Provisional Local Government Finance Settlement
(Limited Text - Ministerial Extracts only)
Read Full debate
The Minister for Local Government and English Devolution (Jim McMahon)
The Government were elected on a mandate of change, to deliver a new era of economic growth and national renewal, and reverse the years of failure and decline that we inherited. Through the tough decisions that we took in the Budget, we prevented a return to austerity while protecting working people’s payslips. The plan for change that the Prime Minister unveiled earlier this month is the next stage on the journey of reform—a plan to kick-start growth and get Britain building again, putting more money in people’s pockets and delivering 1.5 million new homes, good jobs and opportunities for all.
Just this week, we announced our plans to rebuild and reform local government, and to empower local leaders to deliver that change so that the benefits are felt in every community. We cannot do this alone. We need strong, empowered local government to work with us, as equal partners in a new relationship. Public service is our collective duty, but after a decade of cuts, fiscal mismanagement and the failure of the previous Government to fix the foundations, it is a fact that councils of all political stripes are in crisis. The broken local audit system in England and the scandal of the unacceptable backlog that led to the recent whole of Government accounts disclaimer further illustrate the dire straits of the system and the legacy that we must reconcile.
The Prime Minister gets this. As a former director of a critical public service, he knows that reform is vital, and so does the Deputy Prime Minister, having worked on the frontline as a home care worker, seeing the human impact every single day. I am proud to have public service and local government in my blood too. That is why I take the responsibility to lead the Government’s work to rebuild the sector with the seriousness that is due and the urgency that is required. The work has already begun, and today marks a major milestone in our mission to rebuild local government and put councils on a firmer financial footing, as we publish the provisional local government finance settlement for ’25-26 and launch our consultation on these proposals, alongside our consultation on wider funding reform.
In the autumn Budget, the Government announced £4 billion of additional funding for local government services, of which £1.3 billion would come in the settlement presented today, but we know that we need to rally. That is why I am announcing over £700 million of additional grants. That includes over £200 million of extra funding for social care since the policy statement. I also confirm that the new funding includes £515 million that will be made available in the final settlement to support councils with the increase in employer national insurance contributions. The package in the provisional settlement will enable local government to invest in the vital services that people rely on, making £69 billion available—equivalent to a 3.5% real-terms increase in councils’ core spending power when compared with ’24-25. I confirm that this will increase even further in the final settlement.
Today is the start, not the end. Taken together, the additional funding made available in this settlement and the Budget will deliver over £5 billion of new funding for local services over and above local council tax. Alongside that, every authority in England will receive a one-off share of £100 million currently held in the business rates levy account.
Together, we must ensure that public investment is used for long-term prevention and reform of local public services, rather than expensive short-term crisis responses, which often have much worse outcomes. We are determined to end the cycle of failure that we have seen for too long, and we will provide certainty by ensuring that no authority will see a reduction in its core spending power after accounting for council tax flexibilities next year. We are also ensuring that taxpayers’ money goes to where it is needed the most. That includes an immediate down payment: a highly targeted £600 million recovery grant, funded through repurposing the rural services delivery grant and the services grant, ahead of broader reforms to a fairer funding system later. Today, we are launching a consultation on local authority funding reform starting in ’26-27.
There will always be tough decisions to make, but we are determined to ensure that we fairly reflect the real drivers of cost, including demand, the need for public services, and importantly, the ability of councils to raise revenue locally. That is why we are making up to £3.7 billion of extra funding available through this settlement to help local authorities to meet the spiralling costs of social care. That includes an additional £200 million uplift to the social care grant, which I confirm today, taking the total increase to the grant for ’25-26 to £880 million. That includes the new children’s social care prevention grant, first announced in the policy statement, which I today confirm will be uplifted in a further final settlement by £13 million, taking the total to £263 million. That is the first step in our national roll-out of transformed family health services, as we double settlement investment in preventive children’s social care services to over £500 million next year. I place on record my appreciation, and that of the Deputy Prime Minister, for the partnership and determination shown by the Treasury, the Education and Health Secretaries, and their Ministers and officials.
We will not do as the previous Government did and impoverish councils, and those who need support the most, then parade them around for public shaming. That helps no one. We must work together to get councils back on their feet financially. The principle stands that it is for local authorities to decide at what level they set their council tax, and they are accountable to local taxpayers; however, we are committed to keeping taxes on working people as low as possible, and we have to strike a balance, so we will maintain the previous Government’s policy, as set out in the Office for Budget Responsibility forecast, of setting a 5% council tax referendum principle, made up of a 3% core principle and a 2% principle for the adult social care precept. That means that residents will have the final say over increases that go beyond that.
We have put in place a framework for 2025-26 to support those councils in the most financial difficulty. Similar to the approach taken by the previous Government, we will consider requests for bespoke referendum principles on a case-by-case basis. We expect the changes outlined today will give the respite needed and clarity on the direction of travel, but we also know that 14 years have hit hard and, for some, the recovery grant and the other measures will still mean that additional support is required. We will put taxpayers and the impact on working people at the forefront of our decisions, and we will look carefully at councils’ individual circumstances—for instance, how much they charge in council tax and the strength of their plans to protect vulnerable people on low incomes.
To recognise the impact of council tax on households across all councils, we are consulting with the sector on changes to payment instalments, which will allow annual council tax bills that are spread over 10 months to move to a 12-month schedule by right, helping household budgeting, spreading the cost for working people and mirroring how most household bills are paid.
Ensuring local government can deliver for working people in the long term requires a root-and-branch reform of the way that councils are funded. That is why through the 2026-27 settlement—the first multiyear settlement in 10 years—we will introduce an up-to-date assessment of councils’ needs and resources. Today we are launching a consultation on the objectives and principles of those changes. We will consider representations from all corners of the sector to develop our understanding of the drivers of need, including deprivation, and of the impact in rural areas on service delivery—fairness for all delivered once and for all. We will redouble our work to shift power away from Westminster into the hands of those communities who know their area best. We will reduce the myriad of funding pots that councils have to contend with, giving them the flexibility they need to deliver local and national priorities.
