Local Government Finance

Wednesday 5th February 2025 Commons Chamber

[Madam Deputy Speaker (Caroline Nokes)]

We now come to the motions relating to local government finance, which will be debated together.

18:05

[The Minister for Local Government and English Devolution (Jim McMahon)]

I beg to move,

That the Local Government Finance Report (England) 2025–26 (HC 623), which was laid before this House on 3 February, be approved.

[Madam Deputy Speaker]

With this it will be convenient to discuss the following motion on council tax increases:

That the Referendums Relating to Council Tax Increases (Principles) (England) Report 2025–26 (HC 624), which was laid before this House on 3 February, be approved.

[Jim McMahon]

The Deputy Prime Minister and I, like many others in this House, have local government in our blood—we are proud public servants. We know what a difference the sector makes every day to millions of people across this country, and how much stronger local government, working in genuine partnership with central Government, can achieve to change lives. I thank the millions of dedicated public servants who work in and for the sector for all their efforts to deliver more than 800 services that local people rely on.

We know it has been a difficult few years, but this statement is an important step towards rebuilding the foundations of local government, ready to meet the scale of the challenge ahead so that we can rebuild our country together as part of our plan for change. That is why I take the responsibility of leading the Government’s work to rebuild the sector with the seriousness and urgency that is, quite frankly, long overdue.

Today, I will set out funding for local authorities in England for the coming year through the final local government finance settlement. Before I do, I want to say that the Government are grateful to all those who contributed to the consultation on the provisional settlement, which attracted 227 responses, including more than 45 from Members of this House.

[Sir John Hayes (South Holland and The Deepings) (Con)]

I am extremely grateful to the Minister for giving way, and I appreciate much of what he has already said on the difficulties and challenges local government faces, and the Government’s recognition of that. Part of the consultation feedback he will have had is on the local authorities that have to fund drainage, such as South Holland, in my constituency, and many others. There is a real problem here, because drainage is not adequately funded through the system; it does require an extra grant, in my judgment, to those local authorities. Will he look at this issue, and will he meet me and others to discuss it further, should that be helpful?

[Jim McMahon]

I thank the right hon. Gentleman for his question, and assure him that it is an issue we are acutely aware of. The disproportionate burden that drainage places on small district councils is quite a challenge. We met representatives from a number of district councils to talk about the internal drainage board levy system, and, as an interim measure—in the end, I think we do need a more fundamental review of how it is paid for—we have increased the levy grant by £2 million to £5 million, so we are beginning to get there. However, I agree with the right hon. Gentleman entirely: we do need a long-term solution to that. He has my commitment that we will find a way through that as we begin the wider reforms later on.

As the Chancellor said last week, this plan will be achieved first and foremost through growth, which will be driven by empowered local leaders working in partnership with local communities and local businesses; those who have skin in the game are now on the playing field, not confined to the terraces as spectators. This new approach has to start with strong and empowered local government, because whether we are talking about raising living standards, delivering 1.5 million new homes and vital infrastructure, getting our NHS and social care system back on its feet or creating good jobs and strong communities, it all comes back to local councils delivering for local communities.

Indeed, we cannot deliver on the national renewal that working people deserve without grassroots government leading the charge, which means resetting our relationship with local leaders and rebuilding the foundations from scratch. It means ditching the slogans and gimmicks in favour of a determination to get the basics right, delivering decent local services that people can begin to rely on once more.

After 14 years of neglect and decline, that will be easier said than done, and, because of the scale of the challenge, it will take more than six months to fix. But be clear: we have changed course. The work has begun with determination and with pace. Councils of all political stripes are feeling the strain, and it will be a long, hard road to get them back to full fitness. This final settlement marks an important milestone on that journey, as we finally turn the page on chaos, austerity and 14 long years of managed decline.

In that spirit, the settlement addresses the financial crisis facing councils head on, moving away from bidding wars for wasteful competitive funding pots and towards core, stable multi-year financial settlements.

[Rebecca Long Bailey (Salford) (Lab)]

The statement is extremely welcome. In Salford, our core spending for 2025-26 will increase by 8.7%. That is above the national average, but it is still less than the 14% we have had to increase our adult social care budget by to meet higher costs. Does my hon. Friend agree that the Government must move quickly on multi-year settlements and up-to-date assessments of councils’ funding needs?

[Jim McMahon]

I thank my hon. Friend for that question and pay tribute to Salford for its leadership in the work it is doing in many areas of public sector reform in Salford and across Greater Manchester. In the end, if all we do is pay at the back end for a system that, frankly, is broken, we will be paying more and more every single year for a system that is delivering worse outcomes for service users. That is bad for service users and bad for taxpayers, so we must have a more fundamental response and we fully intend to do that.

The multi-year settlements are essential to ensure local leaders have the time and space to plan their budgets. But we will not stop there. We are introducing a fairer system to give councils the certainty and stability they need to go from costly crisis management to long-term prevention and the root-and-branch reform of local public services. Crucially, I can now confirm that core spending power for the sector will be more than £69 billion for 2025-26, a 6.8% cash terms increase on this year. I can confirm that, despite some very difficult choices—there have been choices and trade-offs to make, as there always are—this settlement will mean that no local authority will see a reduction in its core spending power.

[Mr Jonathan Brash (Hartlepool) (Lab)]

I welcome the settlement, which sees a reversal of the past 14 years for Hartlepool, where cumulatively we lost £235 million in a decade. This year, additional grant funding is going up by £10 million, which is hugely welcome. However, there remains the problem of the council tax system itself. In Hartlepool, if you are in a band H property you pay more than £3,000 more than you do if you are here in Westminster. Surely the Minister can agree with me that that is inherently unfair? Will he engage with me and the all-party parliamentary group on council tax reform, which I lead, to bring fairness to towns such as Hartlepool?

[Jim McMahon]

There are, understandably, many criticisms of council tax. It is accepted that it is a fairly regressive tax in terms of the relationship between the ability of a household to pay versus a property’s value, but in the end it is a reliable tax that is understood by the taxpaying public. The framework of council tax will be maintained, in the same way as business rates, but that does not mean that we cannot do more to make it fairer. The best way to make it fairer in this settlement is for the Government to play their part. What we have seen over the past 14 years is that, despite an acceleration in council tax increases, councils have still found themselves impoverished: they cannot raise enough money locally, whatever they do, to fund the demand for local public services. We clearly see the role of the Government as an equaliser to the system. Taking into account the ability to raise tax at a local level, by providing a top-up the Government can ensure that every area gets decent local public services, and we can begin to get some fairness into the system. I take my hon. Friend’s point entirely, however, and I look forward to the work of the all-party parliamentary group.

[Luke Taylor (Sutton and Cheam) (LD)]

I echo the call for a replacement for the council tax system. We on the Liberal Democrat Benches have called for that for years. Please will the Minister and the Government consider bringing forward plans that retain the power for local councils to decide levels of taxation, but make it a much more progressive model of taxation?

[Jim McMahon]

I cannot commit to that today. What I can do is to commit, from a political point of view, that the Government are willing to work cross-party and through APPGs to understand the weight of the issue and the potential solutions. I will be honest, though: we need to manage expectations on whether we can get consensus in this place on a new form of council tax or local property tax, but that does not mean we are not willing to listen to arguments.

[Steve Barclay (North East Cambridgeshire) (Con)]

We saw one area of consensus when the Minister responded to the point made by my right hon. Friend the Member for South Holland and The Deepings (Sir John Hayes) about internal drainage boards, and I welcome his recognition of the problem in areas such as Fenland in the Cambridgeshire fens. That was a pertinent point, and I thank him for his comments.

Will the Minister take this opportunity to tell us whether any council will be worse off when this settlement is netted against the additional costs of employer national insurance contributions and those of their suppliers? According to reports that we have been given, a number of councils will be worse off. Can he rule that out?

[Jim McMahon]

The £515 million of investment from the Treasury to help councils with the increase in employer national insurance contributions has been distributed on the basis of their net service expenditure costs. We thought that that was the fairest way of establishing an evidence base that could be scrutinised. There have been legitimate representations about third-party provider costs in some critical areas, such as social care. We accept the figures from the Local Government Association because we have no reason to dispute them, but our difficulty is that that in itself does not mean that the cost will be passed on directly to the local authority in question. Some parties are bound by contracts that mean that they cannot pass it on even if they wanted to. There will be negotiations about the ability of a provider to absorb that cost, but we do not underestimate the problem. No one is going to pretend that this settlement fixes the system. What we want to try to do is stabilise the system through a multi-year settlement with bigger reforms.

[Steve Barclay]

I commend the Minister for the constructive way in which he addressed my question, but I think it important to be clear. He seems to be saying that as a result of this settlement, a number of councils will be worse off. We understand the context, but I think he has just confirmed expressly that councils will be worse off as a result of the tax rises that the Chancellor has imposed and which this settlement does not fully meet.

[Jim McMahon]

I think that that is true up to a point, but we need to take a couple of factors into account. First, the payment relating to employer national insurance contributions goes straight to the council. Secondly, this needs to be taken in the round. For the right hon. Gentleman’s own council, the social care grant is £48 million, the social care change grant is £6.7 million, and when it comes to third-party providers, the market sustainability and improvement fund is £10 million. We are trying to meet the demand in a very complex environment, but, as I have said, there is no pretending that this will fix a broken system in one fell swoop. The reform will take time.

