advice on proposed developments. We were taken to court and we lost.

Local authorities are increasingly dependent on what they can raise locally, but this is increasingly restricted. I travel to Westminster on a road that has a yellow box junction which, because of the sets of traffic lights on either side of it, often traps traffic. It may be an urban myth but it is said to be the most profitable yellow box in London. I understand that the local authority does so well out of infringements in that yellow box that it is one of the very few that still offers free domiciliary care.

I would be frustrated now—to take one example which, judging from the speakers’ list, may get quite an airing today—if I were a member of a local authority which was cutting all spending on arts and culture, which I regard as essential and not an optional add-on. If I were not a councillor, in this context, would I want to stand? In fact, I would feel quite anxious at the prospect, at a time when councils are selling off the family silver—indeed, heading towards fire sales—and spending capital receipts on revenue. Those are receipts from assets paid for by the public and they will be lost from public use.

I am well aware that my references to local government finance are a bit simplistic and, at any rate, broad-brush, but my central point is absolutely serious. Our communities are not short of issues to get involved in, but I would guess that most noble Lords would argue that single-issue politics are rather different from the democracy which comes with responsibility and should come with power.

On these Benches, and around the House, we value local democracy. I came here in 1991, because my then party leader was able to make a single nomination and wanted our single new Peer to have had experience in local government and to make the point about its importance. I stood again in 1994 because the local mandate was the only democratic mandate I was able to seek. I am sure I am not the only speaker to have done that—in fact, I know that. My local community was very important to me. Would I want to do the same in 2024?

12:50

[Baroness Bull (CB)]

My Lords, I am grateful to the noble Lord, Lord Shipley, for securing this debate. As trailed by the noble Baroness, Lady Hamwee, I will indeed use this opportunity to highlight how the current crisis in local government finances is impacting on arts and cultural services, and the communities that enjoy and benefit from a thriving local cultural ecology.

The positive effects of arts and culture on place-making and local communities are well evidenced. Aside from the intrinsic value, cultural venues and services create jobs, attract visitors and support the wider local economy. Cultural programmes provide skills development for young people, connect with marginalised groups, engage communities in local issues and encourage active citizenship. Culture makes neighbourhoods more desirable places to live, with cultural spaces providing a resource in which people feel pride and a place where different parts of the community can come together. In short, arts and culture make for a better place to live, work and do business—all of which is very much the core business of local authorities. Indeed, much of this cultural activity is enabled by local authorities, which are the main public investor in arts, culture, tourism and heritage, allocating £650 million each year to libraries and £430 million to museums, heritage and the arts.

However, this long history of investment is under increasing threat. We have already heard about the pressures facing local government today: inflation, wage increases, pensions, the cost of living and energy, homelessness, the rising cost of adult social care, and increased numbers of children with special educational needs and disabilities. Analysis from the Local Government Association in October last year showed that English councils face, as we have heard, a £4 billion funding gap across the year—and that is just to keep services standing still. The extra funding announced for 2024-25 will help, but it will not bridge this gap.

The now too-familiar reports of, at worst, bankruptcies and, at best, dramatic cuts, can no longer be seen as isolated incidents, but have to be acknowledged as systemic failure. Currently, some 19 councils across England are receiving exceptional financial support, which is more than double the more typical number—between five and nine—in this category since the onset of the pandemic. Local councils’ core spending power has seen a 24% real-terms reduction between 2010 and 2025. While much of this has been absorbed in new ways of working, efficiencies and staff reductions, it is inevitable that non-statutory services, such as arts and culture, will take a hit. According to a recent LGA survey, 55% of responding councils

“reported that cost savings would be needed in their sport and leisure service provision”,

with 48% reporting

“that cost savings would be needed within their library services”,

and over a third, 34%, reporting

“the need for cost savings in their provision of museums, galleries, and theatres”.

For cultural organisations, this crisis in local government funding sits alongside changes to the Arts Council portfolio and the ongoing impact of Covid, from which the sector has yet fully to recover. It also has to be set against a backdrop of the 10 years of austerity policy, which saw average local authority investment in culture reduced by nearly 37%. As a result, directly or indirectly, theatres, venues and arts organisations in local communities are facing existential crises—from Windsor and Maidenhead to Woking, Ipswich, Nottingham, Birmingham and beyond. Some have already closed; others are struggling to pull off a five loaves and two fishes-type of miracle to get them through the coming year. While London venues and organisations are certainly not immune, withdrawal of local authority support has a disproportionate effect outside London and other major conurbations, where there are far fewer alternative sources to fill the gap through, for example, corporate sponsorship.

The allocation of levelling-up funds to cultural projects has been welcome, although it is concerning to read in the recent report from the Public Accounts Committee in the other place that as at September last year, local authorities had been able to spend only 10% of the Government’s three levelling-up funds. Likewise, the announcement in the Spring Budget that theatre, orchestra and exhibitions tax relief will be made permanent was warmly welcomed, but it might be hard for some local communities to feel the benefits of theatre tax relief when their local theatre is boarded up.

What is needed is not one-off funding but long-term, sustainable and multi-year settlements that will enable councils to invest in the local cultural infrastructure and services that create thriving, dynamic environments for local communities. Without guaranteed funding, cultural activities suffer from an on-again, off-again effect which leads to community disengagement and uncertainty for organisations and the people they employ. In the end, it is local communities that suffer. Will the Government heed the call from the Local Government Association for multi-year settlements that allow councils to plan ahead and provide communities with the services they deserve?

Pitting arts and culture head-to-head against other local priorities and needs is never a good idea, particularly so at the moment, when the here and now pressures are so loud. Arguments about their longer-term impact on the economy, growth and jobs are understandably hard to hear.

Nevertheless, arts and culture play a major role in delivering for communities, and successful local cultural strategies—that is, strategies that are specific to the area and that work in partnership across different sectors—can deliver to multiple local priorities: skills, regeneration, education, employment or health. As Liz Green, the chair of the LGA’s Culture, Tourism and Sport Board, has written, local councils need the creativity of cultural organisations and their perspective on how things might be done differently, not just in cultural services but across the board. There are many good examples of this collaborative approach in practice, with a recent example being Culture Start in Sunderland —a city-based partnership spanning social housing, schools, the voluntary and youth sectors, and higher and further education, as well as culture—which aims to mitigate the impacts of growing up in poverty by enabling more children and young people to access the multiple benefits of cultural participation.

Strengthening and enhancing the local cultural offer strengthens and enhances local places and improves the lives of people who grow up, live and work there. It makes them more attractive to visitors and business, and more likely to attract funding from grant-makers and investors, all of which further enhances the local environment. There are many stakeholders who contribute to the positive benefits that this kind of local cultural ecology can deliver, but the underpinning certainty of local government funding has always been the catalyst that enables the change.

12:58

[Baroness Scott of Needham Market (LD)]

My Lords, I thank the noble Lord, Lord Shipley, for securing today’s debate, and for the characteristically incisive way he introduced it. My noble friend Lady Hamwee need not be diffident about painting with a broad brush, because her broad brush, in the hands of someone with many years of experience, painted a picture of the threat to local democracy that our current system is posing. In many ways, that is probably the most important point that can come out of today’s debate.

I share my noble friend’s commitment to local communities. That is why, when the National Association of Local Councils asked if I would become its president, I was very happy to take on that role, because that town and parish council sector, which covers 91% of the country, is the first layer of local government and the one that faces these challenges on a very personal and day-to-day basis.

I want to make sure that that sector is not lost in today’s debate. It is interesting that, in the otherwise excellent House of Lords Library briefing, this sector does not get a mention. There are around 100,000 councillors who are volunteering their time in this sector, putting in, we estimate, 14.5 million hours a year—I sometimes felt that I worked that myself. They are working so hard to change and improve their local area. Unlike other tiers of local government, they do not have many statutory duties but they do have an array of discretionary powers, which they are using to deliver services in their area. Sometimes it is interesting to see these quite archaic powers, designed in a different age, being used to address very modern problems, such as loneliness, the climate emergency and the cost of living crisis. They are doing that on top of the more conventional activities, such as dealing with allotments, bus shelters, Christmas lights, open spaces and public toilets.

In that sector, the parish precept is usually the main and only dedicated source of income. In 2023, the total parish precept came to £708 million, which is 1.8 % of the total council tax requirement for England, with an average band D rate of £78. Unlike principal councils, local councils do not receive revenue support grant or a share of business rates, and they do not generally have access to central government funding. It remains a very strong feeling in the sector that parish and town councils should be able to apply for central government funding schemes on the same basis as principal authorities.