That effort is underpinned by our strategy to streamline and simplify the local audit system in England. Local communities deserve transparency, accountability and the effective early warning system that local audits provide. We are taking immediate action by replacing the broken and dispersed system with a focused, proportionate and value-for-money local audit office, ensuring that the system is fit for purpose. This is a long-term challenge, and it will take hard work and dedication to achieve, which is why we are wasting no time in fixing the foundations, getting the audit backlog under control, overhauling the system for the long term, returning to secure multiyear settlements, and bringing forward ambitious plans for devolution, growth and reform of public services, while improving standards, accountability and efficiency. We are building for the long term to get local government fighting fit, legal and decent, and as equal partners to rebuild our country from the ground up, and ready to play its part in delivering the Government’s missions through our plan for change. I commend the statement to the House.
David Simmonds (Ruislip, Northwood and Pinner) (Con)
It is Christmas. The two wise men and the wise woman on the Government Front Bench have arrived bearing their gifts for local councils, but on closer inspection, while the goal is beautifully packaged, the box is somewhat emptier than people had been expecting.
It has been a challenging few weeks for local government. We have heard the Government’s plans to take as much of the local as they can out of local government, and it is clear that this statement will leave our local authorities facing further challenges in doing their day jobs and significant uncertainty as we go into the new year. All that comes from a Government who promised just a short time ago that they would end the bidding war, as they called it, among councils. They then promptly started a new bidding war for homelessness funding, rather than addressing it through the settlement given that it is a core statutory duty of local authorities. The consequence of the Government’s approach is that localism, on central Government terms only, represents just in London a £700 million net cut in the funding that councils will have available to deal with homelessness at a time when rough sleeping is at 27%.
Councils face uncertainty about the cost of funding elections. The Minister told us just a few days ago that he would be considering whether to cancel local elections in places facing local government reorganisation. Up and down the country in all those local authorities, our returning officers are booking and paying for the polling stations, hiring the staff and carrying out the canvassing. They need certainty as we go into the new year.
Of course, our councils face additional and uncertain challenges that were announced in the Children’s Wellbeing and Schools Bill, as well as from various statements made by other Ministers, that clearly imply a significant increase in the cost of new statutory duties coming the way of our local authorities, with no clarity about how those may be funded. All of that is on top of bringing forward local government reorganisation proposals to a deadline early in the new year. It is not clear whose interests that serves, but for all those local authorities that may be considering that, it represents a significant additional cost pressure.
As many of our councillors go away for their Christmas break and try to digest the detail of the settlement over their Christmas lunch, they will face rumbling indigestion as they realise that their budget pressures will grow significantly, especially in rural local authorities, which face huge losses from the cancellation of funding that supported the additional and quantified costs of local government services in a rural environment.
I will be fair to the Minister: the £2.7 billion black hole that we spotted at the time of the Budget announcement has shrunk by around £700 million, but when it comes to council tax increases that will be announced by our local authorities in February, how much will they have to put up council tax to meet the shortfalls? How much will they have to put up council tax to cover the Government’s new approach to asylum, which is driving up the cost of temporary accommodation? When will the Government provide clarity on the dedicated schools grant override, given the impact it has on our local authority budgets? When will they provide clarity on the election preparation costs? Given that the Local Government Association has identified a £1.766 billion shortfall just from the Government’s national insurance contributions measure, when will they announce further funding to cover those costs?
Let us consider this: the cancellation of the new homes bonus means £3 million lost by Birmingham, £3.7 million lost by Buckinghamshire, £4 million from Central Bedfordshire, £5.3 million each from Ealing and Milton Keynes, £3.7 million from North Yorkshire alone, £9.5 million from Lincolnshire, £14.3 million from the rural services grant and an £18 million cut for a rural local authority in this Budget. It is clear there are tough times ahead for local authorities as they begin to look at the detail. The new homes bonus, in particular, means the places that have built the most homes are the ones that lose the benefit. If this is fixing the foundations, I would not want to stay in the tent which is the only thing they would hold up in our local authorities.
Jim McMahon
Here we go again. I would think that after 14 years of councils being on year-to-year watch to find out what position they would be in, the Conservatives would at least welcome the preparation now for multiyear settlements. They had 14 years to get their house in order, and they could not even line up to give councils more than 12 months’ certainty about what was coming. The one thing councils were absolutely certain about was that it was only going to be bad news after bad news. When there were crises in adult social care and children’s services and when homelessness was rising at a rate of knots, the last Government were completely missing in action—that was what councils were facing. How many councils went bust on their watch? Councils were lining up saying to the Government that they could not afford—
Jim McMahon
Let us talk about Birmingham, because the Opposition referenced the £3 million new homes bonus. The new recovery grant—£600 million of brand new money targeted at those councils with high deprivation and low tax bases—just for Birmingham is £39 million. That will start the repair work of rebuilding the foundations.
When we talk about fair funding and why it is needed, we will not do what the previous Government did, where they put party politics ahead of the national interest. Let me remind the Conservatives of what the previous Prime Minister, the right hon. Member for Richmond and Northallerton (Rishi Sunak), said in Tunbridge Wells in 2022:
“We inherited a bunch of formulas from Labour that shoved all the funding into deprived urban areas and that needed to be undone. I started the work of undoing that.”
That is a record of shame. It is nothing to preach about. To right the wrongs of the past 14 years and finally get money where it is needed, this Government will work for public service, not party interest.
Madam Deputy Speaker (Ms Nusrat Ghani)
I call the Chair of the Housing, Communities and Local Government Committee.