[Mr Clive Betts (Sheffield South East) (Lab)]

My hon. Friend has done an excellent job on behalf of local government with this settlement, in very difficult circumstances, and I think the sector recognises that. However, I have one caveat. In response to the questions about council tax, he said that there would not be unanimity, but I think there will be a great deal of consensus that if the former Secretary of State, Michael Gove, thinks the system is regressive, it is probably very regressive. I hope my hon. Friend is keeping his mind open—I think he did leave the door a little ajar—about the fact that at some point we will have to have a review of a system that is based on valuations that are more than 30 years old. This is simply not sustainable for the long term.

[Jim McMahon]

I take my hon. Friend’s points entirely. I credit him for much of the work that was done when he chaired the Select Committee, which he did for a long time, and I attribute to his intervention the credibility that it is due. We are focusing today on our immediate fiscal response to support councils over the current financial year, but we accept that to bring about long-term structural reform, such matters as addressing a council’s ability to raise local tax through business rates and council tax must be taken into account, alongside, of course, the cost of delivering public services, including the cost of rural service delivery. We are absolutely committed to taking all those factors into account.

[Andrew Rosindell (Romford) (Con)]

rose—

[Wendy Morton (Aldridge-Brownhills) (Con)]

rose—

[Jim McMahon]

I am going to make a bit of progress. I am mindful of time, and I believe we are guillotined at 7 pm.

The Budget will deliver more than £5 billion of new funding for local services over and above council tax income. There are no slogans and no gimmicks. This is real action—£5 billion-worth of real action—and I can confirm that £20 million more will be made available for the children’s social care prevention grant, putting prevention and reform at the heart of the recovery. After hearing representations from the councils affected, we can also announce an additional £2 million of support for councils with internal drainage board levy pressures. That is on top of what was announced in December’s provisional settlement, so the grant is now worth £5 million in total.

We will set aside almost £60 million for the coming financial year to ensure that local leaders have the vital capacity to get their financial house in order, so that councils can be effectively supported to better understand their spending and, equally, so that they can be held to account for it by their electorate, which is a vital part of the democratic process. The funding that we are providing includes £515 million to help local government with the increase in employer national insurance contributions.

[Wendy Morton]

My understanding is that employer national insurance contributions are not being fully funded by the Government. I would be delighted to hear that I am wrong, because that is really worrying me, having spoken to my local council. On that basis, does the Minister not accept that by imposing this extra burden on local authorities, ultimately it is working people who will be affected? There will be fewer public services, less money going into social care, and pressure on council tax.

[Jim McMahon]

This is not a perfect settlement, but it is my honest belief that it is a good settlement. We are keen to make sure that the money goes to local authorities in a way that is transparent, with an evidence base that can be scrutinised. Councils are sick and tired of the system being manipulated by Governments of different types over different periods in a way that is not fair.

[Wendy Morton]

Will the Minister give way?

[Jim McMahon]

I will make some progress, but to answer the right hon. Lady’s question on employer national insurance contributions directly, the funding is based on service expenditure costs. The reason is that that allows councils to make a decision about whether the money will cover in-house provision, or whether they will have contractual pressures further along in the system that show up in their service expenditure budgets. That is the approach that we have taken, and the Institute for Fiscal Studies has come out and said that it is a fair way of doing things. As I say, there is no perfect way to deal with this issue in the time that we have, but we have arrived at a good way to do it that gets the money out of the door to the places that need it.

[Matt Rodda (Reading Central) (Lab)]

Will the Minister give way on that point?

[Jim McMahon]

I will give way for a final time before making some progress.

[Matt Rodda]

I commend the Minister’s approach, because it is excellent that we have certainty. The Government are supporting local councils to make wise budgeting decisions and to invest in all the crucial things that we all want to see in our communities, including more help for vulnerable people, the important work on children, and infrastructure improvements such as new cycle lanes and better parks. Those are all valuable contributions to our communities, so I thank him for that.

[Jim McMahon]

That is the point. When it comes to fairness in the council tax system, we have to be honest and say that there has increasingly been an imbalance, whereby people are paying more and more but often receiving fewer and fewer universal neighbourhood services. There is a real danger to the democratic process if there is not a link between the tax that people are paying and the quality of public services that they are getting in return. In the end, councils are wrestling with adult social care, children’s services and temporary accommodation, and what else can they do but meet the demand? It is not a good position for the taxpayer or for local authorities, and we acknowledge that.

Our new £600 million recovery grant targets areas with both the greatest need and the greatest demand for services. The recovery grant is the first meaningful step towards long-overdue funding reform, but it is only the first step. A longer-term and more fundamental overhaul of the way that councils are funded is needed to ensure that all councils can deliver for local residents. The Tories committed to improving and updating the way that councils are funded through the fair funding review, but in the end they failed to take the tough decisions needed to deliver it, just like they failed to give councils certainty and security so that they could plan ahead, with a decade marked by year-by-year, hand-to-mouth settlements. That is why the 2026-27 settlement, which will be the first multi-year settlement in a decade, will introduce an up-to-date assessment of councils’ needs and resources.

We are acting where the previous Government failed. We will get on with the job of allocating funding fairly, based on the evidence of need, because councils know that every pound counts, and they also know that the current system—

[Andrew Rosindell]

Will the Minister give way?

[Jim McMahon]

I will make some progress, but I will take more interventions later.

Councils know that the current system is riddled with inefficiency and is poorly targeted at meeting need. It is vital that we get this right, and we want to hear from all parts of the sector to better understand the drivers of need, including deprivation, the ability to raise tax locally and the impact on service delivery in rural areas. The consultation on these reforms runs until 12 February, and we welcome representations from all who have a stake in this agenda. We are listening to the sector and, through this settlement, responding to the real drivers of cost, especially the spiralling demand in areas such as social care. Importantly, we are taking into account the ability of councils to raise funding locally.

[Andrew Rosindell]

What does the Minister say to residents of the London borough of Havering, who have had a very poor settlement over many decades under all Governments? We have one of the oldest populations in London and also one of the youngest populations in London, so the settlements never take into account the factors that I have outlined. Will he please look at the outer London boroughs? It seems to me that all the money goes to inner London, and we do not get very much in places such as Romford.

[Jim McMahon]

Where we can agree is that we accept that the old perspective that there are inner-London pressures that do not feature in the outer-London boroughs might have held in the past but it does not address the complexity that there is today, because a number of pressures have moved outwards into those outer boroughs. I think that that is accepted and appreciated. I said that this might not be a perfect settlement, but it is a good settlement. The hon. Gentleman’s council has a 6.5% increase in its core spending power. So there is room there—this is not a flat cash settlement—and we hope that the local authority will make the necessary decisions.

We are not interested in scoring party political points or pitting one council against another. We know that councils of all political stripes are struggling, and we want to work together, through the later reforms that we are looking at as part of the more structural review we are undertaking, to make sure that we genuinely address that. We hope that when Members across the House look at the rationale and the evidence base—whether they agree with the quantum is a separate issue—they can at least say that it holds. That is the work that we are undertaking today, and we encourage Members to contribute to the process.

[Jas Athwal (Ilford South) (Lab)]

On the point about inner and outer London, the problem is that outer-London boroughs are now seeing inner-London problems, the funding system is archaic and the formula is based on outdated deprivation statistics, using household numbers rather than population. This unfairly impacts boroughs such as Redbridge, which covers my constituency. It is home to many multi-generational families living under one roof—

[Madam Deputy Speaker (Caroline Nokes)]

Order. We simply cannot have interventions like this. They need to be spontaneous; they should not be read out from pre-prepared scripts.

[Jas Athwal]

Can I just make this point?

[Madam Deputy Speaker]

I think the hon. Member has already had long enough.

[Jim McMahon]

In a way, there is commonality across the House in recognising that particular problems really ought to be taken into account when it comes to local government funding, and if it is got right—our intention is to get it right—it will take into account up-to-date population and deprivation statistics. It should take into account the ability of a local authority to raise tax locally through council tax, or through business rates or fees and charges. It should take into account the cost of delivering services, whether that is about the rental costs of acquiring a space to operate from or even the cost of delivering services in areas such as rural or coastal communities, where there are particular issues. The formula should take that into account, so let’s work through that.

We are responding to the pressures, which is why we are making £3.7 billion of extra funding available for social care authorities. That includes an uplift of £880 million in the social care grant, which includes an additional £20 million that I have confirmed today for the new children’s social care prevention grant, taking the total for that grant to £270 million. That paves the way for the national roll-out of transformed family help and child protection services. We have doubled settlement investment in preventive children’s social care to £500 million next year. If we do not reform the system and focus on prevention, we will continue to pay more and more, too often for worsening outcomes.

This is happening alongside the Education Secretary’s work to take forward the Children’s Wellbeing and Schools Bill, which will crack down on profiteering and improve child protection—something that the Tories failed to do, at a very dear cost to taxpayers, who were left to pick up the bill. Again, the severe pressures on SEND services came across loud and clear during the consultation. As we have announced, we are boosting SEND provision and alternative provision by an extra £1 billion to start to return the system to financial sustainability and to improve outcomes for young people. We are aware of the impact that dedicated schools grant deficits are having on council finances, which is why we are committed to working with councils, parents, teachers and schools to transform SEND provision and the life chances of the children who need it.

[Ben Maguire (North Cornwall) (LD)]

Cornwall council is now £1.3 billion in debt. What is the Minister’s plan to address future settlements, which will obviously be affected by very high interest rates on that enormous debt? The human cost is that the adult education centre in Camelford is now closing.