During the passage of the Levelling-up and Regeneration Bill, I put forward an amendment to address the situation where government said it did not have the powers, but disappointingly the Government did not agree. On a positive note, and I thank the Minister for this, the Government have extended the community ownership fund to allow applications from parish councils. In the short period of time since then, around £4.5 million has been allocated for community assets, such as a market, community centres, a library, parks, a skate park and a nature reserve.

I move on to trends in spending power and the impact of reductions. It is striking how investment by town and parish councils in their local area has changed over the past few years. In 2010-11, the total precept was 1.4% of the total council tax requirement for England, and, as I have said, this year it is 1.8%. In some cases, that is because the sector is doing more, getting involved in more things and being more active, and that should be welcomed and applauded. However, it is also because many parish and town councils have stepped up to take over services from principal councils, particularly those discretionary areas where principal councils feel they have no choice but to withdraw. It is alarming to hear warnings from bodies such as the LGA that government funding will lead to a £4 billion gap over the next two years. When coupled with the number of principal authorities issuing Section 114 notices, this will place even more pressure on parish and town councils, especially town councils, because otherwise they will completely lose those important discretionary services such as libraries and leisure centres, and support for community organisations, culture and the arts.

You can argue that it does not matter which bit of local government is paying for something. I would argue that it does matter, because facilities such as libraries, for example, are often used by a significant rural hinterland, and there is a danger that the local town council will end up footing most of the bill, whereas, at the moment, it is spread more widely, right across the local authority precept. It is simply not going to be sustainable for parish and town councils to keep on increasing their precept to provide much-needed investment in their area just to stand still and take up the slack that has been left by principal tiers of local government which have no choice. I think the sector would argue that we should have access to dedicated funding for some of those services, such as improving high streets, parks and leisure centres—the quality-of-life services that matter so much.

Despite increasing pressures on their budgets, town and parish councils have taken all available steps to demonstrate financial prudence when setting the precept. I think that has been recognised by the Government, who continue to defer setting referendum principles for that tier, which is welcome. However, I argue that no local authorities should be forced to hold referenda. We should not be having levels of intervention by the Government at this point. I very much agree with the noble Lord, Lord Shipley, and the noble Baroness, Lady Eaton, that finance settlements should cover multiple years. Local government has always been told that it should behave more like business; no business would operate on a one-year basis.

I conclude with two specific asks for the Government. The first is technical but important, and is for one specific reform to the audit regime. The limited assurance regime for smaller councils works very well, but there is a £25,000 threshold at which they enter the rather more costly and onerous category 1, and there is currently a backlog for that. If the Government would consider raising that level and introducing a matching transparency regime, it would relieve some councils of a huge burden. The second is more fundamental: that parish and town council should have the diverse range of funding opportunities they need to fund growing services, take local action on national priorities and help pick up where principal authorities are having to leave. This includes direct access to government funding, multiyear freedom to set their precept, no referenda, a share of business rates and the exemption of cultural assets.

13:05

[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a pleasure to follow the noble Baroness, Lady Scott of Needham Market, and to agree with her about the importance of parish and town councils. In travelling around the country, as I often do, I see so many of them stepping up to the plate where the larger-scale authorities—the principal authorities—are simply not able to continue as they do not have the funds. That is crucial. Keeping public toilets open, managing areas of grassland, and even keeping tourist centres open are the kinds of things I have seen.

Like other noble Lords, I begin by thanking the noble Lord, Lord Shipley, for securing this crucial debate. There is hardly anything more central to the declining quality of life in the UK—the broken Britain that we talked about when we were debating the Budget—than how much local government is struggling. I declare my interest as a vice-president of the Local Government Association and of the National Association of Local Councils.

In April, we are coming up to about 75% of councils making the maximum increase that the Government allow, according to the County Councils Network. That means a £99 increase for a band D average property, with bills going to more than £2,000 a year. At the extreme, things are absolutely desperate. The obvious example is Birmingham City Council, which is looking at a council tax hike of 21% over two years as it struggles to find savings of £300 million. This is in a context where councils and councillors are acutely aware of how the cost of living crisis is affecting so many of their residents, but we are in TINA land: there is no alternative. For councils to keep meeting even their statutory requirements—requirements that are put on them by Westminster, about which they have no choice—they have to put those increases in.

I suspect that, if one were to search this debate, “one in five” would be the phrase that comes up most often. I make no apologies for repeating the phrase, because one in five councils is at risk of going broke. That is 20% of councils in the country. This is an absolute crisis, yet our media is so focused on what happens here in Westminster, particularly in the other place. A media that focuses on London will fail to grasp the scale of the crisis around the country, and I am afraid I do not think the Government have truly grasped the scale of the crisis either.

I referred to the rise in council tax, but the proportion of money that councils get from council tax has risen from 40% in 2009-10 to 60 % now. Where else do councils get money from? Often, they can charge for certain services, such as leisure centres and parking, and they can generate income from the sales of property and from certain types of waste removal. But think about those services, and put them at the intersection of the cost of living crisis: yes, they can increase the cost of the local swimming pool or the gym, but that means that more and more people will not be able to access them.

We can think about the issue of sales of property. We have seen, since the election of Margaret Thatcher, the sale of 50% of what was publicly owned land—a large amount of that being council land. Once it is sold, it is not coming back. You close the library; you sell the building and the land. When times get better, you cannot bring them back—it is gone. That library is so much a part of central meeting places. Even as technology changes and IT comes in, it is a public space that could have been dedicated to public purposes in the future, but we have simply lost those spaces. Communities do not have places to gather any more.

It is also worth highlighting—I do not think anyone has picked this up yet—that we have seen austerity right across central government, cuts to Civil Service workers’ pay, and to the real level of benefits. That increases poverty and ill health, which puts more pressure on councils to provide services such as social care. This is literally a downward spiral in which we are trapped.

The list in the Library briefing is worth looking at; this picks up points from the noble Baroness, Lady Bull, and others. We have seen the following spending cuts from 2010-11 to 2019-20: cultural and related services cut by 37%; planning and development services by 37%; non-school education—we keep talking about the need for skills—down by 32%; housing services by 25%; highways and transport services by 24%, which picks up the point raised by the noble Baroness, Lady Eaton, about potholes and the general state of the roads; and environmental and regulatory services down 10%, just at the point where we are starting to realise what an incredibly parlous state our natural world is in and that it desperately needs to be boosted, in its own right but also to improve public health.

Many noble Lords will have received the briefing by the National Council for Voluntary Organisations, which raises the important point that we think about the cuts to council services and how much is lost—the libraries, the theatres, et cetera—but funding that local councils have given to charities and community groups has also been slashed, and that again is cutting away at the basic standard of quality of life in our communities. Almost three-quarters of organisations are not receiving enough funding to meet the demand for the services they offer. Nearly two out of five organisations have reduced the number of people whom they support. When you think about the Covid pandemic—several noble Lords have referred to the loneliness pandemic—and an ageing population, we are reducing the number of people being supported when it is clear that the need is increasing.

I come, briefly, to two final points—first, that council tax and business rates is a broken, wildly out-of-date system. The Green Party has long held, and continues to call strongly, for a land value tax, which would be levied on the annual value of land itself, excluding any structures or improvement. It follows good taxation practice, it would be cheap to collect and difficult to evade, and it would discourage the use of land for speculation. At the moment, land is an ideal speculative investment, and we can, I am sure, all point to examples where land is not used well, because someone is just sitting on it and waiting for its value to rise.

The noble Baroness, Lady Hamwee, talked about elections. Of course it would be lovely to have democratic elections with a single transferable vote system or similar, as there is in Scotland for local councils. It would be great to have local communities fully represented in the House of Commons. But what is interesting and worth noting is that there is a big shake-up happening in local councils: we increasingly see groups of different parties coming together to run councils, which is an exciting development.

13:14

[Baroness Miller of Chilthorne Domer (LD)]

My Lords, in my noble friend Lord Shipley’s excellent opening speech, he mentioned many of the public amenities that are now under immense threat due to this Conservative Government’s starvation of local government. These public assets—community assets—have been built, bought and improved over centuries and decades. I appreciate how lucky I was in my 15 years in local government in Somerset that we were able to plan and construct local amenities. Now, under this Government, starved of resources, local authorities will have little choice but to sacrifice these common assets, be they libraries, green spaces, public toilets or cultural centres.