Florence Eshalomi (Vauxhall and Camberwell Green) (Lab/Co-op)
I thank the Minister for outlining this much-needed funding uplift. I agree with him that councils up and down the country, regardless of their political persuasion, need the Government to support them, not to criticise and denigrate them, which is sadly what we have had in some cases over the past 14 years. He mentioned some of the authorities that still face those pressures, including Birmingham, Nottingham and Woking, which have already effectively faced bankruptcy. The Local Government Association has outlined that up to one in four councils is likely to require additional emergency support.
A Sky report has today outlined that families are stuck in temporary accommodation for an average of five and a half years. We should not be calling that “temporary accommodation.” Imagine spending the entirety of your school life in temporary accommodation because you do not have your own home. The funding that the Minister has announced for tackling homelessness is welcome, but it is a sticking plaster, if we are honest, because it does not give councils the tools to build social housing. Homelessness will end only if we build new homes, so what steps is the Minister taking to ensure that councils have those powers?
In the short term, the £18 billion boost to the homelessness prevention grant is a step in the right direction, but the Government must consider the unintended consequences. Local authorities are already reliant on that funding to plug gaps in temporary accommodation—many use up to 75% of it for that purpose—but the new rules mean that only 49% of the grant may be used in that way. How will that change not lead to a further reduction in funding for temporary accommodation, at a time when, as we all know, the system is broken?
Jim McMahon
I thank the Chair of the Select Committee for her question. We are all getting ready for Christmas and looking forward to time with our families and our own respite, but in the end it is hard to enjoy that moment given the prospect of just how many children in this country are in temporary accommodation. Some 159,000 children do not have a secure, affordable place to live and so are in temporary accommodation. In my own town, there are 500 such children. We do our best—we martial for the Christmas parties that charities put on—but it is no replacement for a secure family home.
There will be lots of differences in the exchanges that take place here, but we need to focus on why we are doing what we are doing. The reason we are building 1.5 million new homes is of course economic, and about decent, well-paid, working-class jobs—we talk a lot about that—but in the end it is about sorting out the housing crisis. If we sort out that crisis, we sort out the temporary accommodation crisis and the financial crisis in local government. If we sort out the crisis in adult social care, of course we sort out the financial crisis, but we will finally deliver on the promise of the state looking after the generation who gave so much. If we sort out the crisis in children’s social care, we finally deliver on the state promise to invest in the next generation.
Repairing the foundations is, of course, about financial foundations—that is important—but it is also about people and communities, and in the end that is what we are all here for.
Madam Deputy Speaker (Ms Nusrat Ghani)
I call the Liberal Democrat spokesperson.
Vikki Slade (Mid Dorset and North Poole) (LD)
I refer the House to my entry in the Register of Members’ Financial Interests, as I am a Member of Bournemouth, Christchurch and Poole council. Local government was brought to its knees under the last Conservative Government, with funding slashed and responsibilities piled on its depleted and exhausted workforce. I thank the local government workforce and wish them a happy Christmas.
I and my local Liberal Democrat colleagues welcome the move to multi-year settlements—something we have long called for—and the funding announced today for homelessness prevention. I agree with the Deputy Prime Minister and the Minister that we must eliminate the use of B&Bs, especially for families at Christmas. I also welcome the announced consultation on changing the funding formula, as listening to our local leaders is absolutely crucial.
However, we remain really concerned about the removal of the rural services grant, which suggests that the Government do not understand the nature of rural communities, including the difficulties of providing services over sometimes vast areas, subsidising public transport, and identifying hidden poverty, often among older populations—that costs an awful lot.
On special educational needs, it is deeply worrying that councils—particularly those that may literally run out of money, such as Bournemouth, Christchurch and Poole council—still have no idea about what will happen to the statutory override. How are they supposed to set their budgets in February without that certainty? Can the Minister confirm that no council will be forced to join the Safety Valve scheme, for example, which would put at risk the support provided to some of the most vulnerable children?
As we go into winter, the impact on social care is of the greatest concern. Dorset council shared with me a letter sent to the Dorset Care Association in which the director of adult social care states:
“We simply will not have the resources to meet the national insurance contributions for providers.”
Indeed, the Minister told me, in response to a written question, that only direct national insurance costs would be covered. What does he say to providers and to staff in charities such as Diversability, who fear for their jobs this Christmas?
Jim McMahon
It is important that we have a debate on local government finance based on the numbers. I have said already that, when taking into account council tax, no council will see a reduction in its core spending power. That means that before the final settlement, and not including extended producer responsibility and live parts of the grant, the hon. Lady’s own council will see an increase of at least 5.8%. We are covering the national insurance contributions made there, and in addition we are funding an extra £880 million through the social care grant. We have heard representations through the sector.
We are not saying that all this will fix everything today—it cannot. We are less than six months into the new Government and we have 14 years to reconcile. I hope the hon. Lady does not mind, but I remind her that a number of those 14 years were under the coalition Government. What we missed then and are trying to make up for now is that if we take away community and preventative services, which we all know make a big difference—not just in cost but in outcomes—we end up paying more and more at the back end, but for worse outcomes. The cruelty is that the Liberal Democrats’ moment in government, which I accept was short, was the time to invest in reform and prevention. That time was not taken and that opportunity was missed, and 14 years later we are reconciling that and fixing the system from the ground up. We will do that.
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
I welcome this commitment to local government and recognise that the Minister has a big job to do in addressing the challenges that have arisen because of the last 14 years—not least in local government audit. I welcome what seems to be a commitment to embracing the Redmond review. Will he give more detail about what will replace the Office for Local Government?