[Jim McMahon]

Very real pressures have built up, and I will not criticise any council from the Dispatch Box—the days of doing that have long gone. That is not to say that I agree with every decision made by individual councils, or that I would not have chosen a different course. In some cases, the decisions were plainly not in the interests of local taxpayers.

However, we are where we are, and we need to stabilise the sector this year and reform the funding system over the multi-year settlement, so that we begin to build back the foundation of sustainability and long-term security. We need to invest in prevention and reform, so that we get ahead of the problem instead of paying at the back end for worse outcomes. In the end, we need a funding system that really holds.

By doing that, we will ensure that most councils in most parts of the country find themselves in a much better position than they were before the work was undertaken. Because of the types of decisions that have been taken, there will always be outliers. Whatever system we design, we can accommodate most councils in most circumstances, but because of the decisions that have sometimes been taken, we cannot accommodate all councils in all circumstances. The Government have committed to working alongside councils to work through this. Of course, local government reorganisation will accelerate the need to do that in some areas, because we will have to reconcile the creation of unitaries with the inherited debt liabilities. We are fully sighted on that.

[Natasha Irons (Croydon East) (Lab)]

I thank the Minister for meeting me and other Croydon MPs to talk about our council’s legacy of debt.

The Minister talks about early help and prevention. Will the funding formula take account of things such as youth services, where early help and prevention can have a massive impact on what councils have to spend over a longer period?

[Jim McMahon]

Absolutely. Deprivation is a key part of the funding settlement. This is the first settlement in a long time, and probably the first since the area-based grant in 2010-11, in which deprivation is a measure by which the Government allocate money to the sector.

If we see this as only a local government problem, we will miss the prevention and reform agenda that we need. My hon. Friend and I often talk about this, but the Home Office is working on diversionary activities for young people. In many communities, gang activity, child criminal exploitation and knife crime are very real issues that draw too many young people into crime. We need those diversionary activities in the places where people live.

We need to address that, and it should be a whole of Government agenda. That is why we are marshalling our work around the Government’s missions, and our approach is anchored to the plan for change.

[Luke Myer (Middlesbrough South and East Cleveland) (Lab)]

I welcome the focus on deprivation. The Minister says he does not want to criticise the leadership of particular councils, but will he praise the leadership of Middlesbrough council? Mayor Chris Cooke has led the council out of a best value notice and produced the first growth budget in years, with increases in area care and much else. Will the Minister commend that work?

[Jim McMahon]

That work is demonstrated by the Department being able to remove the best value notice. We know that Middlesbrough is not at the end of the improvement journey, and the council itself would say that, but the characteristics of strong civic leadership are clearly on display. I appreciate that it is a lot easier to praise a council from the Dispatch Box.

When we consider funding for councils to deliver vital services, we must also consider the taxpayer. We are committed to keeping taxes on working people as low as possible. At the same time, we understand the immense pressure that councils are under, which is why we will strike a balance in maintaining the previous Government’s policy of a 5% referendum principle threshold, which includes a 3% core principle and a 2% principle for the adult social care precept. We all know that councillors, mayors, police and crime commissioners and councils will take into account the impact of increases on households, and it is right that they do so. For the vast majority of councils, those principles and the additional £5 billion in funding that we have announced will be sufficient to support them in setting their budgets. However, we know that some councils are in difficult positions, as we have heard today. For some, unique local decisions have had an impact on their financial stability. For others, over a decade of mounting pressures has finally caught up with them, and whatever they do, that is the reality. We are determined to work together to find a way through that, including by considering requests for additional council tax flexibility and requests from councils seeking exceptional financial support.

[Mr Lee Dillon (Newbury) (LD)]

My own council, West Berkshire, a small unitary authority, now has only 2% of its net revenue budget in reserves, and has written to the Government seeking £16 million of exceptional financial support. I urge the Minister to stand with West Berkshire council and to grant that support, so it can continue to deliver those important services.

[Jim McMahon]

The hon. Gentleman has my commitment that we will review the submission that we have had in good faith and in the spirit of partnership. We recognise that the councils that have made exceptional financial support applications have done so at the end of a process, not at the start, and that they need the Government to work with them. We will confirm exact allocations later, local authority by local authority, but I take on board what the hon. Gentleman says.

The financial legacy left by the last Government has led to a record number of councils asking for additional council tax increases. The ability to request additional increases already existed, but there is a need to balance them with the impact on local taxpayers. On that basis, we have taken a stricter approach than the previous Government. That means avoiding excessively high increases and agreeing to rises only where councils have comparatively low levels of existing council tax.

Having carefully considered requests, we have agreed to modest increases in six local authorities: Windsor and Maidenhead, Birmingham, Bradford, Newham, Somerset and Trafford councils. However, our strict approach means that we have not been able to agree to all the requests that we have had and that not all requests have been met in full. Taxpayers in those areas are still expected to pay less than the average amount of council tax, compared with similar councils, because of the approach that we have taken. We have been clear that all councils should take whatever steps are necessary to protect their most vulnerable residents from the impact of additional increases.

At national level, even with those increases, the overall increase in council tax is not expected to exceed that of last year. Without the additional £5 billion provided in the Budget and the settlement, there is no doubt that that would not have been possible. In a way, that displays the new relationship, because, unlike the previous Government, we will not impoverish councils or parade them around to be shamed. Instead, we will work with them to put them back on their feet financially. We will fix the broken local audit system and the unacceptable backlog that we inherited; move from a failing, dispersed approach towards a focused, proportionate local audit office that offers value for money; and improve transparency, accountability and confidence in how hard-earned taxpayer money is being spent.

However, we all know that there is no quick fix. The legacy that we have been left is nothing short of scandalous, but this settlement marks a turning point. It will back local government with the long-term funding and certainty that it needs to fix the foundations, based on a new partnership with central Government. Through reform, fairer funding and better stewardship, we will ensure that the sector is fit, legal and decent, so it can stand on its feet as a strong, functioning arm of the state. The settlement will provide more money for local government, especially in areas of greatest need, such as social care, and more investment in the things that matter to local communities, from support for our high streets and town centres to mending potholes and boosting local planning departments, adding up to public services that we can all begin to rely on once again.

Stronger communities will support a stronger economy, with higher growth, delivering higher living standards for working people that will be felt in every part of the country. Driven by a devolution revolution, we will deliver the greatest transfer of power from Whitehall to our communities in a generation. Finally, we will put politics back into the service of working people. Our plan for change has local government at its heart and I commend it to the House.

18:39

[Kevin Hollinrake (Thirsk and Malton) (Con)]

May I first put on record my admiration for the fine work of councils, councillors and officers right across the country? That work is often carried out at the most challenging times against a backdrop of real financial pressures on those local authorities, not least the rising demand for adult social care, special educational needs, temporary accommodation and others. I do not think there was ever a time when we appreciated councils more than during the covid crisis—as well as during the cost of living crisis—when we saw the fine work they did and how important it is to have those councils and councillors helping local people.

I welcome the extra money provided in the spending review—a 6.8% increase in core spending power. I welcome the approach that the Minister intends to take with the multi-year settlement. That is a sensible way forward. I also put on record my respect and admiration for the Minister. He always takes a considered and responsible approach and has huge knowledge of the sector. I promise him that we will work across parties wherever we can on the things we agree on to try and make it easier for local councils to do the fine work that they do.

[Andy McDonald (Middlesbrough and Thornaby East) (Lab)]

The shadow Minister is generous in giving way. He quite correctly praises councillors. Does he think, as we move forward with the changes, that it would not be a bad idea to start thinking about how we compensate councillors for their efforts? Many of them give up so many hours of their week and do vital work for very little by way of recompense. Does he agree that we should look at that?

[Kevin Hollinrake]

I can only reiterate what the hon. Gentleman has said and what I said earlier: they do fine work and most do not do it for money but because they have the interests of their local communities at heart. That should always be the case, and those are the kind of councillors that we want. Where people have expenses to do their jobs, that needs to be properly compensated for.

Will the Minister accept that the majority of the extra money provided through the settlement is raised through council tax increases, which are effectively taxes on local taxpayers—that is, working people? As he is sensible and considered, does he regret the fact that the Prime Minister stood on a stage in Swindon on 30 March 2023 with the Deputy Prime Minister, who is also the Secretary of State for Housing, Communities and Local Government, stating that he would freeze council tax for the first year they were in Government? That has not been the case. The Prime Minister quite clearly promised

“a tax cut for the 99 per cent of working people who are facing a rise in their council tax”.

His words were also that there would be

“not one penny on your council tax”.

We said then that those promises were not worth the paper they were written on. How right we were.

Under Labour, typical council tax bills are to rise by 5% in April 2025, in another increased tax on working people. That means that the average household faces an above-inflation increase of around £100 in their council tax bills in that year. All that will do in many cases is fill the black hole in council finances that Labour is creating due to an increase in national insurance contributions. Furthermore, it is quite clear that Labour is deliberately funding largely Labour-led urban areas at the expense of rural areas.

[Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)]

I thank the hon. Gentleman for giving way. He is one of the more reasonable of his party’s Front Benchers—not that he needs my praise.

Between 2010 and 2024, Stoke-on-Trent city council had a cumulative loss of £411 million. In cash terms, if the budget had been frozen and there had been no increases, we would have had that much more in spend. Does the shadow Minister accept that the damage that his party did in local government cannot simply be fixed in one settlement after seven months of a Labour Government?