As the noble Baroness, Lady Bennett of Manor Castle, just said, once amenities are gone, they are gone. She is right, and it puts me in mind of a well-known poem, written at the time of the Inclosure Acts, and just as relevant today:

“The law locks up the man or woman

Who steals the goose from off the common

But leaves the greater villain loose

Who steals the common from the goose”.

That is just what this Government are doing—they are stealing the common.

These common assets are irreplaceable, and the ones I want to highlight today are libraries. This possibly stems from my time at school and the only post I had—head librarian—led to a career in books. More importantly, libraries are a crucial element for everybody in intellectual levelling up. Nobody has put this better than Bobby Seagull, who many remember as the “University Challenge” champion who went on to become a City whizz-kid and then a maths teacher. He is, especially, a great advocate of libraries, as he explained when he came here to Parliament a while ago:

“Growing up in financially challenging conditions in an east London council estate, our library was a paradise”.


More affluent areas are more likely to still have quality libraries that remain open and well stocked, but deprived areas will suffer multiple deprivations, and libraries will be one of the first of these. The Government are consigning a generation to poorer literacy and lower academic attainment.

Libraries are popular—they have 40 million visits a year, which is more than cinema and football combined. They are one of the most popular services that councils provide. In addition to their central focus on reading and literacy, libraries support a wide range of activities, which was particularly seen during the pandemic, including digital skills, warm hubs, job clubs, and access to financial advice and support. They are the ultimate community resource, yet public library funding in the UK has fallen by more than 30% in total since 2009-10, and 800 libraries have closed. At least 32 councils are exploring very significant cuts or closures—in some cases proposing to close over 65% of their branches. I hope the Minister will not dare to suggest that such cuts are a local government choice. She knows perfectly well that local authorities now have no choice, given that central government has subjected them, year after year, to real-terms cuts.

What answer are the Government giving to the worst-affected local authorities, struggling in the face of ever-diminishing central government funding? They are saying, “Sell off your assets”. The exceptional financial support framework will allow councils involved—I use the word “allow” in inverted commas—to use capital receipts from the sale of assets or borrowing to cover their day-to-day costs of this amount. Traditionally, libraries occupy buildings at the heart of their communities, where land values are higher—making them an obvious option to cash in on short-term capital at the expense of long-term value.

The Financial Times highlighted this recently when it said:

“The UK government is now considering loosening the rules for allowing councils to sell off assets. This is bad news for everything from libraries to swimming pools, town halls to toilets”.


We really are in a disgraceful state of affairs. A later verse of the poem I quoted is just as apposite as the first:

“The poor and wretched don’t escape

If they conspire the law to break;

This must be so but they endure

Those who conspire to make the law”.

13:19

[The Earl of Clancarty (CB)]

My Lords, I thank the noble Lord, Lord Shipley, for the opportunity to speak in this debate. Like my noble friend Lady Bull, I will talk about the arts and cultural services.

A good place to start is by quoting the briefing that the Local Government Association provided for the debate in this House on the arts in the name of the noble Lord, Lord Bragg, on 1 February:

“Councils have a key role to play—they are the biggest public funders of culture, spending over £lbn a year and running a wide range of other services. They are also place shapers and have a convening and supporting role in setting the context in which the arts can flourish. The arts are discretionary, but councils invest because they see the value to local people”.


One could of course add, “when they have the funding to do so”. The quote is valuable because it describes the intricacy of the relationship between the arts and the local community. On the one hand, the arts are a good in themselves in many different ways—they are something that local people can take pride in, and they may have a national or international reputation—but, on the other, the arts are also inextricably bound up in the identity of a local area. They are or can be a part of the character of that community.

How should all these varied arts be funded? I believe they should continue to be funded primarily through local government funding. That is still the most efficient and comprehensive means by which we can fund the day-to-day activities of the arts and other cultural services: efficient because local governments are the experts in their areas, and comprehensive because every area of the country is covered by local government and therefore much better at levelling up than the patchiness of the levelling up fund, whose purpose in any case ought to be properly understood as additional to the core funding of local government.

The great tragedy of the last 14 years is that, not only for the arts, we have seen at least a partial dismantling of this inherently efficient and comprehensive system. The specific point about the arts in relation to the funding cuts, as the noble Lord, Lord Hall of Birkenhead, pointed out recently when interviewed by the Observer on these cuts, is that they have been a “canary in the mine”. The noble Lord said:

“What we learn in Birmingham will soon matter across the country”,


and we are seeing that in Hampshire, Nottinghamshire and many other councils. It is the arts and other cultural services such as libraries, community and leisure activities that have been the first to feel the effect of long-term cuts. Indeed, around seven years ago Nicholas Serota made the point that the biggest crisis in the arts was in local government funding. It was seven years ago too that we had a debate in this House on local government funding and the arts—for which the noble Lord, Lord Shipley, did the summing up for the Liberal Democrats—which was in effect a warning sign to the Government that, bleak as the picture was then, it was going to get bleaker unless the matter was addressed. As we know, it has not been addressed, with a cliff edge having been reached in some cases.

The Government have had all the warning signs, but the Secretary of State for DCMS, Lucy Frazer, recently gave an interview for the Stage in which she said:

“It’s disappointing when local authorities make decisions to cut the arts”.


What is of course far more disappointing is the refusal by this Government to take responsibility for a situation for which they are ultimately responsible. The evidence is in front of them: it is not about well-managed authorities or otherwise. It is always possible to pick out councils that can be understood as examples of good practice—or in some cases good fortune, as recipients of the levelling up fund—but that does not describe the overarching narrative across the country of decreasing funds and the cutting of services, and of the irreparable loss of infrastructure, including buildings, as others have referred to. It is this that Lucy Frazer and the rest of her Government refuse to acknowledge.

I applaud the Government for giving the arts and the creative industries such a prominent position in the Budget, and one hopes that prominence will continue. However, theatres, museums and orchestras will have a sense of relief, more than anything, that tax relief, which was originally increased to counter the effect of Covid on the arts, has been set permanently at a higher rate. That shows perhaps more than anything how much some organisations that have normally depended on local government funding have come to depend on what was originally a temporary measure.

Staying with the Budget, capital projects are welcomed and will not be turned down, but what the arts really need is that basic help with day-to-day funding for which local government has been key. As a colleague pointed out to me earlier in the week, the Budget is not a spending review.

I will touch on one other area, the nature of the arts themselves. It is impossible in this discussion not to bring in funding streams other than local government, such as the Arts Council, which has started to fund through the Let’s Create strategy much that would once have been funded by local government, such as community arts projects, side by side with professional arts and arts facilities. For a long time my worry has been where this leaves professional artists and performers. Both community arts and professional arts are important, but there is an increasing danger that the professional arts are being shut out. That needs to be addressed because it is happening due to local government cuts.

It has become clear that we do not have a strategy for the arts that includes local government funding. We need more joined-up thinking, including between DCMS and the Department for Levelling Up, Housing and Communities. On funding of the arts overall, we are still moving in the wrong direction. I understand that the Arts Council has been asked how it can now make further savings of 5%. This makes no sense. As the LGA says:

“Public funding is an essential part of the ecology of the arts and culture in the UK”.


The Arts Council found that in 2020, for every £1 generated in the arts and culture, an additional £1.23 gross value was generated in the wider economy. Our arts and creative industries are the growth area in this country. They stimulate growth, as my noble friend Lady Bull pointed out. It is high time we reinvested in them, not least at the hugely significant local government level.

13:26

[Lord Hussain (LD)]

My Lords, I thank my noble friend Lord Shipley for securing this debate. I am one of those Peers who had the opportunity of being a member of my local borough council—in my case, Luton Borough Council—for many years before coming to this House. Serving on the local council gave me a sense of pride and satisfaction. The council’s remit stretched from social services to education, housing, environmental improvement, libraries, parks, leisure services, community development, street services and much more.

On top of the usual meetings of the council and other outside bodies, I remember that the ward councillors periodically used to have surgeries and tour every street of their wards, along with field officers from relevant departments, taking note of any potholes, graffiti, fly-tipping, fly-posting, flooding, broken pavements, abandoned vehicles and anything else that was reported to them, and took prompt action as required. All this was made possible with sufficient central government funding and local taxation, but over the years our local authority, along with other authorities, has met with drastic cuts in central government funding. That has resulted in significant reductions to the library service, the youth service, community centres, daycare services, road repairs, refuge collection, street cleaning and many other areas of service, while the council tax has risen four times over the years.