Jim McMahon
Most in the sector would agree that Oflog—the Office for Local Government—had a vague remit that was an expensive way of gathering data. In the end, if it were to be developed, we could risk mission creep whereby its remit would verge into the areas that local authorities so disliked about the former Audit Commission. We are trying to get the right balance between the early warning system that enables us to see which individual councils are under stress, and, importantly, noting any developing systemic threats or themes for which central Government might have to take much earlier action. We want to rebuild that early warning system.
However, we are absolutely clear that we are not replacing the Audit Commission. For one, it was hugely expensive, and we need to ensure that any money goes to the frontline of local public services. Honestly, councils do not need inspectors going in to mark their homework when they should be trusted to get on and do the job well. People understand what the National Audit Office is, so we hope that they will understand and see the benefit of a local audit office, and that it will be embraced by the sector.
Joy Morrissey (Beaconsfield) (Con)
Will the Minister set out how he expects local authorities such as mine in Buckinghamshire to absorb with such little notice multi-million pound impacts from significant changes to the social care funding formula, and the effects of the NICs rises on commissioned services and suppliers, particularly charities such as Mind, which will be greatly affected by the changes?
Jim McMahon
Again, the hon. Lady’s council will see a core spending power increase of 5%, and that is only this part of the settlement—it does not include extended producer responsibility or billions of pounds in other grants that will come. This is a genuine attempt to make sure we give councils the funding that is needed, and I think we have succeeded in a very difficult context, but it is a matter of fact that some councils’ local tax bases are stronger, for reasons that go back many years and, in some cases, many centuries. That is not because of the efforts of the local council—it is what it is—and for too long, councils in deprived communities with lower tax bases have done everything that has been asked of them. They have raised council tax to the maximum, so local communities are paying more and more, but increasingly they are getting less and less. They are seeing their neighbourhood services diminish.
There are tough choices, and we do not shy away from that. We have been very honest in the oral statement about the trade-offs that have had to be made, but the increase of 5% in the core spending power of the hon. Lady’s council will help deal with the issues she has raised.
Peter Dowd (Bootle) (Lab)
I would prefer to see the wise men and women on Labour’s Front Bench than Ebenezer Scrooge and Jacob Marley on the Conservative Front Bench. Does the Minister agree that the statement he has made today is in stark contrast to the legacy left by the Conservative party, which left local government in dire straits?
Jim McMahon
That is the point: the previous Government knew just how bad the situation was, but they put off the tough decisions. For example, how many times in 14 years did the previous Government promise that they would go back to multi-year settlements so that councils knew where they were, but failed to do so? How many times did the previous Government say that they would bring in a fair funding review, but failed to do so? How many times did the previous Government say that they would deal with the audit backlog? They did not just fail to do that; the backlog got worse. If we had not taken action, it would have been 1,000 sets of audited accounts, and that was not due to covid, because those accounts went back to 2015. That failure was systemic, and it was all on the watch on the previous Government. What that meant in practice was £100 billion of public money that they could not account for, so they did not really know the state of the sector, because they completely gave up on monitoring it.
Greg Smith (Mid Buckinghamshire) (Con)
Following on from the question asked by my hon. Friend the Member for Beaconsfield (Joy Morrissey) and the Minister’s answer, can I assure him that there are areas of deprivation in rural communities such as Buckinghamshire? Further to the point made by the shadow Minister, my hon. Friend the Member for Ruislip, Northwood and Pinner (David Simmonds), while the devil is in the detail, it already looks from the figures like Buckinghamshire will take a multimillion-pound hit from the loss of various grants. Can the Minister give an assurance that rural communities will be treated equally to urban ones, and will not be left behind?
Jim McMahon
Either the hon. Gentleman does not know the status of the rural services delivery grant, or he is trying to mislead the House. A large share of large rural authorities should have got the rural services delivery grant but did not, because that grant was not about rural services. When the previous Prime Minister stood up in Tunbridge Wells and said that the Government had taken money from deprived communities and moved it across, he did not mean that it was for all communities; it was for party politics. So where were Conservative Members then when it came to those rural communities that did not get the grant? I did not hear anybody standing up and asking for their rural community to get the money for those services that Conservative Members are now trying to champion. We will absolutely make sure that deprivation and need are part of the funding reforms that are coming, but we will also make sure that we genuinely take into account the cost of delivering services in rural areas. The sector needs a fair funding review, and we are determined to deliver one.
Helen Hayes (Dulwich and West Norwood) (Lab)
I welcome the Minister’s statement, particularly the additional funding to tackle homelessness and provide early help and support for families. I also welcome the principle that resources should be directed according to need. However, as the Minister knows, the elephant in the room of local government finance is that the statutory override for deficits related to special educational needs and disabilities is due to come to an end in March 2026. Councils will be setting their budgets in the new year through to the end of March 2026, and if there is no plan to address the SEND deficits, many councils will be issuing section 114 notices. Councils urgently need certainty at this point, so what discussions are taking place with local authorities about the statutory override, and when will they have the certainty they need?
Jim McMahon
I agree about the importance and significance of the statutory override—that is felt very acutely in the Department and in the sector. We are consulting now on a number of matters, including the statutory override, and we are in constant dialogue with the Treasury about how we deal with that in the long term. In the end, this is another example of the legacy we have inherited. We are taking very difficult decisions to reconcile, reform and repair the system—decisions that should have been taken earlier but were not. That issue is very much on our agenda.
Madam Deputy Speaker (Ms Nusrat Ghani)
I call Lee Dillon, a member of the Select Committee.
Mr Lee Dillon (Newbury) (LD)
I refer Members to my entry in the Register of Members’ Financial Interests: I am a member of West Berkshire council. Last Christmas, I was the leader of that council, and I can honestly say to the Minister that I would much rather receive in my inbox the settlement proposed by the Government than what I received from the Conservative Government.