[Kevin Hollinrake]

I have spoken before about the financial pressures all councils are under. That is principally due to rising demand on services; that is the reality. Eighty per cent of discretionary spend is on the three areas I referred to earlier. There is no doubt that there are challenging circumstances. Nevertheless, the vast majority of money raised through the settlement is through council tax, and much of the money raised for core spending power will go on national insurance rises. There are direct costs, but there are also indirect costs that are not covered. Many councils will be worse off as a result.

[Jim McMahon]

Just to be clear, even rural councils will receive a near 6% increase in their core spending power. It is correct that £600 million through the recovery grant is targeted at deprived communities, but we have followed an assessment of need right through the system, including that of rural authorities. The hon. Member must welcome that.

[Kevin Hollinrake]

I will come on to that, but we do have a different perspective. The point that I am making principally right now is that there are rising costs on councils, both in direct costs through national insurance and through indirect costs, which are not fully covered by this settlement, and I think the Minister accepted that fact earlier in his remarks.

The reality is that rural areas will face higher council tax increases to make up for reduced central funding, despite the cost increases of providing services in rural areas. To give the House an easy example of this, my local authority, North Yorkshire council, spends more on school transport than it does on the whole of children’s social care. That is the cost of delivering services in rural areas. Despite that, the Labour Government have chosen to scrap the rural services delivery grant. They have said that they are repurposing it, but it is now clear that this has not been repurposed to support rural areas in the way that the delivery grant used to do, despite the higher cost of service delivery in those areas.

The chairman of the County Councils Network, Tim Oliver, has warned that rural areas will lose hundreds of millions of pounds due to Labour prioritising urban areas over rural ones in the way that it distributes funds. The Government are moving distribution away from a needs-based formula to one based on deprivation. He has warned that Labour’s funding formula will mean that rural councils would lose an estimated £190 million in a single year. He has also stated that, when taking into account the moneys needed to cover the costs of the national insurance increases, this is the worst settlement for county councils in four years.

[Mr Betts]

Can the shadow Secretary of State just explain his comments? I agree with my hon. Friend the Member for Stoke-on-Trent Central (Gareth Snell) that the hon. Gentleman one of the more reasonable Members on the Conservative Benches. He said that the Government are switching money away from a needs-based formula to one based on deprivation. Is not deprivation very clear evidence of needs in the community? What is the difference?

[Kevin Hollinrake]

Of course there are some needs around deprivation, but that is not the entirety. The major cost drivers for local authorities are the things that I outlined earlier: adult social care, special educational needs and temporary accommodation. There may be some crossover, but the reality is that simply basing that on deprivation will not work for all authorities; some will be worse off as a result of moving from need to deprivation.

[Natasha Irons]

I had hoped that we could move away from this pitting area against area. I can assure the shadow Secretary of State that I am from an urban area with high deprivation, but with very high transport costs for children to get to special educational needs placements, and also massive temporary accommodation costs. Perhaps we need to move towards a better model that takes in all the issues we face in all of our areas. In that way, we are not fighting each other, but working together to get better local councils across the country.

[Kevin Hollinrake]

I do not want to be party political, but it is not us who are changing the formula. The reality is that this Labour Government are robbing Peter to pay Paul. This is a zero-sum game. If they move the formula around, some councils will be worse off and some will be better off. I want everybody to be treated fairly, but this is a very difficult situation against the current spending round.

The Labour Government’s approach is particularly worrying given their intention to move to a new fairer funding formula. “Fairer to whom?” we might ask, given the point we have just made. Labour’s broken promises on this are clear and follow similar promises broken on the fully costed and fully funded manifesto: the family farm tax, the family business tax, the winter fuel allowance, the rise in employer national insurance contributions and, of course, that statement about “not one penny more on your council tax,”

[Andy McDonald]

We were doing so well. We were talking about fairness across the board and not pitting one against the other—so far, so good. But given the shadow Minister’s comment, may I just remind him of the words of the former Prime Minister, the right hon. Member for Richmond and Northallerton (Rishi Sunak), in the garden in Tunbridge Wells, where, when talking about his time as Chancellor of the Exchequer, he mentioned having transferred funds deliberately away from deprived and challenged areas to more affluent ones? Surely we have to call out the record correctly, and if we want a fresh start, let us have a fresh start.

[Kevin Hollinrake]

I think my right hon. Friend the Member for Richmond and Northallerton (Rishi Sunak) was talking about fairness, which we all believe in. The hon. Member for Middlesbrough and Thornaby East (Andy McDonald) will have a different perspective on fairness from other people. The reality is that there is a political division here. One thing that we must agree on is that the statutory duties on councils should be properly funded. My concern is that that will not be the case, and lots of those pressures fall differently on rural councils compared with urban councils.

[Gareth Snell]

Under the formula that has been proposed and on which we will vote this evening, Stoke-on-Trent city council will receive a recovery grant of £8.2 million. I hope that the shadow Minister is not saying that, were the Conservative party still in Government, we would not receive that additional cash, and would therefore be £8.2 million worse off.

[Kevin Hollinrake]

It is interesting, because the loss of the rural service delivery grant cost my local authority £14 million, so it depends where we draw the line and what the priorities are. The change in the rural services delivery grant is robbing Peter to pay Paul. That is the reality.

[Luke Akehurst (North Durham) (Lab)]

My residents in North Durham are in a local authority area, County Durham, that is rural and deprived. I assure the shadow Minister that the previous version of the formulas was not designed to help that kind of rural authority. It may have helped wealthy rural authorities, but it did not help areas that suffered from both the difficulty of providing services in a rural area and the extreme need caused by deprivation.

[Kevin Hollinrake]

We all have different views on this matter. Many parts of my constituency are not wealthy and have deprivation that is not sufficiently catered for by some of the formulas. That is what we are concerned about. We are keen to see fairness across the board, so we will scrutinise Labour’s plans very carefully on that basis.

The Labour Budget promised a big increase in council spending and the return of the sector to sustainability through a comprehensive set of measures to support local authorities in England. As I said, the Government also promised multi-year settlements, and we support those intentions. However, most of the money provided to local councils under the settlement will be through council tax rises for working people. A number of the rises breach the 5% referendum limit principle. Referendums on council tax rises of up to 9.9% have been waived by the Secretary of State, so local people cannot have a say on these dramatic increases. That means that local residents in the Windsor and Maidenhead borough, Birmingham, Bradford and Newham all face increases of more than 5%. Birmingham is notable due to the mess that Labour made there, which Labour is now forcing residents to pay for, rather than taking responsibility. The Liberal Democrats are also raising council tax without allowing Windsor and Maidenhead borough and Somerset residents a say on how they feel about the increases.

Council tax rises make up the bulk of the settlement, and rather than Labour delivering on its claims that it would fairly fund local government, it is pushing the burden on to taxpayers. The Government have also increased that burden with their jobs tax, which will negatively increase costs on local government finance. Although they have provided £515 million to cover the direct costs of employer’s NI, the Local Government Association has estimated that the national insurance contribution hike will cost another £1.13 billion for increases being forced upon providers of outsourced services.

The costs of those outsourced services will inevitably increase, but the Government are providing no money to cover that. Councils and residents will have to pick up the bill. Council tax receipts in 2025-26 are forecast to be in the order of £50 billion, yet Labour’s nonsensical Chagos islands deal is rumoured to cost up to £18 billion. That is equivalent to a one-off £820 deduction from a typical council tax bill. Alternatively, it could have paid for a council tax freeze for the whole of this Parliament. As with all things, Labour is wasting taxpayers’ money rather than giving them a tax cut.

The settlement will make it more difficult for councils to deliver on residents’ priorities, be they social care or potholes, which I note Conservative councils have a better record of filling in. It is an undeniable fact that Labour and the Liberal Democrats deliver worse services and charge more. From Whitehall to town hall, under Labour, people pay more and get less.

[Madam Deputy Speaker (Caroline Nokes)]

I call the Chair of the Housing, Communities and Local Government Committee.

18:54

[Florence Eshalomi (Vauxhall and Camberwell Green) (Lab/Co-op)]

I welcome the real-terms funding increase in the settlement, in the context of a decade of cuts and financial mismanagement. The Minister outlined the additional funding for the children’s social care prevention grant, which will help provide vital services for children in their formative years, which is really important. There is the £660 million recovery grant for places with greater need and demand for services. It is important that we continue to focus on prevention, to stop us getting to a situation where many councils are asking for a bail-out later on.

I would like to remind Members of the consequences of the situation that our councils face up and down the country. For some councils, it means the end of community programmes that keep people active, or that mean people can go out and speak to others. I hosted an event last week on loneliness. Many of our constituents report feeling lonely, and those vital community services keep them active. Because of the situation that councils face, some children who are in need of an education, health and care plan are not getting that support, and we see some parents and carers having to quit work just to get adequate provision for their young people. It means that more and more families are ending up in completely unsustainable temporary accommodation, and we hear stories of families having to travel three to four hours every day just to get to school or work. No one should have to go to bed at night and be unable to sleep because they fear that the accommodation they are in could harm their family. Seventy-four children have had their deaths linked to temporary accommodation in the last five years. We are one of the richest countries in the world. This should not be happening.

People rely on our council services for their wellbeing, and we need to end the chronic underfunding of those vital services. We must remember that what we see today is the result of a false economy of underfunding local government for over a decade. For years we have had to see councils cut vital prevention services just to make ends meet. The result is that more and more people are in dire need of those services, which are far more costly not just to the local authority, but to the livelihoods of the people who need them. We see that in private rented sector inspections, in maintaining and repairing our housing stock, and in providing the vital youth services that my hon. Friend the Member for Croydon East (Natasha Irons) referenced, which boost the life chances of teenagers and young adults. If we are honest, the tragedy of the last 14 years is that it has seen more costly services for our local residents.