The local government finances granted to councils such as Luton are only about 10% of what they used to get 10 or 12 years ago in their annual settlement from central government. Not only has this had a major impact on the level and quality of services that the general public used to get but it has put huge financial pressure on the residents, particularly low-income families, the elderly and single parents. To be honest, I am not sure I would really want to be a councillor any more.

Luton, in the east of England, is generally known to be an affluent town and has been well known for manufacturing for a very long time, but it has what are considered to be some of the most deprived areas in the country, with old housing and poor housing conditions, overcrowding, high unemployment, health inequalities, outdated school buildings, low educational attainment, a high crime rate and antisocial behaviour. The longer these areas are ignored, the bigger the problems will become. Urgent action is needed; these areas need huge investment to bring them in line with the rest of the town. What plan do the Government have to deal with the most deprived areas in the country, such as these?

The issue today is not about Luton alone. Many local authorities are struggling with their finances and some, including Birmingham, Nottingham, Woking and others, have actually gone bankrupt, while many more are on the brink of bankruptcy. According to an LGA survey carried out in December 2023, before extra money was announced—and I am glad that it was—one in five council leaders and chief executives in England thought it very or fairly likely that their chief finance officers would need to issue a Section 114 notice this year or next. Half are not confident that they will have enough funding to fulfil their legal duties next year, 2024-25. This includes the delivery of statutory services. Can the Minister say what plans the Government have to deal with this unprecedented situation and avoid more local authorities being bankrupted?

13:32

[The Lord Bishop of Manchester]

My Lords, I too am grateful to the noble Lord, Lord Shipley, for securing this important debate, but I am doubly grateful for its full title. This is not simply a debate about local government finances; it is a debate about the impact on local communities, and that is a vital distinction. Money is only ever a means to an end. It is an input—a crucial one—but what really matters are the outcomes and, in terms of local government, what really matters is how well local communities are served.

I still recall that back in the 1990s, when I started attending and speaking at national housing conferences, there were some where every positive mention of housing associations brought an audible hiss from some local authority members who were present. They saw us as rivals, and in some cases even the enemy, as we were taking money that had formerly gone to them to provide services that they had previously enjoyed delivering. I guess their attitude could be summed up as: if a job is worth doing, it is for the public sector to do it. I hope that we have long moved on from those attitudes. Local authorities have a vital and leading part to play in the service of their communities, but they are not the sole provider. Other agencies are not competitors; they are partners in the common task of supporting the local community.

Much of my diocese, as noble Lords will know, falls within the Greater Manchester area. Our mayor, Andy Burnham, understands well that it needs more than just local authorities—indeed, more than just the wider public sector—to pull together if we are to maximise the positive impact we can have for our local communities. So, the Greater Manchester Combined Authority works closely with voluntary, community, faith and social enterprises, and our faith communities work hard to be both visible and distinct. The authority acknowledges that faith-motivated work makes a significant contribution to the well-being of the whole of our communities, regardless of the service users’ faith.

Only last year, the GMCA’s faith and belief advisory panel drafted a statement which drew attention to the variety, visibility and delivery of faith community support in a whole range of areas of social need—things such as homelessness and food security. That initial statement is part of working towards a faith covenant. We are currently drafting one which we hope will be signed by each of the 10 local authorities, along with faith community reps. Faith covenants actually emerged from the APPG on Faith and Society, and I know that they are already operating in areas such as the West Midlands and in Leeds.

Our combined authority has a number of action networks, including the homelessness action network. A youth homelessness report from 2023 showed that at least two community partner agencies are working to resolve individual youth homelessness cases through the pathfinder programmes that have grown out of faith communities. Faith involvement is woven into the whole of the provision of tackling homelessness, including the “A bed every night” scheme, whose target remains to ensure that nobody need sleep rough on our streets. The Greater Manchester Food Security Action Network is a similar story, with 134 food banks and 68 pantries or clubs across Greater Manchester, many of them run by faith communities, including my own local Broughton food pantry run by St James Higher Broughton, which I think has been well-reported here before.

As well as responding to immediate needs, partners recognise that the long-term future prosperity of Greater Manchester depends on our being able to achieve our shared commitment to be carbon net zero by 2038. To that end, our faith leaders—Christian, Jewish, Muslim, Hindu, Sikh and Jain—invited our mayor and other civic leaders to accompany us in a delegation to meet and discuss these matters with Pope Francis and leaders of the international Roman Catholic organisations in Rome last year. That really inspired us to think about how we could better work together as faith and political leaders to achieve our goal.

I have drawn my examples predominantly from the combined authority level, but I could equally mention more local cases, such as the Manchester homelessness partnership board, which I chaired from its inception until recently. That body brings together businesses, charities, and faith and public sector partners to maximise impact on ending homelessness in the city. I could speak of how the housing association that I chaired, Wythenshawe Community Housing Group, provides much of the services for young people in its area, using properties owned by the city council but where that council is no longer able to be the provider. Our emphasis is on synergies and partnerships—on recognising that faith communities deserve a seat at the table for what they already do, and what more they can do.

This debate must be as much about recognition and partnership as it is about sources of funding, but I guess that is where the levels of local authority funding kick in. Noble Lords have spoken, and will no doubt in the rest of this debate speak, of the severe limitations that many are operating under and the rapid rise in Section 114 notices that we have heard about. The danger is that when they are faced with major deficits, councils become tempted to cut back on the vital support they provide to those partner bodies, simply to maintain as much as they can of their own directly provided services. I understand why they want to limit the damaging impact of redundancies among their own staff. The trouble is that those understandable responses tend to maximise rather than minimise the harm being done to local communities.

Noble Lords will also note the negative impact of very short-term funding. Earlier on, I asked a Question about the household support fund and its extension for a mere six months. We debated that this morning, but local authorities and their partner agencies need longer-term certainty so that they can plan and provide. They are not helped by constant fears that funding may end in the very near future. So yes, my speech is a cry for a more generous settlement for local authorities; not so that they can plot a return to the municipalism of former decades, but to allow them to plan and deliver services along with their partner agencies.

The principle that we should come together across all sectors to support and strengthen community life is important at all times, not only when the money is short. Because it is through that partnership working, as I have seen over and over again throughout my adult life, that we begin to see, in big ways and small, not only our communities served better but the revitalisation of our common shared life together.

13:38

[Lord Foster of Bath (LD)]

My Lords, I too begin by congratulating my noble friend Lord Shipley on securing this debate and on his excellent introduction to it. I want to concentrate on just two issues: arts and culture cuts, and the unfairness in the allocation of funds between rural and urban areas.

In 2016, the chief executive of Arts Council England, Darren Henley, published a book, The Arts Dividend; Why Investment in Culture Pays. He argues in it that the dividends from investment in the arts and culture include encouraging creativity, helping educational attainment, improving health and well-being, supporting the creative industries, providing defining characteristics to villages, towns and cities, contributing to economic prosperity and enhancing our global reputation.

The noble Baroness, Lady Bull, and the noble Earl, Lord Clancarty, made similar points, and I understand that the noble Lord, Lord Freyberg, may well say something about this, too. Indeed, the noble Earl referred to a debate that he secured back in 2017 on local arts and cultural services, during which reference was made to a speech given earlier that year by the then new chairman of the Arts Council, Sir Nicholas Serota, who said:

“I need to voice long-term concerns around public investment, and especially the loss of local authority funding—which is now the most pressing issue, day to day, for many cultural organisations across the country”.


Seven years on, with further losses to local authority funding, the situation is dire. The extra £600 million this year does not begin to address the acute funding and service demand pressures on councils, which are now merely managing decline.

Our councils are the biggest funders of culture, spending around £1 billion in England on services such as libraries, museums, heritage and the arts. Most are discretionary, not statutory, but many councils are trying hard to protect them as they see the benefits to residents. However, with continued funding cuts, it is ever harder. Spending reductions in cultural and related services are now higher than for any other service area, and councils are warning that further cuts can be expected. As others have said, to avoid still deeper cuts, councils are selling off their assets at a rate of knots. One survey suggests that an average of 6,000 assets, from swimming pools to libraries, are being sold every year, which certainly does not bode well for the future.

A possible lifeline—the levelling-up funds for local councils—is simply not getting through. As the PAC announced last week, only 10% of levelling-up funds have been spent, due to delays in funds being received by councils. Can the Minister explain what is being done to speed up those payments? More importantly, does she accept that councils’ arts and cultural services are not a luxury but are integral to supporting communities, contributing to the economy and helping individuals live more fulfilling and healthy lives? If she does, can she tell us what plans the Government have to reduce their decline?