In his statement, the Minister talked about fixing the foundations. I welcome the £3.7 billion for social care, but does he agree that, with councils spending up to two thirds on their budgets on adult and children’s social care, social care needs full-scale reform if we are to fix the foundations? Will he support the Liberal Democrats’ calls for a commission to undertake that piece of work?
Jim McMahon
To be honest, although I absolutely agree that we need reform, I believe the urgency is today. Think about the number of older people who would have been entitled to adult social care in 2010 who now do not even get support from the local authority, because eligibility has changed in so many areas. There is a crisis, and that crisis is not just being felt in the homes of all the people who have given to this country and deserve better; it is being felt in the acute sector and in the health service, where we are paying far more at the back end because community preventative services are not in place. We are working with the Cabinet Office and the Treasury to say, “Let’s learn as we go” on some of this, in terms of innovation and pilots where we can invest to save—invest in those community preventative services up front, to try to better reduce demand. Of course, it is about money, but in the end it is about the service we provide. I appreciate the hon. Gentleman’s comments about the settlement in the round.
Shaun Davies (Telford) (Lab)
I refer Members to my entry in the Register of Members’ Financial Interests as a councillor in Telford and Wrekin, as well as an honorary vice-president of the Local Government Association.
The Government’s first step to restore funding for local government after a very difficult 14 years is welcome, but council areas such as mine have fast-growing populations, provide outstanding services and provide leadership to the sector. On all three of those counts, until this point, that has not been reflected in the settlement that Telford and Wrekin council has received. Will this Government change that? I also gently remind the House that when I was chair of the Local Government Association over the past couple of years, there was not a single Conservative councillor who thought the settlement or the last Government’s approach to it was fair or proportionate.
Jim McMahon
I am pleased to say that this year, core spending power in my hon. Friend’s area will increase by 8.1%, and again, that does not take into account the billions of pounds that will follow. That reflects the service demand pressures, but also the reality of the local tax bases in that area. Telford, like many areas, does a very good job of providing local public services, but the council itself recognises that the neighbourhood services that most people see and feel—those that make a difference to quality of life—have been retreated on because of the need to fund targeted services, and social care in particular. We are absolutely determined to rebuild adult and children’s social care and sort out the housing crisis, but we also want people to live in good places that people are proud of, which requires those neighbourhood services to be rebuilt. It will take time to do that, but our commitment to Telford and the rest of the country is that we are absolutely determined to do so.
Mike Wood (Kingswinford and South Staffordshire) (Con)
The core spending power tables that the Government have published today show that total Government funding for South Staffordshire is down by 7.5%. Just what do the Government have against council tax payers in South Staffordshire?
Jim McMahon
Given the hon. Gentleman’s background, I am surprised that he is displaying such ignorance of council finance. The Government’s role in local government finance is to be an equaliser. As he knows, everywhere has the ability to raise tax locally through council tax and business rates, but he also knows that some areas have the ability to raise far more than others because of their tax base. It is the job of the Government to equalise—to make sure that when it comes to demand for services, everywhere gets the service provision it needs. That requires the Government to provide more funding in some places to reconcile that lower tax base, so that everyone gets the services they are entitled to. The presentation that the hon. Gentleman has offered shows either ignorance or politics, but I think the country deserves better.
Mr Clive Betts (Sheffield South East) (Lab)
I very much welcome today’s statement and the extra funding that has been announced. I commend the Minister for repeatedly reminding the Conservative party of 14 years of austerity, during which local government saw bigger cuts to its budgets than any other part of the public sector. Of course, the Lib Dems were a party to the coalition Government when the worst of those cuts were made.
May I ask my hon. Friend two questions? First, when he comes to consider more fundamental reforms—which we accept will not be in place for another year—will he look at the council tax system as a whole? It is an unfair and regressive system that takes a disproportionate amount of money from the poorest people in the poorest houses. Secondly, can he confirm that the local audit office will be a stand-alone body that looks at public sector audit, not an add-on to the audit, reporting and governance authority—a previous proposal—which was basically to be a private sector body that looked at local government as an afterthought?
Jim McMahon
I thank the former Chair of the Housing, Communities and Local Government Committee for that question. I can confirm that the core spending power of that element in this settlement for Sheffield will be 8.5%, which is before the additional funds that will follow. Sheffield gets a good settlement from this, but we recognise that it is in a context of growing demand, so we hope councils see that we are meeting them on the challenge they face.
On whether we will review council tax, I think every Government recognise that there are huge limitations with council tax, and also huge geographical variations. It is regressive, which is the nature of a tax based on property values rather than the income of the people in them. However, council tax is understood, its collection rates are high and it is really the foundation—although not the total, as my hon. Friend knows—of the funding of council services. The urgent issue we need to face is that previous Governments moved away from their role as the equaliser in the system. Whereas the revenue support grant used to be in place to support councils by reconciling lower tax bases, recent Governments have been missing in action. We are saying to councils of all political stripes, across every type of authority and every part of the country, that we will reconcile that and work with them to equalise the situation.
On the local audit office, we are absolutely determined that this will not be a return to the Audit Commission. We are trying to do a number of things. First, we want to rebuild the early warning system to make sure that we see any systemic problems developing in the system. However, we also recognise that the cost of audit has increased by 150%, which is a direct cost to taxpayers, and that there is fragmentation in the market, and we need to look at the fall-back position as opposed to auditor supply. There is quite a lot that we need to deal with, but this is very much about the provision of audit and making sure the early warning system is rebuilt; it is certainly not a blow to the inspection regime.
Madam Deputy Speaker (Ms Nusrat Ghani)
I know the Minister wants to give thorough responses, but I have absolute confidence that he can do that with fewer words.