This settlement is a welcome step in the right direction to help councils meet some of the pressures they face, but again, if we are all honest, many of our councils will still struggle to provide the vital services that residents need and deserve. I am sure that many Members eagerly anticipate the start of the Housing, Communities and Local Government Committee’s inquiry on local government finances. As Chair, I do not want to pre-empt what we will discuss over the next few months, but I want to raise a few specific points with the Minister today.

The Minister knows—he has received representations on it and Members have raised it—that because large councils are big employers, they will be impacted by the rise in national insurance contributions, as the shadow Minister, the hon. Member for Thirsk and Malton (Kevin Hollinrake), referenced. He also referenced the LGA data, which indicates that even with the additional generous funding outlined by the Minister, councils will still be short by over £100 million to cover the extra cost for directly employed staff. The Minister touched on the service expenditure cost, but there is still a gap that needs to be filled. Is the Minister considering the impact that will have on staffing pressures in our councils, and have the Government considered the effect of indirect costs through the commissioned providers? Our councils do not exist in a bubble. The impact of other Government spending areas, such as health and welfare, will have a drastic effect on the costs that our councils face.

I come back to an issue that I have raised multiple times, as the Minister knows. I remain concerned about the impact of freezing local housing allowance at a time when private rents have gone up by nearly 10%. That could create extra and significant burdens on the vital and well thought-out homelessness prevention work that our councils do. Will the Government finally confirm what work they have done to assess that risk; whether freezing LHA will impact on families who are struggling with rising rents; and what pressures—unintended, maybe—that could place on homelessness services across the country?

[Mr Betts]

My hon. Friend raises an important point on local housing allowance. When we considered that issue in the Public Accounts Committee, it was pretty obvious that officials had not done any proper assessment of the impact that freezing the allowance would have on homelessness. Something ought to be done. If the Government take the major step of freezing an important allowance, they ought to know what impact that will have on other services.

[Florence Eshalomi]

I thank the former Chair of the Housing, Communities and Local Government Committee —I know of the work that his Committee did on this issue. The reality is that we need to build more homes. The Government have an ambitious target, but our residents need somewhere to live in the interim. That will mean more strain on the private rented sector and on rents. I hope that the Minister is considering that impact in his work with officials from other Departments, including the Department for Work and Pensions.

Will the Minister inform the House about the details of the public health grant for 2025-26? That will play such a vital role in addressing major health inequalities, which we all want to see reduced in our respective areas. We are talking about treatment for drug and alcohol services and smoking prevention, for example. I declare an interest as a co-chair of the all-party parliamentary group on HIV, AIDS and sexual health. Vital sexual health services help to address health inequalities, so it is vital that councils get funding—and certainty about it.

Extra money is only part of the solution. Some residents will yet again face higher council tax bills next year. They have the right to scrutinise, ask and ensure that every penny of that is spent in the right places, but the reality is that accountability in local government is far too often not fit for purpose. As the Minister knows—he referred to it—the situation got so bad that the National Audit Office refused to sign off the whole of Government accounts for the first time ever in November last year. Only one in 10 councils submitted reliable data for 2022-23, and over 40% did not submit any data at all. The Minister outlined the mess that he inherited, and the measures that the Government are taking to deal with the backlog, but we must ensure that we do not find ourselves in this position again.

The Minister also referred to the local audit office. Will he confirm what additional long-term steps the Government will take to address local government auditing? The consultation closed recently, on 29 January, and I would be grateful if he would outline a timeline for updating the House on that. I know that he shares my desire to give councils the support and flexibility they need. The first step in that is to fix council finances. We welcome the Government’s commitment to multi-year settlements from 2026-27 to give our councils the certainty that they have lacked for so long. I hope that he and the Government will remain open-minded to some of the reforms that our Committee will look at, so that we can all see councils up and down the country delivering the effective services that our residents need and deserve.

[Madam Deputy Speaker (Judith Cummins)]

I call the Liberal Democrat spokesperson.

19:04

[Mr Will Forster (Woking) (LD)]

Local government should be the bedrock of our communities. Councils should be empowered to deliver local services and invest in infrastructure, and they should be planning to make sure their communities prosper. Instead, years of Conservative mismanagement have left councils across the country on the brink of financial collapse.

Nowhere is this clearer than in my constituency of Woking. Woking borough council faces debts of over £2 billion. That debt is a direct result of reckless local decisions made by the Conservatives, enabled by a former Conservative Government who refused to step in until it was too late. This catastrophic black hole has had devastating consequences for my constituents, and because of this crisis and that Conservative legacy, public services have been—and continue to be—stripped back. Community projects are now a second thought, and council tax has gone up. As Woking’s new Member of Parliament—elected seven months ago, mind you—I have regularly raised the plight of my council’s finances and those of the whole local government system with the Minister and the Department, and I will continue to do so.

[Mr Betts]

On these occasions, I always sit and wait for the Lib Dems to accept some responsibility for the financial mess they created in local government. There was a 50% cut in grants to local government during the 14 years, and the biggest part of that cut came during the coalition Government. Is it not time that the hon. Member stood up on behalf of his party and apologised for his role in austerity, which created this crisis?

[Mr Forster]

I was about to be nice to the Minister and the team before the hon. Member intervened, which is quite ironic.

I am very grateful that the Government have listened to the concerns of distressed councils, including mine. Unlike the previous Government, who imposed higher council tax rises and higher interest rates as a punishment for bankruptcy, this Government have listened, and I am grateful to the Minister for doing so. That has saved my council alone millions of pounds. What I found very surprising was the brass neck of the shadow Secretary of State, the hon. Member for Thirsk and Malton (Kevin Hollinrake), when he criticised this Government for their tax rises; the previous Government punished my council with a 10% council tax rise because it dared to go bankrupt as a result of Conservative decisions. I have urged the Minister to not impose the same level of council tax rises as the previous Government, and I hope he will not do so.

Thanks to the work of the Liberal Democrats who now run Woking council and the amazing council staff, Woking is turning a corner, but I really worry for its future and that of councils like them, and the District Councils’ Network worries as well. The Minister has highlighted that there is no reduction in any local authority’s funding this year, but the DCN says that 0.3% is the average cash increase in core spending power for boroughs and districts. That is not good enough. Those councils shape their areas—they protect homeless people—and a 0.3% increase in core spending power is just not acceptable.

Turning to county councils, the County Council Network says that four in 10 of its members say that they are in a worse position than before the autumn Budget and the financial settlement, and one third say that their service reductions next year will now be severe. Considering that there is very little fat left to cut, I really worry about those services.

[Jim McMahon]

The hon. Member must accept that part of the difficulty we have in a two-tier system is the inability to move money around that system. It is correct to say that rural councils, mainly in two-tier areas, have had an increase of nearly 6%, but we have a huge inability to move that money around. There is around £2 billion in the two-tier system that could be freed up through reorganisation of local government, so will he stop looking both ways on reorganisation, and give a commitment on behalf of his party that the Liberal Democrats will support it?

[Mr Forster]

I thank the Minister for admitting that the 0.3% rise in DCN funding is happening. I do not think he can say that the Liberal Democrats and I are looking both ways on unitarisation, based on the statement earlier and the questions that took this debate later than Members might have wanted. We have concerns about unitarisation, particularly about the way that the Government are doing it. Fundamentally, we welcome reform of local government, but it cannot be imposed on councils and local areas, and we are concerned that that is happening. My county council, Surrey county council, has 14 days of reserves left—that is how bad of a state its finances are in. The Minister has talked about the past 14 years; I am more worried about the 14 days until my local authority, which is protecting vulnerable elderly people and children, will run out of money.

Social care is another area where the previous Government failed miserably, and I worry that Labour is set to repeat the same mistakes. Councils that provide social care are supposed to be better off under this settlement, but the reality is that demand for care is rising, costs are soaring, and local authorities are still struggling to meet their legal needs—I am sure all Members know that from their casework, and we see it time and again in tribunals. The Government’s allocation of funding for social care is simply not enough, and their refusal to commit to long-term reform, and particularly to have a long-term inquiry, will make the problem worse, not better.

On top of that, local authorities are saddled with extra costs from the Government’s policies. The increases in national insurance contributions will push up payroll costs for councils across the country, yet the Government’s package of support is lacking. Councils will be short of hundreds of millions of pounds just from NI contributions, and once again they will be pushed to increase council tax or cut services.

The Liberal Democrats are concerned that rural councils will suffer as a result of the Government’s decision to remove the rural services delivery grant in favour of the new recovery grant. The new grant will be allocated through a need and demand basis, and we are concerned that that will exclude rural councils from critical funding because it does not consider the specific reasons that the delivery of services is more expensive in rural areas.

[Gareth Snell]

Stoke-on-Trent will get £8 million from the recovery grant, and we are the fifth poorest city in the country. The hon. Member and I want to see services in our communities funded, so I urge him not to fall into the false trap that the Conservatives are setting by trying to pit our councils against one another. I want services, and he wants services; we need to agree to fund them properly and not be put into some sort of “Hunger Games” competition.

[Mr Forster]

I thank the hon. Gentleman for his helpful contribution. We should not have councils competing against each other, but although we have to recognise deprivation, and local government funding should be linked to that, we also have to recognise the cost of delivering services. Our fear is that removing the rural services delivery grant will not do that.