Some councils are better placed than others to sustain such services, so I turn to the issues impacting rural communities. In 2015, the then Defra Secretary, Liz Truss, claimed:

“This Government … is committed … to ensuring the interests of rural communities and businesses are accounted for within our policies and programmes”.


Four years after that claim, I chaired your Lordships’ special committee on the rural economy, which concluded that her commitment had not been met and rural areas were losing out. We demonstrated that, for many rural services—health, dentistry, public transport and policing, among others—government funding per head was lower for rural areas than for urban ones despite higher delivery costs. For policing, for example, the current funding formula means that, in Suffolk, where I live, we get a Home Office grant of £114 per resident, whereas Merseyside gets £217.

The committee also demonstrated that rural house prices and rents were higher despite lower wages’ that broadband and mobile connectivity were worse; and that government funding to rural local councils was lower, meaning higher council taxes for rural dwellers. The evidence was clear that rural areas were being unfairly treated, not least in the local government funding settlement.

Five years on, little has changed: all of these disparities remain. Of course, there have been some welcome initiatives—Delivering Rural Opportunity, published only on Monday, lists some of the Government’s favourites —but, despite such welcome initiatives, huge disparities remain between rural and urban areas. In times of reducing public expenditure, it is ever more important to distribute available resources fairly.

Michael Gove, in the final local government finance settlement update, appeared to suggest that he had cracked it. He said that,

“in response to the consultation feedback and in recognition of the specific challenges and difficulties local councils can face serving rural, sparse populations, we are increasing the Rural Services Delivery Grant by £15 million in 2024-25”.—[Official Report, Commons, 5/2/24; col. 6WS.]

Of course, any increase is welcome, but, as the Rural Services Network has pointed out, the extra money will go to only a limited number of rural councils—only the top quartile—based on a “super sparsity” measure. Very many will get no extra funding.

Even with this small amount of extra cash for a few councils, huge rural/urban disparities will remain. The RSN analysis for 2024-25 shows just how stark it will be. Urban local authorities will receive some 36%—£141—more in government-funded spending power per head compared to rural authorities. Rural residents will pay, on average, 20%—£112—more per head in council tax than their urban counterparts because rural councils are still getting less government grant. This simply is not fair. Rural communities continue to be disadvantaged and their residents left behind at a time when the aim is supposed to be levelling up across the country.

Ten years ago, the Government seemed to acknowledge the need to do something about this and changed the funding formula to make it fairer. But, in effect, they then did not use it. They added and froze in place a “damping process”. As a result, there are councils in London receiving millions of pounds more than the Government’s own formula says they should and rural councils getting far less than they should. Of course, I want to see the size of the pot increased, but, whatever its size, it should be allocated fairly. Does the Minister accept that it is not being, that rural communities are losing out and that the damping process should be phased out? All councils are getting a poor deal from this Government, and rural councils are getting the worst deal of all.

13:46

[Lord Freyberg (CB)]

My Lords, I too thank the noble Lord, Lord Shipley, for initiating this important and timely debate. As the final speaker before the Front-Bench speakers, I would like to add my voice to others’ on how the arts and cultural services are an essential component within our local communities. As stewards of our communities’ well-being, it is incumbent on us to confront the challenges facing local government and to recognise the indispensable role that the arts play in enriching our lives and fostering vibrant and inclusive communities.

The fiscal health of local government is a barometer of our collective prosperity and resilience. However, over the past decade or so, most local authorities have grappled with budgetary constraints exacerbated by economic downturns, rising costs and competing priorities. The ramifications of these financial challenges extend far beyond the balance sheets of government offices; they reverberate through the very fabric of our communities, affecting the services and amenities that define the quality of our lives.

Amid these fiscal pressures, one area that often bears the brunt of budget cuts is the arts. Programmes and initiatives that support cultural enrichment, confidence-building, skills development, creative expression and artistic endeavours are often deemed non-essential or expendable in the face of tightening budgets. Yet such a narrow perspective fails to recognise the intrinsic value of the arts and their profound impact on our communities’ social, economic and cultural vitality.

The arts are not merely a luxury or an indulgence; they are a fundamental component of what makes a place thrive. From public art institutions that beautify our streetscapes to local theatre productions that ignite our imaginations, the arts enrich our lives in myriad ways. They foster a sense of identity and belonging, cultivate empathy and understanding and serve as a catalyst for social cohesion and community engagement.

Moreover, the arts are not just cultural assets; they are economic engines that drive local prosperity and growth. As the noble Earl, Lord Clancarty, mentioned, studies have consistently shown that investment in the arts yields significant returns, generating jobs, stimulating tourism and fuelling economic development. Whether it be through the revitalisation of disinvested neighbourhoods that need to reinvent themselves through leisure and tourism, or the creation of creative industry clusters, the arts have the power to catalyse positive change and drive sustainable economic growth at a local level.

However, despite their undeniable contributions, the arts and cultural provisions remain vulnerable to the vagaries of budgetary constraints and fiscal austerity. When local governments face tough choices about where to allocate scarce resources, the arts are often relegated to the sidelines, resulting in reduced funding for arts organisations, cultural institutions and community arts programmes. This not only undermines the viability of these vital institutions but deprives our communities of the myriad benefits that the arts afford.

The impact of these funding cuts is felt most acutely by the marginalised and underserved communities, which often have limited access to arts and cultural opportunities. For many individuals, particularly young people, the arts serve as a lifeline—a source of inspiration, empowerment and hope in the face of adversity. When funding for arts education programmes is slashed or arts venues are forced to shut their doors, it is these communities that suffer the greatest loss. Here, I completely agree with others that, once these buildings are sold, they rarely, if ever, return to community use.

Moreover, the erosion of support for the arts exacerbates existing inequalities and perpetuates systemic injustices. As we are the world’s sixth richest nation, it is a sad state of affairs that even essential services such as libraries and museums are under threat owing to a lack of funding. Without adequate funding and resources, artists from underrepresented backgrounds face barriers to entry and struggle to make their voices heard. This not only stifles artistic innovation and creativity but perpetuates a homogenous cultural landscape that fails to reflect the diversity of our communities.

In confronting the challenges facing our local government finances, we must reaffirm our commitment to the arts and cultural provision as essential pillars of community well-being and resilience. This requires a paradigm shift in how we conceptualise the role of the arts within our communities—not as expendable luxuries but as indispensable assets that demand our unwavering support and investment.

To ensure the continued vitality of the arts, we must rethink the allocation of resources to support arts organisations, cultural institutions and community-based arts programmes. This includes sustained funding for grants, subsidies and public/private partnerships to empower artists and cultural organisations to thrive. It also entails integrating arts and culture into broader community development strategies, recognising their integral role in fostering social cohesion, mental health and well-being, economic prosperity and inclusive growth.

Furthermore, we must adopt a more equitable approach to arts funding, ensuring that resources are distributed fairly and that all communities have access to arts and cultural opportunities. This requires actively engaging with marginalised and underrepresented communities, amplifying their voices and centring their experiences in our cultural narratives.

The County Councils Network, in its briefing for today’s debate, calls for the next Government to have

“an honest discussion … as to what councils can be expected to deliver”

I believe that we should begin that process right now, because councils cannot afford to wait.

In conclusion, the state of current local government finances presents a formidable challenge, but it also presents an opportunity to reaffirm our commitment to arts and culture provision as essential components of vibrant, resilient communities. As we navigate the complexities of budgetary constraints and competing priorities, let us not lose sight of the transformative power of the arts to unite, inspire and uplift us.

13:54

[Baroness Pinnock (LD)]

My Lords, I thank my noble friend Lord Shipley for securing this debate, and for his excellent and analytical introduction, and all noble Lords for the many local examples that they have shared and for their eloquent contributions. I have relevant interests as a councillor for nearly 40 years and as a vice-president of the Local Government Association.

The words “local government” were once synonymous with pride of place and pride of people. Councils were duly elected and took action to improve that place, be it through housing improvements, creating parks or ensuring public health reforms. It is a sentiment that the right reverend Prelate the Bishop of Manchester also expressed. The demise of the once great vision of what elected bodies could achieve for their place has been gradual. The question is whether we are reaching an endgame in that vision. My noble friends Lady Scott of Needham Market and Lady Hamwee have exposed and expressed that as a real threat.