Jim McMahon
That is exactly the point of moving to a fairer funding formula—and we will of course consult on the component parts making that up. We have to take this in the round—I genuinely want any part of the country and any type of local authority to be able to interrogate the system, and even if they disagree with the quantum—there will always be arguments that—to be able to say that the rationale and the evidence base hold. It is a matter of accepted fact that there is a premium on the cost of rural service delivery, just because of the travelling involved. For example, for a home care worker, there is the travel time between appointments and all the rest of it. However, it is probably also accepted that the evidence base is not as robust and strong as it needs to be, so we want to make sure through this process that we take into account the need for that strong and robust evidence base.
Chi Onwurah (Newcastle upon Tyne Central and West) (Lab)
Fourteen years of Tory austerity and fiscal mismanagement have halved the central Government funding for Newcastle city council, sucked the blood vampire-like from our local economy, and left local businesses and families drowning in uncertainty, so I welcome this increased funding and the specific commitments on housing and social care. However, can the Minister reassure me that there is further light at the end of the tunnel, because this Government’s work on reforming public services, local funding, business rates and innovation investment will mean that the people of Newcastle and the north-east will have the power and the resources to build the public services and the economy that we choose?
Jim McMahon
That is completely right. By the way, I give credit to council officials, frontline workers and councillors, because it is local government that has led on innovation and reform and that has bound together local communities in very difficult times—and, I would say, with other parts of the system too often working against the local interest, not with it. We need to find a way of sending that message not to local government, because I think it is understood there, but to the wider system. We need to say that when we make such public sector investment in Newcastle and other places, we expect the whole system to rally around a single plan for the place and its people. We expect local government to be respected as the local leader—the convenor of place—that can hold the ring to make sure there is not duplication or contradictions and that the money delivers the right outcomes for local people. We are absolutely committed to that.
James Wild (North West Norfolk) (Con)
Large rural counties such as Norfolk face higher costs in delivering their services, and the Government’s jobs tax adds £14 million to the pressures that Norfolk county council is facing. Can the Minister clarify whether the NICs funding he referred to in his statement, which will go to Norfolk county council and other councils, will cover the cost of social care commissioned services?
Jim McMahon
First, I pay tribute to the leaders in both Norfolk and Suffolk for the conversations we are having, particularly on devolution. We look forward to, I hope, making progress on that in the near future, because that is where the real prize is. We can sort out the foundations of council funding and reorganise public services to get efficiencies, but in the end we need to see devolution. We need to see power coming out of this place and being given to local communities. The best way to achieve that is through a mayoral strategic authority working hand in glove with local authorities.
On the question about NICs, we have provided over £500 million for the costs of employers’ national insurance contributions and we are providing additional money through the social care grant, and it is for councils to decide how best to spend that money.
Emma Foody (Cramlington and Killingworth) (Lab/Co-op)
I welcome the Minister’s statement and the fact that this Government are starting to fix the damage done by more than a decade of disastrous settlements for local government. In my constituency, that means increases of more than 5% for each local authority in core spending power, but does the Minister agree that as important, if not more important, is the consultation on long-term proposals to fundamentally improve the way that local government is funded through a fairer system?
Jim McMahon
That is exactly right. We have approached this year as very much a recovery operation. We could see that councils were in the ditch and needed to be pulled out and taken home, and that is exactly what this one-year settlement will do. However, what they need and deserve is a multi-year settlement that gives long-term security and stability, and for that long-term settlement not to be the continuation of a broken system, but a system that has been rewired and put right. With the fair funding review, the multi-year settlement and the reform agenda, putting prevention at the heart of public services, we will begin to achieve the end to which my hon. Friend rightly points.
Tom Gordon (Harrogate and Knaresborough) (LD)
We have heard a lot from colleagues about the delivery of rural services. Harrogate and Knaresborough was one of the areas that saw local government reorganisation, and we are now geographically the largest council in England. So what reassurances will there be on making sure that rural services can be provided? One of the biggest barriers the council faces is being able to deliver home to school transport, the cost of which has gone from £5 million just a few years ago to what is expected to be over £25 million this year.
Jim McMahon
I have covered the rural services element before, so I will home in on the home to school transport issue, which I know is a huge issue in many county council areas, where children are carried further away to get to schools. I will be honest and say that some of that is absolutely required, and has always been required, but quite a lot of it is the result of a broken system in which education is not being provided in local communities and parents have been forced to move further out. The plan we have to rebuild education and to invest in schools, some of it funded through impositions on private schools to get that money into the state sector, is about rebuilding local education provision so that parents have the choice and the confidence to go to the state school nearest to their home. That will have an impact on council budgets for home to school transport.
Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)
After eight years of Conservative rule in Stoke-on-Trent, the council was taken to the brink of bankruptcy, and the Minister will be well aware of the extraordinary financial support that we have received and about which we are having additional conversations. How will the recovery fund interact with authorities in receipt of extraordinary financial support? May I also put on record the thanks of the city to Councillor Alastair Watson and Jon Rouse, the chief executive, for the work they have done to stabilise council finances in difficult times?
Jim McMahon
I thank my hon. Friend for that question, and I join him in paying tribute to the council officers and council leadership in Stoke-on-Trent. As a direct cash payment—the down payment I mentioned earlier—Stoke-on-Trent council will get £8.7 million, and its core spending power will increase by 8.6% just in this round, but that may well over 10% by the time the full allocations come through. That is part of the rebuilding process, and as I have said, it reflects the fact that we cannot punish councils because of their inherited historical tax base. We must make sure that the Government step up to their role to equalise the system so that everyone has fair access to public services.
Clive Jones (Wokingham) (LD)
I thank the Minister for his statement. I recognise and accept the importance of proper funding for areas of high deprivation, but it is important to acknowledge that councils with low deprivation face rising demand for their services. In my constituency of Wokingham, children with special educational needs and disabilities are suffering from this lack of investment. They are deprived, too, but in ways that are not being measured, so their council is not getting the crucial funding to look after SEND services properly. We want Wokingham borough council to get on with the job of delivering more for local residents, so how will the Minister ensure that Wokingham receives what it needs?