Last year the rural services delivery grant provided £110 million to rural councils to compensate for the vast rural areas that they serve, but this means that they will now face higher costs. We are concerned about, and it will leave rural communities and residents struggling, with fewer services and higher taxes. The Liberal Democrats urge the Government to provide rural councils with the funding settlement they need.

The Liberal Democrats believe in properly funding local government so that we can care for the people we need to care for, house the people we need to house, and protect vulnerable residents. I thank the Minister and his officials for putting the funding settlement together. It is a step in the right direction and an improvement on what we have seen, but as I think the Minister will concede, it couldn’t not be—it was always going to be better. This is a step in the right direction, but the challenges we face as a society and a country are huge, and the Liberal Democrats and I need to hold the Government to account to make sure that this is the last one-year single financial settlement. We need to make sure that social care is properly funded. That does not mean kicking the can down the road in three years’ time. It means that the homelessness strategy that we are promised in July genuinely solves the problem, genuinely tackles prevention, and is fully funded.

We also need to tackle special educational needs on a long-term, cross-party basis, not kick the can down the road, which is the fear for those issues. I was pleased that the Minister agreed—almost conceded—to have a cross-party review into the council tax system. The hon. Member for Hartlepool (Mr Brash) highlighted that his constituents in a band H property are charged £3,000 more than for a band H property in London, which is unacceptable. It is well known that Buckingham Palace pays the same level of council tax as an average three-bedroom semi-detached in Blackpool. That is not reasonable. We must fundamentally tackle those issues.

The Liberal Democrats and I are immensely grateful for the councillors and council staff who give up their time and their lives to shape their communities. We cannot let them down in this House, and they need to be fully funded going forward.

19:14

[Mr Clive Betts (Sheffield South East) (Lab)]

I am pleased to say that this is one of the first occasions for many years when in speaking in this debate, I do not have to stand up and say how badly Sheffield is being treated, because we have got a fair settlement for the first time in 14 years. Sheffield is a well-run council, and I congratulate Councillor Tom Hunt, the leader of the council, and Kate Josephs, who is the chief exec. We are not at a financial cliff edge. This settlement will not resolve all the problems and difficulties that the council has, but it does mean that the cliff edge is a bit further away, and the council has a bit of room to look at and take serious decisions about resource allocation and trying to continue with—and in some cases hopefully improve—some of the services.

In this settlement, Sheffield council has received £16.5 million from the recovery grant, which is right. We have lost out in so many settlements, because we are a deprived community, and deprived communities had the biggest cuts of all during the years of austerity. That is the reality. Some 60% of our properties are in band A. Putting council tax up does not bring in the same amounts of money as it does in more affluent areas, and it is right that the Government have recognised that.

We have an increase in the grants for social care and homelessness provision, and that is welcome, though I have to add a caveat. The council is saying to me that those grants still do not cover the increased costs it is facing in those two areas. Indeed, the national insurance increase has not been totally compensated for by Government. There are some challenges and issues in the settlement. It is not 100%, but it is an awful lot better than where we have been previously, and that is what we must remember.

I am sure the Minister recognises that this is the easy year. We come to the real challenges next year with the longer-term settlement. A three-year settlement is absolutely right. Fair funding will be looked at, and that is absolutely right. It cannot carry on. The previous Government were going to do a fair funding deal 10 years ago, but they never got around to implementing it. Clearly that review is needed; it is just a question now of getting on and doing it. We recognise that is a massive challenge.

If we are going to get that settlement right for the three years, we have got to address children’s social care, SEND provision, homelessness and the fight for temporary accommodation between different Government Departments, which drives costs up. Those issues need resolution. We also need a resolution to adult social care, although I understand that may not come until a couple of years afterwards. If we can at least sort the other issues out, it will be a significant step forward.

I will raise three other issues briefly, because I appreciate the shortage of time. I can see the Chairman of the Public Accounts Committee, the hon. Member for North Cotswolds (Sir Geoffrey Clifton-Brown) on the Opposition Benches, and he will probably recognise this point. We have been told clearly by the Treasury that from next year, Departments must not spend money allocated for capital projects on revenue. The way that local Government has had to be bailed out in the past few years is by capitalising revenue expenditure. What happens if the Treasury locks down that activity? Has any thought been given to that? It clearly needs some thinking about.

The Chair of the Levelling Up, Housing and Communities Committee, my hon. Friend the Member for Vauxhall and Camberwell Green (Florence Eshalomi) mentioned public health. Why is the grant late once again? I accept that is probably not the Minister’s responsibility, but he referred to prevention being important, and it is, and that is exactly what public health is about. From next year at least, can we get the public health grant at the same time as the local government grant?

Finally, I echo the comments about the hard work of local government staff and councillors in particular. Many councillors lose money, and there is a real challenge about getting younger people to become councillors. I asked the Secretary of State earlier about that, but she did not respond directly to my question. When will the Government look at reinstating the right for councillors to join the local government pension scheme? For many younger councillors, that is a real difficulty. They come in, they lose money, but they also lose their pension in the longer term, too.

[Florence Eshalomi]

I declare an interest as I served as a local councillor, like many colleagues in this House. It is about not just the pension; the additional costs that younger councillors face now to go in and serve their local community may be off-putting. On top of that there is the level of abuse that local councillors face for carrying out their public duty. Does my hon. Friend agree that the Government should look at that?

[Mr Betts]

I do. I welcome arrangements being put in place for the police to give more protection to councillors in that space. Recognising the financial strains, particularly for younger councillors, does not take a lot of money. I ask the Minister to allow that to happen.

I forgot at the beginning to declare my interest as vice-president of the Local Government Association. I am sure that it is pleased with the settlement. The Minister recognises the challenges that have been outlined—they are to be faced in future years, but I thank him for this settlement today.

19:20

[Sir Geoffrey Clifton-Brown (North Cotswolds) (Con)]

I am pleased to follow my very hard-working, excellent deputy on the Public Accounts Committee, the hon. Member for Sheffield South East (Mr Betts), who has huge knowledge on local government matters. In fact, whenever we come to local government matters in the Committee, we always defer to him.

I echo the opening remarks by my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) about our hard-working councillors up and down the country, whatever their political persuasion. Often, they work many hours and do not get much pay for it. They do it because they want to improve the lot of their local communities, so I warmly welcome that. I even echo his opening remarks to the Local Government Minister, who I always think is a fair and reasonable man. He has dealt with this matter in a knowledgeable and professional way, and I pay tribute to him.

I want to pick up on a couple of things from the excellent speech by the Chair of the Levelling Up, Housing and Communities Committee, the hon. Member for Vauxhall and Camberwell Green (Florence Eshalomi). She is very knowledgeable on this whole matter. First, the local health grant, which has been picked up by others, is peanuts in comparison with the total health budget, but if we can keep the population more healthy through the things that she said and other preventive measures, it would be far better for them and far cheaper for the country in the longer run. I do not know why Governments of all colours have not paid more attention to that.

Secondly, I want to pick up on local housing allowances, which the hon. Member for Sheffield South East also mentioned. As he said, the impact on homelessness has not really been calculated, which our PAC report made perfectly clear. The Minister needs to look at that relationship and how we can get a closer, more targeted local housing allowance or another allowance to alleviate the problem of some of the poorest in our society who cannot afford the houses that they live in, and who have to be subsidised to a considerable extent by the local authority, putting even more pressure on it.

Often, local government is not understood by our constituents, but they certainly know when they are not getting the services they pay for from their council. Council tax bills are increasing up and down the country. I was shocked to read that some people’s council tax is going up by as much as 10%, as the Secretary of State has given permission to override the legislation in place for a referendum to be called if council tax is raised by more than 5%. I remind the House, as my hon. Friend the Member for Thirsk and Malton did, that the Prime Minister stated in Bristol that he would freeze council tax bills for all. Clearly, that is not the case. I would love it if he was able to, but clearly when he said it, it was not realistic.

The Public Accounts Committee, which I have the great honour to chair on behalf of this House to try to expose how the taxpayer’s pound is spent—well or not, as the case may be—has taken a strong interest in local government. We will shine a light on the areas needed, as will the Chair of the Levelling Up, Housing and Communities Committee. Together, hopefully we can make a real positive difference in the way that services are delivered for people up and down this country.

It is clear that local government finances have increasingly become more dependent on council tax rather than central Government grants. I listened to the speech by the Liberal Democrat spokesman, the hon. Member for Woking (Mr Forster) about his local council, but it cannot be denied that some councils have managed their budgets better than others.

I welcome the multi-year settlements that this Government have introduced. We often criticise the Government, but I think these settlements will be warmly welcomed by councils, and would, I think, be welcomed in other areas of Government spending, too. Like a business, local authorities will be able to plan, investing taxpayers’ money into longer-term projects with more certainty, and therefore hopefully using money more efficiently.

I urge the Government in their review of the funding formula to keep in mind the rural-urban divide, which we have had quite a lot of discussion about this evening. In what I am going to say, I do not to wish pit one council against another in any way—that is not the object of what I am saying. I simply say that if we put the emphasis more on one facet and less on the other, we will benefit some councils and disadvantage others. The problem with rural councils is that in many cases it costs more for them to deliver services, which is not properly reflected in the grant. Even the House of Commons Library says that scrapping the rural service grant and replacing it with a recovery grant already demonstrates a divide. According to the Library, which is supposed to be independent, the change in methodology for allocating money has meant that rural areas are losing out to urban areas and city centres.