Local government is shorthand for the provision and delivery of services that make a tangible difference to the lives of individuals, families and communities, be they in villages, towns or cities. That is why this debate is so important. Cutting funds to councils means real reductions in services that provide basic support to people in need, blocking opportunities for young people and leaving the place that people call home in a state of decline.

The challenge for the Minister is to demonstrate that the Government understand that local government is not about the delivery of disparate services defined only by central government. Local government, at its best, is far greater than the sum of its parts. It is local government that is the key to preventing difficulties becoming crises. For example, closing swimming pools and leisure centres as well as reducing youth provision will mean that young people have fewer places to go and fewer interests to enjoy, and the consequence can be a rise in anti-social behaviour.

My noble friend Lord Shipley has rightly focused on sources of income for local government. That is something that we really need to think about in this debate. A SIGOMA briefing stated—and I thought that this was really telling—that there has been a move away from providing local government funding based on need to one based on local tax-raising ability, so that councils in more affluent areas are able to raise far more through council tax than councils in more deprived areas. Can the Minister confirm that that is the case and that government claims of increasing core spending power include a requirement for councils to raise council tax by the limit set by the Government?

All that adds up to not very much in the sense of levelling up, which sounds ever more a hollow promise, as many noble Lords have said. Does the Minister agree that the social care precept is a new tax, introduced by the Government to help fund social care? That tax adds a further 2% on council tax bills in the higher-tier authorities and unitary councils and 2% more on the bills of hard-pressed council tax payers. In my own council, that means, for the average council tax payer, an additional £200-plus per year. As we all know, council tax is regressive, so is that a fair way of raising more funding for social care services?

As my noble friend Lord Shipley has rightly pointed out, 69% of local councils’ total spend is on adult and children’s social care, leaving 31% for everything else: highways, leisure, parks, libraries, culture, the arts—we could go on. I remind the Minister that my noble friend also said that the Government seem to be knowingly letting things get worse, in terms of the consequences of cuts to all the other services. We are still waiting for the fair funding review.

Of course, there are other forms of income for local government. The Government have been pushing for councils to use their reserves, but this is such a short-term and short-sighted approach to local government funding. As reserves can be used only once, this props up a budget for one year only and leaves an even bigger gap the following year. It is not sustainable for the Department for Levelling Up, Housing and Communities to push councils to use their reserves, especially because, as we have been reminded, the OBR has assessed that local government is facing further significant cuts to its funding as the proportion of GDP will fall by 3% over the next few years.

My noble friend Lady Hamwee contrasted being a local councillor 30 years ago with how local government is now—so constrained by government that it is in straitjacket. There is, as she says, little local discretion now available to local councils. That means, of course, that local councils are not able to respond effectively to real local need, because if there is no discretion, there can be no response.

Quite rightly, we have a real focus on arts, culture and libraries. The noble Baroness, Lady Bull, the noble Earl, Lord Clancarty, the noble Lord, Lord Freyberg, and my noble friends Lord Foster and Lady Miller all raised the vital role that culture, the arts and libraries play in the life of a place, and their economic importance in attracting business and investment. There are also the life chances they open up and the opportunities they provide for enhancing life and well-being. The tragedy is that these are the areas of local government funding that have had huge cuts, and there is no sense of the Government recognising the impact of the cuts, and no sense that the cuts will be replaced, except by these odd little pots of money that can be applied for and go somewhere—but, in the scheme of things, go nowhere. My noble friend Lady Miller had the telling statistic that more people go to libraries every year than watch football—I am up for that, as a statistic.

My noble friend Lady Scott of Needham Market pointed to the value of parish and town councils, and the enormous work they are doing. I know that my colleagues in Somerset Council, which is struggling with huge cuts to services, has sought a bigger and better partnership with its local parish councils to make up the difference.

To conclude, there is a crisis in local government. As we have heard, one in five councils are anticipating effective bankruptcy. Selling off council assets permanently reduces councils’ ability to serve local residents. Local councils matter. As we have heard, people are passionate about what local councils at their best can do. That is why the gradual decline of local government matters. We on these Benches value what councils can do; we will support and enhance them. The question to the Government is, will they?

14:05

[Baroness Taylor of Stevenage (Lab)]

My Lords, I draw attention to my interests in the register. I thank the noble Lord, Lord Shipley, for securing this vital debate and for his excellent and thorough introduction. I thank all noble Lords who have spoken so powerfully. It clearly demonstrates the very rich nature of our sector.

Your Lordships will know that I was a local government leader for nearly 17 years. Distressingly, because of local government funding cuts, I had to cut the council’s budget every single year of those 17. In the first years, this was a very specific technical adjustment which only affected a small number of councils—unfortunately, mine was one of them. After that came a torrent of funding cuts which saw millions of pounds taken from our budget in cash terms—and that is before unfunded inflation is taken into account.

Councils across the country have had the same experience. In spite of the constant refrain from Ministers on the Government Benches that more funding is going in, the fact is that it is not meeting either the rising demand for services, the increasing demand due to failures in other public services, inflationary costs, or the costs of dealing with multiple government initiatives.

I am afraid it is just not good enough to say that this is just a few councils which have been badly managed, or to say that, if councils cut back their budgets for consultants and equalities programmes, as the noble Lord, Lord Shipley, referred to, the problem would go away. In fact, the Hunger Games approach to funding taken by DLUHC, which sets councils and their communities against one another in competitive bidding rounds, has driven much of this expenditure. It would be interesting to know—across all government departments, but DLUHC would do—what departments have spent on consultants and equalities training in the last three years.

LGA analysis shows that, by 2024-25, cost and demand pressures will have added £15 billion to the cost of delivering council services since 2021-22. Despite increased funding in both of the last two years, mostly from council tax, there is—as the noble Lord, Lord Shipley, and the noble Baronesses, Lady Eaton, Lady Scott, and Lady Bull, have all said—an ongoing gap of £4 billion. There is a dreadful built-in impact here, too, that sees the poorest areas the worst affected. Many noble Lords have referred to that, as did the right reverend Prelate. The broken local government finance system means that those areas get the same cuts and are least able to fill the gap through council tax or retained business rates. As noble Lords have pointed out, the double whammy here is that these areas are likely to have the highest levels of increasing demand, too.

UK councils have fewer powers to raise revenue locally than any other G7 nation, with 95% of the UK’s tax revenue and 75% of public spending controlled centrally. So, when the Minister tells us about the increase in core spending power, as I am sure she is about to do, please remember that 44% of the additional core spending power available to councils will go solely to fund the cost increases in commissioned adult social care, due to the national living wage increase. This leaves a reduced amount of funding to address the impact of national living wage increases on other parts of the local government workforce and outsourced services that are highly exposed to the national living wage, such as waste collection and disposal, let alone the impacts of inflation, demand pressures and other cost drivers across all services.

As the right reverend Prelate mentioned, every aspect of our community life has been impacted. Every service has been affected. The noble Baroness, Lady Hamwee, pointed out the impact on our local democracy; it is not what people become councillors to do. This is not what communities expect; they are paying more in council tax and getting less back in services. We know that people truly value the services that impact on their lives every day, as soon as they walk out of their front door—but look at what has happened to them. Net spending on cultural services has been cut by 43%, with sport and leisure facilities down by 44%. England has lost almost 400 swimming pools since 2010.

Sport development and community recreation has been cut by 59% per person, and spending on parks and green spaces has been cut by 30%. Community centres have been cut by 39% and libraries by 50%—800 libraries have been cut. Museums and galleries have been cut by 40% and theatres and public entertainment by 38%. The noble Baronesses, Lady Bull and Lady Miller, the noble Earl, Lord Clancarty, and the noble Lords, Lord Foster and Lord Freyberg, all spoke very powerfully about the impact of local government cuts on cultural services.

More than half of areas have made cuts of more than 50% to transport and highways. This is even worse when you look at some areas, such as North Yorkshire, Bath and North East Somerset, and Lambeth, where there have been cuts of over 90% to highways work—no wonder there are potholes. Think of the negative impact of that on local economies.

These are services that everyone uses, but what about the most vulnerable in our communities? Some of the high-demand, high-cost services that local government delivers are used by only a very small percentage of our community. With services such as adult care, children’s services and temporary and emergency accommodation, many people will not realise the extent of the funding gap until they try to use that service. A recent County Councils Network report tells us that children’s and adult care services are consuming two-thirds of their total budgets. Surely, we should judge the strength of our communities and society by the way we deliver to the most vulnerable.