Jim McMahon
I thank the hon. Member for coming to one of our surgeries to make representations on behalf of his council. I know that he cares about these issues. We need to be careful not to think that those who have received the recovery grant are the only places that have deprivation, because that is not the case. The recovery grant is very targeted and has two components: one is whether the area has a weaker tax base; the other is whether the area has significantly higher deprivation than other comparable areas. We are clear that we need to root out deprivation and need wherever they exist. The fair funding review is intended to take into account many different component parts, including the cost of rural service delivery, general overheads, premises costs, deprivation and the rest, so that, whatever the issue and whatever the context, councils have confidence that the funding is correct.
Amanda Martin (Portsmouth North) (Lab)
I thank the Minister and his team for listening to the voices of Portsmouth North and for the additional funding allocated to homelessness and rough sleeping, so that Portsmouth city council’s projected deficit can be addressed. It would be remiss of me not to thank the council workers, alongside Bev and all the volunteers at Helping Hands and other charities in the city. They have supported the growing number of people on our streets under the shameful Tory coalition’s reign of recklessness. Can the Minister confirm that after five months in government, this is just the start of additional support for our councils? Can he also clarify that, should the Lib Dem-run Portsmouth city council need further advice, his door is always open?
Jim McMahon
I congratulate my hon. Friend on her question to the Prime Minister earlier.
The council’s overall core spending power will increase by 7.8%. Putting Portsmouth to one side, whatever measures we take in general terms, we can never cast the net so wide and so thinly that we catch every council at the extreme ends. If we did, the net would never get to the depth needed. The door is open to any council that needs a conversation about their particular circumstances. Regardless of party politics, councils can have absolute confidence that we will deal with them professionally, appropriately and with the respect they need.
Several hon. Members rose—
Calum Miller (Bicester and Woodstock) (LD)
I draw the House’s attention to my declaration in the Register of Members’ Financial Interests as a county councillor in Oxfordshire. In my constituency and in my surgeries and correspondence, the frustration, desperation and anger of parents and children with special educational needs is constant and shocking. Their needs are not being met, and as the Minister has acknowledged, the funding shortfall for the high needs block is significant and has led to a deficit, which the Local Government Association estimates will be £3.6 billion at the end of this financial year. I very much welcome the Minister’s focus on this issue, as well as that of his colleagues in the Department for Education. Can he assure parents and children in my constituency that, under the multi-year settlement to which he has referred, the future needs of these children will be adequately met, and the needs of the council addressed, as we face those huge deficits?
Jim McMahon
Yes, I can confirm that we are providing, with the support of the Department for Education, new funding of £1 billion to support the high needs block in SEND for the reasons that the hon. Member says. We also know that money today is not the answer in the long term. We have to reform SEND provision in the mainstream, so that parents and pupils get the support that they need.
Josh Fenton-Glynn (Calder Valley) (Lab)
I welcome the money for homelessness in today’s statement. Evidence increasingly suggests that prevention works in homelessness. Calderdale is one of three local authorities working with Crisis to pilot a system of early prevention. In six months, that has already led to a 20% reduction in people using temporary accommodation. Will the Minister look at that work and commit to championing what works?
Jim McMahon
My hon. Friend makes a good point. Where councils such as Calderdale are doing well and excelling, they are working hand in glove with the local community and voluntary organisations to ensure they get the coverage to reach into communities. I applaud that work, and I hope that the 7.4% uplift in core spending power in this part of the settlement goes some way to supporting it.
Jim Shannon (Strangford) (DUP)
I thank the Minister for a positive statement on the funding that is available. Government policy states that local government is the foundation of a good state, from bin collections to driving economic growth. It is paramount that that is done across the whole of the United Kingdom of Great Britain and Northern Ireland. What discussions has the Minister had, or will he have with the Secretary of State for Northern Ireland regarding the possibility of securing greater funding through the Barnett consequentials so that Northern Ireland can have the funding it needs to stimulate local, community and economic growth?
Jim McMahon
I probably have to be a bit careful not to stray into that, given that this is a statement about councils in England, but the premise of the hon. Member’s question about adequate funding for local public services is correct. Let us remember that councils deliver more than 800 different services to local communities in England. They employ more than a million people, many of whom will be local people of the community. Councils are a huge power and force for good, and I will certainly ensure that the representation he has made is passed on to the Secretary of State for Northern Ireland.
Deirdre Costigan (Ealing Southall) (Lab)
Massive cuts to local government services by the previous Conservative Government have seen rough sleeping more than double and families in temporary accommodation regularly forced to move from hotel to hotel with their belongings in black sacks. I welcome the record £14.7 million in homelessness funding that the Minister’s Department has awarded to Ealing council. That is an increase of almost £4 million. Can the Minister outline how that will help those people sleeping out in West Ealing and in Southall town centre tonight? How will it end the use of hotels and bed and breakfasts for families in Ealing Southall?
Jim McMahon
That is precisely why we have provided an extra £233 million to meet the demand. We do not take any pleasure or pride in that, actually. It is a sign of a system that is not working that we must keep on providing more and more money for temporary accommodation, to the benefit of hotel owners and not to the benefit of the people who need a safe, secure and affordable home. This funding has to be part of a wider plan. That is why the 1.5 million new homes are so important. If we do not provide those safe, affordable homes for people, we will always be in this cycle of trying to play catch up, and that is not sustainable.
Emily Darlington (Milton Keynes Central) (Lab)
May I, too, welcome the multi-year certainty given by the statement today? As a former deputy leader of Milton Keynes council, I can say that it is the kind of certainty we ask for, rather than getting a letter—on Christmas Eve, usually—setting out what the funding might be, already halfway through our budget-setting process. I also welcome the fact that Milton Keynes is getting more than £7 million to prevent homelessness. I welcome the fact that there will be transparency, but can the Minister give reassurances to Milton Keynes that with the loss of the new homes bonus, additional funding will be given to Milton Keynes to make up for that difference?