Now, I do not want to get into deep water, but a need is a need. Adult and children’s social services, which have been mentioned today, are both high-consuming, voluntary parts of the budget, and are increasing. If the Government take away the needs basis and put it into deprivation basis, they will benefit some councils and disadvantage others. I repeat: a need is a need. That includes adult social services and children’s social services; it also includes SEND—our Committee produced a report on SEND, which said the system is broken—which is a hugely consuming part of the budget, and is consuming a greater and greater percentage.

[Gareth Snell]

Will the hon. Gentleman give way?

[Sir Geoffrey Clifton-Brown]

Just a second. Another part of the budget that is consuming more and more is temporary housing accommodation; this, again, needs a fix in some way or another. Structurally, we cannot let these areas of spending go on unreformed, so that they continue to put huge pressure on the finances of all councils.

I give way to a former member of the Public Accounts Committee.

[Gareth Snell]

I thank the hon. Gentleman for giving way—I did enjoy my time on the Public Accounts Committee.

For two years, I led a small shire district council. We were often told that there would be money for county councils, because that is where the greatest need was in terms of adult and children’s social care, and various other demand-led services. I do not even think the divide is urban-rural; it can sometimes be between county and district, in the same locality. Is this the hon. Gentleman’s quiet way of telling us that when the Government bring forward the orders for reorganisation, his party will be supporting that, to take out that one element of potential divide in our funding systems?

[Sir Geoffrey Clifton-Brown]

I am really pleased that the hon. Gentleman has raised the whole business of devolution, because I am going to come on to that at the end of my speech. What I think we should do is build it from the bottom up, as we did, and let local people have a real say in what they want for the future of the delivery of their local services. I am going to say a little bit more about that and ask the Local Government Minister some quiet questions about it at the end.

I turn to a matter that is bread and butter for the Public Accounts Committee, which the hon. Member for Vauxhall and Camberwell Green, the Chair of the Housing, Communities and Local Government Committee, also raised, which is the whole business of local auditing. Without proper auditing, there is no guarantee that all the money—I say “all the money”, but I just mean “the money”—that councils get from both council tax and local government grants, in one form or another, is being spent wisely and providing value for money. The shocking position that we find ourselves in with local auditing at the moment is not, I think, helping the whole system.

The Public Accounts Committee recently held an evidence session on the whole of Government accounts, as the hon. Lady referred to, where we found that 44% of councils did not submit any data at all to those whole of Government accounts, and that 46% of accounts had not been audited for nearly five years, in some councils’ cases. The Local Government Minister has laid before the House measures to ameliorate the timing of producing local audits. Hopefully, we can get to a situation where we can start those local audits and get a set of figures we can begin to rely on. The next year, once we have started with an established set of figures, we hopefully ought to be able to get a properly audited set of accounts.

[Jim McMahon]

Will the hon. Gentleman give way?

[Sir Geoffrey Clifton-Brown]

I will in just a second, but I want to make a really important point to the Minister about why all this matters.

Why does it matter? If we do not have a set of properly audited accounts, we do not have a sound basis on which to know what we are spending money on. As the Local Government Minister knows only too well, it is not only the audited accounts that are important but the assurance that goes with them, so that council officers, councillors and the public—the council tax payers—can begin to get an idea of whether something is going wrong with their council. I say to him gently that if more councils knew that, we might not run into a situation where they issue section 114 notices. However we cut the cake, when a section 114 notice comes into effect and the Government send in officials to run the council, it always ends up with local people getting a poorer service—they have their services cut—that is more expensive in council tax. It is really bad when a council gets into that situation, and that is why we need proper audited accounts.

[Jim McMahon]

I am only intervening given the hon. Gentleman’s position as Chair of the Public Accounts Committee. I think that this is a common interest for the PAC, Parliament and the Government. I do not want to labour the points about the past; the question now is how we move forward. From our perspective, it is not acceptable at all that the whole of Government accounts cannot be reconciled because of local government audit backlogs, so we want to address that. More importantly—this is definitely where there is a common interest—we must rebuild the early warning system, because what we cannot pick up effectively enough is whether there are systemic problems, which are more than just one council beginning to wobble, that we should be aware of and take action on.

[Sir Geoffrey Clifton-Brown]

The Local Government Minister must be clairvoyant—or he must be reading my notes.

I warmly welcome the Government’s consultation on local audit reform, which would establish a statutory and independent local audit office. It would be responsible for the co-ordination of the system to provide the quality oversight and reporting that is currently missing. There is even talk about setting up some form of backstop public auditing system. A lot of reforms are being consulted on, which is to be warmly welcomed, and the Government are to be congratulated on tackling this subject. I really hope, as Chairman of the Public Accounts Committee, that the Local Government Minister and the Government succeed in that quest, because if we do it, we will begin to make local government much more efficient. We have not talked much about efficiency, but it is common across public services that if we improve efficiency, we make taxpayers’ money go further.

The consultation document—this is the core of the matter—states that

“just one per cent of councils and other local bodies publishing audited accounts on time last year and a backlog of nearly 1,000 outstanding audits dating back to 2015/16”.

That demonstrates that real reform is needed, and quickly. We are in total agreement, and we will go on examining the matter and pushing the Government to see how we can do that.

I will move on and make some remarks of my own on Gloucestershire county council. First, I pay tribute to the chief executive, Pete Bungard, who has run the council for 27 years—as I will say in a minute, it has been pretty well run financially—and to the retiring council leader, Councillor Mark Hawthorne, who has led the council so well. They will both be sorely missed. It is because it has had such constant leadership that I believe Gloucestershire county council is in a strong financial position today. As a Conservative-led council, it is one of the few that is not raising council tax to the full 5%. It is raising it by only 2.99%. That means, based on a band D property, that residents will pay only an additional £6.65 each month. That is a very creditable performance.

I am pleased that Gloucestershire is on track to invest an additional £32.7 million in local services in critical areas for its residents. That includes £10 million towards road improvements, with a focus on rural roads, as part of a £100 million four-year programme in Gloucestershire. The Public Accounts Committee recently focused on the condition of local roads. Over £1 billion a year is spent on that, but the Department for Transport admitted—this is something we really need to concentrate on—that it did not know exactly how local authorities spent that money, as it is not ringfenced. As with a lot of areas of government, we need better data on how councils are spending money to make sure we get better maintenance of our roads and avoid potholes. I am sure that all Members of Parliament find, whether they are looking through their postbags or knocking on doors, that everyone raises the issue of potholes.

I am pleased that the county council will be investing £12.8 million in a 200-place special school for Gloucestershire. Sending special needs children out of county is one of the most expensive actions that any council has to undertake, and I think that, in the long term, building our own facility in Gloucestershire will be good value for money. As I have said, the Public Accounts Committee carried out an inquiry into special needs, and we reported that the system was broken. This comes back to my earlier point: just spending more and more money when the structure needs to change is not the answer. It does not matter whether we are talking about special needs, children’s social services, mental health services or adult social services; it is just not the answer. We need longer-term structural reform, and I hope we may see some proposals for that from the Government. As the Committee discovered, in the last 10 years the cost of SEND services has doubled, but we are not getting double the service. That demonstrates that the system is well and truly broken.

Let me now say something about a point raised by the hon. Member for Stoke-on-Trent Central (Gareth Snell), my former colleague on the PAC. During the exchanges on the statement this afternoon, I said to the Secretary of State and Deputy Prime Minister that people in Gloucestershire would be pleased that they now have certainty that our elections will take place this year, which means that a new county council will be elected. Can the Minister give any indication—I asked his boss this question—of a timetable for when he expects my council to move towards devolution? I am not against devolution at all, but what I will say loud and clear is that I would like adequate time to be provided for a wide consultation to take place in Gloucestershire so that we can have the wholesale backing of its people and know what they really want the structures for the delivery of local government services to be in the future. If they have bought into it, they will be much happier with any change that may take place.

I should be grateful if we could have that timetable either tonight or in the relatively near future, and if the Minister could explain how a transition might work in Gloucestershire. Will the new council stay in place for four years, albeit perhaps towards the end of those four years shadowing a new unitary authority, so that we do not have elections again within the four-year cycle? That would be very helpful information.

[Jim McMahon]

On the timetable point, all councils in the 21 two-tier areas for reorganisation will receive their statutory elections. Individual councils will need to decide whether to apply for the process or not. If they choose to apply, we would expect their proposals to be submitted to the Government by November. That is quite a short period for them to work up the proposals, but there will be support in terms of capacity along the route. As for how that unlocks devolution a bit further down the line, we are obviously concentrating on the devolution priority programme at the moment and getting the mayors in place, but the door is always open to areas that want to talk about mayoral devolution.

[Sir Geoffrey Clifton-Brown]

The Minister has partly answered the question, but he did say that it was a very short timeframe. I understand that we will receive the letter very soon and that is great, but how long will there be after that for the county council to work up a proposal that might be acceptable to the Government? That is what it will want to know. I request earnestly that we have enough time to consult people as widely as possible, for the reasons that I have just given. [Interruption.] The Minister is indicating that he will write to me; that would be very helpful. Perhaps he will put a copy in the Library so that everyone else can benefit, and also respond to the question about whether the newly elected council will be in place for four years or not.

This has been a very constructive debate, as is often the case when there are relatively few Members present. When Members on both sides of the House can get our teeth into a subject like this and come up with constructive proposals on behalf of our constituents, which is what we are here for, we really are achieving something. Thank you, Madam Deputy Speaker, for allowing me to catch your eye.

19:39

[Shaun Davies (Telford) (Lab)]

I declare my interest as a serving unpaid councillor at Telford and Wrekin council and an honorary vice-president of the Local Government Association.