There are rising costs in children’s social care, with budgets up by 13.6%, driven by huge increases in placement costs. LGA research has shown that, in 2022-23, councils paid for over 1,500 placements costing £10,000 or more per week—over 10 times as many as the 120 placements purchased by councils at that price in 2018-19. It is way past time that this private-sector racketeering was brought to an end.

Costs of home-to-school transport are escalating, with budgets up by 23.3% in the last year, equalling a 130% cash-terms increase since 2016-17. Increasing costs and demand in adult social care means that budgeted spend increased by £2.5 billion in the last financial year. Costs of homeless services are increasing, with multiple contributory cost and demand drivers pushing budgets up by nearly 20% last year. Government data shows that more than 104,000 households were in temporary accommodation at the end of March last year, the highest figures since records began. Some district councils are now spending 30% to 40% of their total budget on emergency accommodation.

In most local areas, funding to the voluntary community sector from local government has either been cut or dried up all together, with seven in 10 organisations having withdrawn from public service delivery altogether, according to the excellent briefing from the National Council for Voluntary Organisations. The noble Baroness, Lady Bennett, mentioned this. When authorities issue a Section 114 notice, both the NCVO and Women’s Aid report that all their funding is cut immediately. I do not have time to go into the pressure on housing revenue accounts, but the recent decision to remove councils’ rights to retain 100% of right-to-buy receipts, at a time when we should be encouraging a surge in provision of new social housing, is incomprehensible. We need 90,000 new social homes a year, so that cut was a crazy decision.

Levelling up means nothing if we cannot support vulnerable children and adults, the homeless, the voluntary sector, domestic abuse victims and the leisure and arts sectors. Everything I have outlined will have long-term impacts. There will be pressure on acute services from not funding early intervention properly, and pressure on the NHS when our vulnerable residents cannot be looked after in their own homes. There will be an impact on the health and mental health of people and communities when their leisure and culture opportunities get closed down, and there will be significant long-term impacts of poor-quality, unaffordable and insecure housing. Young people will lose their opportunities and aspirations because their learning needs have not been met. New homes will not be delivered or will be delayed because of cuts to planning departments. There is such a simple solution: just allow local authorities full cost recovery on major planning applications. The noble Baroness, Lady Eaton, and the noble Lord, Lord Shipley, both mentioned that.

There will be a dramatic impact on the economy when local government cannot deliver either the infrastructure or the economic development support to meet business needs. The Government are quite simply closing down the best route—the local, devolution route—towards ensuring that we get the growth that the country needs to fund our public services properly.

I have been in local government for almost 30 years. My colleagues around the country are heroes, from those in parish and town councils—mentioned by the noble Baroness, Lady Scott of Needham Market—to those in the larger metropolitan authorities; they deliver for their communities, even in these most devastating and toughest of times. Please give them the trust and respect they deserve, give them long-term funding settlements, and work with them to reform the broken funding system—I was pleased to hear that the new noble Lord, Lord Fuller, is working on this project. Fix the broken business rates system that fails both businesses and the communities where they operate; give authorities the strong fiscal devolution they need, not the piecemeal approach we have seen in recent years; and then leave them alone to get on with it. Local councils, in touch with their local communities, will always deliver better than any Whitehall directive, even a levelling-up mission.

14:15

[The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Scott of Bybrook) (Con)]

My Lords, I thank the noble Lord, Lord Shipley, for bringing forward this important debate on the current state of local government finances and the impact on local communities. I also thank all noble Lords for their considered and insightful contributions today.

The Government are clear in their support for councils—there is no decline in that support—and the vital work they do to support local residents in all corners of the country. It is important to start by recognising some of the things that are happening. In Bolton, Stoke and Wandsworth, the councils have all recently renovated or opened new library spaces to the public. In Warwick and North Yorkshire, we have seen the opening of new leisure centres in Kenilworth and Knaresborough, and in Sandwell, Knowsley and Rushmoor, levelling-up funding will deliver improved leisure centres and facilities for local residents.

The Government are committed to delivering for our towns. In October of last year, we announced the investment of £1.1 billion into 55 towns across the country, with each town receiving a £20 million endowment-style fund to invest over the next decade. This will allow our towns to develop long-term visions and to deliver change for their residents, such as the regeneration of Ashburner Street, in Bolton. Finally, in Blackpool, the central regeneration scheme is scheduled to get under way, following planning approval, with an estimated 1,000 jobs set to be created as a result.

That is only a very small sample of the achievements and developments that councils across this country have made in recent months and years, all of which have made a positive impact on their local communities. All local authorities across the country should know that we place the utmost importance on the partnership between central and local government, and recognise the crucial work they do in delivering day in and day out for our local communities.

However, as has been mentioned, the Government recognise the pressures that some places face in delivering this work. We have heard from the noble Lord, Lord Shipley, and the noble Baroness, Lady Pinnock, that we are letting it get worse. We are not letting it get worse, and I will mention more about what we have done this year to help local authorities. Many of the problems that these places face, and that we all face as a country, are driven by global economic factors and the resulting higher inflation. That is why the Prime Minister has prioritised and successfully delivered on his commitment to halving inflation. However, we are all aware that demand for key services that councils provide, and the costs of those services, continue to rise steeply as well, not least because of an ever-aging population that, quite rightly, requires increasing social care support.

In February, the Government announced the local government finance settlement for 2024-25. This settlement makes up to £64.7 billion available to local authorities next year, an increase in core spending power of £4.5 billion on last year, equivalent to 7.5% in cash terms. This above-inflation increase demonstrates that the Government are standing behind councils up and down the country and are listening to them.

We have additionally taken action to provide further support to local government to enable continued delivery while wider system reforms for social care are implemented. At the final local government finance settlement, the Secretary of State announced that we are providing £1.5 billion in additional grant for social care through the settlement for 2024-25 compared to 2023-24. Having listened to the views of local government, this includes an additional £500 million for the social care grant.

While being mindful of the level of adult care provision, where possible councils should use this uplift to invest in areas that help also place children’s social care services on a financially sustainable footing. This includes investment in expanding family help and targeting early intervention, expanding kinship care and boosting the number of foster places.

Further to this, in the Budget earlier this month the Chancellor announced £165 million to support councils to improve the quality of, and increase capacity in, residential children’s homes, so that children with the most complex needs can be cared for in a provision that meets those needs. This funding will boost local authority-run provision and, in doing so, respond to concerns that excessive profiteering—as we heard from the noble Baroness, Lady Taylor of Stevenage—and often poor quality is threatening the sustainability and outcomes of local government children’s services.

Nevertheless, we recognise that, sometimes, private placement costs are too high, and that council tax payers are stuck footing the bill. The Government’s position is that this is an issue with profiteering rather than profit. Through reforms to children’s social care, they will continue to explore what action is needed to best support councils. The Government will be developing proposals on what more can be done to combat profiteering, bring down costs and create a more sustainable market for residential placements, which they will publish later this year.

The Government recognise the significance of special educational needs pressures on councils. This is why the Spring Statement committed £105 million towards a wave of 15 new special free schools, to create over 2,000 additional places for children with special educational needs and disabilities across England. On top of this specific funding for social care and SEND, the Government have committed to a 4% funding guarantee that will ensure that all councils receive at least a 4% increase in their core spending power before any local choices on council tax, efficiencies or reserves. We have listened to the many councils and the many things they told us. They would otherwise have experienced cash losses in funding next year, and we have stepped in to prevent that.

We are committed to supporting councils wherever they are in the country. This is in answer to the issue raised by the noble Lord, Lord Hussain, about Luton. The most relatively deprived areas of England will be receiving 18% more per dwelling in available resource through the 2024-25 settlement than the least deprived areas; those councils, such as Luton and others, will be getting more. We understand that those councils have faced historic challenges in tackling deprivation. It is also why we have increased the value of the rural services delivery grant—as mentioned by the noble Lord, Lord Foster of Bath—by over 15% to £110 million, to support rural authorities dealing with the unique challenges of serving very dispersed populations. That is a second successive year of above-inflation increases for this grant.

The action we have taken to support local government in this financial settlement and beyond demonstrates our commitment to the sector. We recognise and thank those in the sector for the important contribution they make in delivering local services for their communities, up and down the country. We have worked in partnership with representatives, sector leaders and local councils, to ensure that this settlement helps to meet the needs of local government. This engagement has been a vital part of the decision-making for this settlement. When local councils speak to us, we listen, and this includes those councils that face the most significant challenges.