Jim McMahon
I thank my hon. Friend for the advocacy that she shows for Milton Keynes and for the local authority. Overall core spending power in Milton Keynes will increase by 6.1%, and that is only part of the settlement—the council can easily expect that to increase in its final settlement. It shows that the Government are working in partnership with the council to deal with the issues that she raises.
Natasha Irons (Croydon East) (Lab)
I welcome the extra funding going in to tackle homelessness, especially the £15 million allocated to Croydon council. After 14 years of Tory Members turning their backs on local councils, local councillors and the communities they serve, does the Minister agree that there is a cost to doing nothing when it comes to reforming local government funding? Can he outline what kind of support might be available to councils still carrying large amounts of debt?
Jim McMahon
There is a legitimate question to ask the previous Government about why on earth some councils were allowed to borrow disproportionately to their revenue. In the end, some councils have found themselves on the wrong side of that. When we were designing the recovery grant, that was about deprivation and low tax bases, and dealing with the quantum was about directing money to particular services, but I will be honest: there will always be councils—Croydon will be one of them—which, because of their unique situations, are just outside that general allocation. We are ready to have one-to-one support conversations where needed.
Chris Vince (Harlow) (Lab/Co-op)
Madam Deputy Speaker, let me wish you a lovely Christmas break. [Hon. Members: “Ah!”] Don’t put me off. I welcome the Minister’s statement. As someone who worked for a homeless charity in Harlow, I welcome the additional at least £1.2 million of funding to support homelessness and rough sleeping in Harlow as well as the additional £1.6 million of funding to neighbouring districts, which partly overlap between me and the hon. Member for Epping Forest (Dr Hudson). That is coupled with multi-year funding for councils, for which I achieved cross-party support in the Harlow district council chamber. Does the Minister agree that that shows a clear desire by the Government to support the most vulnerable people in my constituency, but that that must come with joined-up thinking on the planned 1.5 million new homes and investment in our NHS?
Jim McMahon
That was a cute way to get a long question in—merry Christmas, Madam Deputy Speaker.
My hon. Friend is absolutely right. I pay tribute to the work that he does to represent the people of Harlow as well as the local authority. We stand ready to work on those long-term funding settlement issues to ensure that we genuinely rebuild the foundations.
Peter Lamb (Crawley) (Lab)
I commend the Minister for his work in bringing forward the settlement to secure a fair deal for the sector, but, as many hon. Members have alluded to, the elephant in the room is temporary housing. That is in large part due to decisions taken by the last Conservative Government to freeze the housing benefit subsidy at 2011 levels and cap the local housing allowance at a far lower level than local housing tends to cost, with the end result being that local government is subsidising central Government’s welfare bill to an astounding extent, with two thirds of the council tax in my local area going towards paying that bill. As an advocate for the sector, will the Minister meet with counterparts in the relevant Departments to try to lift that cap, so that people are housed at a rate that is cheaper both financially and socially?
Jim McMahon
We come back again to the broken housing market. The need to build 1.5 million new homes is there, but—let us be clear—they have to be the right homes in the right places for the need in the local area. That means not only more social homes but council provision. We continue to see a cycle—we have all seen today’s inflation figures, which are driven by private rent—in which the taxpayer pays more and more for accommodation that is often substandard and does not even meet the decent homes standard, with no benefit to the taxpayer. We have got to rebuild council housing and social housing and make it fit for purpose and affordable.
David Baines (St Helens North) (Lab)
Thank you, Madam Deputy Speaker, and merry Christmas—I won’t get any longer for saying that.
I thank the Minister for his statement and welcome the announcements made today. In 2010, the last year of the previous Labour Government, St Helens borough council received £127 million in central Government funding. Under the Conservatives, that was cut to just £13 million a year. Services cannot be run on thin air and, despite the best efforts of council staff and Labour councillors, cuts have had consequences. Will the Minister assure me and my constituents that under this Government we will get the funding for the essential services that we need?
Jim McMahon
That is exactly the reason core spending power in St Helens will increase by 8.6% just through these measures. Given the type of council, we could easily expect that to top 10%. That is our down payment to say, “We need time to prepare the multi-year settlement and we need to do the fair funding review, but we know that councils cannot wait for that, given the last decade,” as my hon. Friend described.
Madam Deputy Speaker (Ms Nusrat Ghani)
The last question goes to the ever-patient Mark Ferguson.
Mark Ferguson (Gateshead Central and Whickham) (Lab)
Thank you for squeezing me in, Madam Deputy Speaker. I refer the House to my entry in the Register of Members’ Financial Interests. I was glad to hear my hon. Friend refer to the unfair funding formula championed by the previous Prime Minister, laser targeted as it was at reducing support to communities like mine. There are parts of Gateshead where the average life expectancy for a man is 73 years, yet the last Government focused wholeheartedly on reducing support to areas of deprivation like that. I welcome the almost £2 million that Gateshead council is receiving to tackle homelessness this year on top of its previous allocation, but given that one of the shameful legacies of the last Government is crumbling infrastructure in communities like mine, what efforts will be made to support councils like mine with the infrastructure they need?
Jim McMahon
In the end, some of it is about the quantum of funding, and some of it is about freedom of funding. Taking away the ringfencing and reporting is absolutely critical to that. Gateshead, and every other council, has our absolute commitment.
Finally, Madam Deputy Speaker, may I say thank you to the millions of public sector workers, council officials and, importantly, councillors for the work that they do in providing good public services every year, day in, day out? May I wish everyone a merry Christmas and a happy settlement day?