The Government also work closely with councils to understand the specific pressures that local government is facing. They are looking at a range of data on demand for services and the costs faced by councils. As a result of the local government finance settlement, the vast majority of local authorities will be able to set balanced budgets in 2024-25. We have published details of exceptional financial support agreed with a small number of councils, but the vast majority of this support relates to six councils where there has been severe local failure. The Government have had to step in there and take the most serious action through statutory intervention.

A small number of other councils requested financial support on an exceptional basis, due to specific local pressures that they were unable to manage themselves. We stand ready to speak to any council that has concerns about its ability to manage its finances or faces pressures it has not planned for. Our door is always open to them.

Before I conclude, I will answer as many of noble Lords’ questions as I can. If I do not get through all of them, obviously I will write. First, the noble Lord, Lord Shipley, and the noble Baronesses, Lady Hamwee and Lady Bull, brought up local government funding reform. We remain committed to updating the system in the next Parliament, and will work closely with local partners to take stock of the challenges and opportunities that they face. Of course we will consult with them before any potential funding reforms, but we talked to councils last year about any of the reforms we could make and they did not want any disruption or uncertainty at that time.

The noble Lords, Lord Shipley and Lord Hussain, brought up council tax reform. The Government continue to protect local tax payers from excessive increases. We believe that our approach strikes a fair balance and is an additional local democratic check and balance on local authorities. We are not allowing council tax to increase in place of increased funding; it is provision for a balanced package that includes a substantial increase for this coming year, as I said.

The noble Baroness, Lady Scott of Needham Market, and the noble Lord, Lord Shipley, brought up audit issues and the backlog. Local audit is vital in supporting democratic accountability and providing assurance for local people and their elected representatives. At the time of its abolition, we believed that the Audit Commission was too centralised and that it encouraged local bodies to focus more on the views of the commissioner than on local people. The Government are working with the Financial Reporting Council to tackle a significant backlog of local audits and put the system on a sustainable footing for the future.

[Baroness Taylor of Stevenage (Lab)]

Does the Minister think it acceptable that 99% of local authorities did not clear their audits in time last year?

[Baroness Scott of Bybrook (Con)]

No, I do not. We will work with local authorities on that issue.

The Government have invested £5.5 billion on highways maintenance since 2021. In 2023, we provided an additional £200 million to fix the equivalent of 4 million potholes. In October last year, the Government announced £8.3 billion of new funding, over a 10-year period, for local road resurfacing. We are putting in extra money and not asking councils to find it in their base budgets.

My noble friend Lady Eaton and the noble Lord, Lord Shipley, brought up the Office for Local Government. Oflog aims to provide authoritative and accessible data and analysis about the performance of local government, which is important, and to support its improvement. It is still in its infancy, but its three aims are: to inform, by improving access to data; to support, by facilitating sector-led improvement; and to seek any potential failures that it can find, getting in early to support our local authorities.

The noble Baroness, Lady Hamwee, brought up the issue of local democracy and devolution. If anybody sat through the levelling-up Bill in this Chamber, they will know that devolution is at the heart of our plans to increase economic growth and level up the whole country. We remain committed to seeing more empowered and accountable local leaders to do this, who can pave the way for that growth and innovate because they know the challenges and what is best needed for their areas.

There was quite a lot of talk on planning authorities and whether local authorities should have the ability to set their own planning fees. This came from my noble friend Lady Eaton, who has so many years in local government—probably more than many of us who have a lot there. I thank her for her speech and her insight. We increased the fees considerably last year, by 38% for major applications and 25% for other applications. We have done another couple of things to help the planning sector. We have what we are calling a planning super-squad: this is an important team of senior planners who can go into a local authority that has a large or complex application and help it with the capacity and delivery issues. We hope that this will get some of our bigger planning applications away much quicker. We have invested £13.5 million in that. We have also put £29 million in a planning skills delivery fund. That is to help local planning authorities with their backlogs. We are doing a lot but, as we said on the LURB as it went through, we will not look at local authorities setting their own planning fees because we feel it might destabilise things, by having different areas with different fees across the country.

My noble friend Lady Eaton also brought up the right-to-buy receipts. At the Budget earlier this year, the Government announced increases in flexibilities available for local authorities to fund a higher percentage of the cost of replacement of affordable homes. That is taking right-to-buy sales from 40% to 50%. We hope that this will allow local authorities greater resources to allocate towards what we know is important housebuilding in the social rented sector.

The noble Lord, Lord Shipley, brought up business rates. We have ensured that all current enhanced business rate retention areas will continue for the next year. During this time, the Government will continue to review the role of such arrangements as a source of income for areas, and their impact on local economic growth and as part of the deeper devolution commitments as set out in the levelling-up White Paper.

The noble Lord also brought up council reserves. The Government consider reserves to be an important part of the resources available to local councils. Interestingly, reserves remain significantly higher since the pandemic, having risen £31.6 billion over that time, but we expect councils to use their reserves appropriately when there are pressures on them.

I am conscious of the time, so I will move to something that most noble Lords brought up, which was quite an interesting part of the debate: culture and the arts. I will ask my noble friend Lord Parkinson, the Minister for the DCMS, to read Hansard—oh, he is here; that is good timing. The debate was wider than just local government, and is something to do with the responsibilities between local and central government, so we will talk about it.

There were some interesting issues. The majority of funding that comes to local government is not ring-fenced in recognition, quite rightly, that local authorities are best placed to make local decisions. I totally agree with all the speakers that arts, culture, sport and heritage make our communities unique and vibrant. They also drive economic growth, give jobs and improve well-being. We encourage councils to reflect on the important role that these sectors play.

We have provided support for the cultural sector across the country. At the Spring Budget in 2024, the Chancellor confirmed the allocation of £100 million for local cultural projects, recognising the importance of pride for the place. This included a number of nationally significant cultural projects such as the British Library North project in Leeds and the National Railway Museum in York. Smaller amounts were also given to places that did not get levelling-up programmes, including Maldon, Erewash and North Northamptonshire, which have all been awarded £5 million of capital funding. I was also interested to hear that a new studio was announced in the north-east last week. The new north-east mayoral combined authority intends to use £25 million of flexible funding to help that scheme.

I am out of time so I close by saying that we recognise the scale of the financial pressures caused by inflation and the wider economic circumstances that have put local authorities across the country under acute strain. To address this, we have listened to the public and engaged with local authorities; this is why we have provided the substantial increase in support above inflation that this funding settlement provides. Once again, I thank the noble Lord, Lord Shipley, for bringing forward this debate and all noble Lords for their contributions. I look forward to continuing discussions with them.

14:37

[Lord Shipley (LD)]

My Lords, I am very grateful to all those who took part in this debate. I must say, I have appreciated the richness of what we have heard today. I hope that the Government will take note of a lot of the valuable comments made. I pay particular tribute to the right reverend Prelate the Bishop of Manchester, who picked out the five key words in this debate: the impact on local communities. We have a tendency to debate funding settlements and fiscal policy but the impact on local neighbourhoods, people and communities was the objective of this debate.

I listened carefully to the Minister’s reply and was pleased by one thing. I agree about the work being undertaken to make residential placements for children more sustainable; I hope that that is going to be completed fairly rapidly.

The Minister said that there has been no decline in the support for councils by the Government. I do not agree. She quoted a whole set of examples of new things happening across a range of local authorities but, first, you cannot generalise from the particular, and, secondly, they were capital projects. I am talking about the impact mostly on revenue of the switch into adult social care, which is not being recompensed for local community services.

The Government capped local authorities on council tax. Since 2016, they have required local authorities to increase council tax for the social care precept by 2%. Had all that money been supplied by the Government nationally, that 2% each year compounded would have been available for those services to those local communities. The whole point of my debate is trying to point out that we have got out of kilter here and that something needs to be done.

I am very interested in the Minister’s statement about reserves. We used to have clear rules about reserves and contingencies in local government. When we had the Audit Commission, we had all of these things. Given the, I think, £31 billion that she cited, I would love for the Minister to write to me to say what proportion of that is earmarked, what proportion is unearmarked and, indeed, what proportion is actually in-year contingencies. It would be helpful to know that.

I thank everyone for this debate; it has been helpful. I hope that this Government, and any future Government, will listen. I hope that the Government will undertake a fair funding review, which has been promised over so many years but has never happened. At that point, we might get the word “local” back into government.

Motion agreed.