I welcome the Government’s local government finance statement, and particularly the real-terms funding increase of 4.3% for local authorities across England. I am particularly pleased to see the £16.5 million of extra funding for Telford and Wrekin council—a 9% uplift. What a contrast that is with the last 14 years of Conservative Government, during which authorities were, in the words of the Institute for Government, “hollowed out” by austerity, with core funding per resident falling by 18% in that time. We have all felt the impact in our communities. A third of English libraries closed during the 2010s, the number of miles covered by bus routes has fallen by 14%, and the proportion of councils’ budgets coming from council tax has risen from 36% in 2010 to 53% today, hitting working people hard in the pocket. I say to the hon. Member for Thirsk and Malton (Kevin Hollinrake) that it is a bit rich for him to talk about council tax rises, given that council tax doubled over the last 10 years under the Conservative Government.

This settlement is a vital first step—I emphasise the word “first”—in the right direction. However, as we have been saying as a sector, and as I had been saying as the chair of the Local Government Association, local authorities need more funding, but they also need reform and a focus on prevention, because local government is the best preventive service that this country has. When it comes to housing vulnerable children and adults, local authorities and local government provide that housing. When it comes to social care and looking after elderly or disabled people, it is predominantly councils, not the NHS, that support those residents. Councils are essential frontline services that intervene to protect our most vulnerable, but they also keep our villages, towns and cities as places where people want to live and bring up their families.

I will address the financial situation that local government finds itself in. If 10% of NHS trusts anticipated that they would have to declare themselves bankrupt in the next year, it would be on the front page of every single national newspaper. But when it comes to councils, there seems to be a situation of normalisation. Over the last 14 years, more councils have gone bankrupt than in the entire history of councils in this country prior to that, and the normalisation of that needs attention. Councils do vital work in protecting vulnerable people, especially the young. That should be celebrated, but my council, like many others up and down the country, is now spending £8 in every £10 on social care, and some councils are spending up to half of their budgets on temporary accommodation.

[Florence Eshalomi]

My hon. Friend refers to the spend on temporary accommodation, which the Select Committee heard evidence about. He may be aware that, collectively, London councils—the 32 boroughs—are spending £4 million a day on temporary accommodation. Does he agree that that is just not sustainable?

[Shaun Davies]

I agree with my hon. Friend, the Chair of the Select Committee, that it is not sustainable. It is also bad for children, families, councils and communities. If children are in temporary accommodation, they genuinely do not know what school they will go to next term. That is bad for children, who are the next generation of citizens.

We need systematic change. Central Government need to ease the burden on local authorities and spread out the load; build enough affordable homes so that we do not have 354,000 people who are homeless every single night in England; move care into the community, as the Darzi report recommended; and resolve the systemic issues so that social care providers do not face funding crises every single year. I add my modest voice to the calls of other hon. Members: will the Government please communicate the public health grant to local authorities so that they can set budgets for the next financial year in a meaningful way?

[Anna Dixon (Shipley) (Lab)]

My hon. Friend makes a good argument about the amount of local government funding that has to go into adult social care. The cuts that we saw under the Conservative Government have hit disabled and older people particularly hard. Does my hon. Friend agree that the new Labour Government’s uplift to local government funding will go at least some way towards addressing the critical cuts that have affected disabled people and social care?

[Shaun Davies]

I thank my hon. Friend and recognise the contribution that she has made for that section of our society. I agree that far more needs to happen, and I know that the Minister is as ambitious as the rest of us to ensure that those 14 years of austerity are addressed.

Giving councils the funding that they need is a welcome change from the constant cuts under the Conservatives, and it helps us to address the emergencies in the short term, but it is also important that we have a Government who accept that the long-term systemic issues require transformation, who do not pretend that everything is fine, and who accept that things need to change and that local government is faster, cheaper and more agile in delivering services on behalf of our communities and our citizens. As I said earlier, it is the best preventive service this country has.

The Government’s missions are ones that I and many Labour MPs back, but almost all of them run through local government. Whether it is safer streets, housing, social care or reforms to the NHS, it requires a confident, healthy local government sector that is able to deliver those services. As I said, this is a vital first step. I know that the Minister, who has exceptional experience in the sector and huge amounts of respect, also recognises that, and I look forward to seeing what comes next.

19:46

[Sarah Dyke (Glastonbury and Somerton) (LD)]

I start by drawing Members’ attention to my role as the chair of the all-party parliamentary group on rural services. The APPG is very concerned about the impact this settlement will have on rural local authorities and their ability to provide for their residents. It costs more money to provide services in rural areas, due to a number of factors including low population density, poor connectivity and larger distances to travel, but these facts are not reflected in the funding formula. Analysis by the Rural Services Network has shown that urban councils receive 41% more per head than rural councils in Government-funded spending power. Residents in rural areas now also pay an average of 20% more in council tax than urban residents do.

The removal of the rural services delivery grant, which provided rural local authorities with £110 million extra to deliver essential public services last year, will force rural councils to make yet more difficult financial decisions in order to be able to continue to provide vital frontline services to their residents. The consultation stated that this grant failed to account properly for rural need, and that funding must be allocated more effectively. However, the Government have failed to follow up on this. Instead, they have removed it a year early, with no published evidence for its removal. That means that rural councils will have the lowest increase in core spending power between 2024-25 and 2025-26.

It is disappointing that the new recovery grant will be allocated mainly to urban councils. We have heard about this from Members across the House today, and I certainly do not want to make this an urban/rural debate, but the Government must accept that there is real rural deprivation and that the continued underfunding of rural councils will have a negative impact on people’s lives. My constituency of Glastonbury and Somerton is an example of this. Glastonbury Central is in the 20 most deprived neighbourhoods in England, and a third of households in Street experience deprivation in at least one dimension, according to the 2021 census.

Is it fair that, because residents live in a rural area, they will have to pay more for less? Let us take home-to-school transport as an example. Research by the County Councils Network from 2018 shows that the average cost per head for home-to-school transport is a whopping £93 per child in rural areas, compared with just £10 per child in cities and towns. School transport for children with SEND cost Somerset council £11.6 million in 2023, a 157% increase on 2018. The council operates 283 routes a day for children with SEND. As the council is rural, those routes are many miles long, so they take longer and are much more expensive than those in urban environments —in some cases, costing £1,650 per pupil per week.

Or take Somerset’s increased risk of devastating flooding. Somerset council is the lead local flood authority and is responsible for managing the flood risk from ordinary watercourses, yet it does not have sufficient staffing capacity to deal effectively with the constant risks we face. Somerset is so often at the forefront of flooding and climate change.

Only last week, Somerset suffered immense flooding that forced more than 100 residents of the Primrose Hill residential park in Charlton Adam near Somerton to be evacuated into emergency accommodation. Martock, Blackford, Yeovilton, Podimore, Cary Fitzpaine, Mudford and Bridgehampton also suffered as a result of the flooding, with some residents completely cut off and unable to get to work, school or medical appointments. I tried to visit some of these communities a week ago on Monday and could not get there, so people certainly could not get out.

The lack of investment and proper repairs and maintenance by the previous Conservative-led county council has left the infrastructure fragile and unable to cope. Gullies and ditches are blocked, while culverts and drains have collapsed and are also blocked.

The funding model for local authorities is broken, and Somerset council, like many others, faces increased costs for social care and SEND provision. As a result, investment is put on hold while budgets for other areas of council work come under increasing pressure. Councils like Somerset, which face huge pressure from increased flooding, need ringfenced funding allocations to manage that flood risk, as council budgets simply cannot cope.

I am afraid that this financial settlement will fail to help rural authorities such as Somerset cope with the increased challenges and demands. The Government must recognise the added pressure that rural areas face, and this must be reflected in any financial settlement.

19:52

[Andy McDonald (Middlesbrough and Thornaby East) (Lab)]

It is an honour to speak in this debate. The hon. Member for North Cotswolds (Sir Geoffrey Clifton-Brown) spoke about auditors, and we are all aware that auditors are spread pretty thinly, which may, in part, contribute to delays in getting accounts signed off.

Local authorities are complex environments. In my area, we have two unitary authorities with populations of less than 100,000 people, so I commend the Government for looking very seriously at a more sensible local government structure. We are fortunate to have a Local Government Minister with such experience and expertise. It is a real boon, especially as we embark on such an ambitious and radical programme.

I welcome this year’s local government finance settlement. Councils have been subject to steep funding cuts since 2010-11, and these cuts have had a disproportionate impact on the most deprived areas. Many authorities face effective bankruptcy, putting essential services and jobs at risk. By 2025-26, councils in England will have received a 15.9% real-terms cut in their core spending power compared with 2010-11. Councils in the special interest group of municipal authorities, like Middlesbrough, have seen an average cut of 19.9%. Middlesbrough itself has seen cuts worth 22%, which is a real-terms cut of £55 million per year that amounts to around £835 per household, so this year’s settlement of more than £69 billion in overall national funding is welcome. It represents a cash-terms increase of almost 7% and a more than four times real increase on the past year.

The Government are on the right track in redirecting funding to areas that are in the most need and have the greatest demand for services. Those areas are often less able to raise income locally, as much as the Conservatives sought to pass the buck to local council tax increases. In areas like mine, many households pay over £3,000 per annum more in council tax than is paid by Buckingham Palace, so this settlement is fairer for councils and will provide welcome relief to the most deprived areas.

In Middlesbrough and Thornaby East, we very much welcome the settlement announced by the Government and the long overdue reforms to council funding. Middlesbrough council is now in a position to invest more money in key services. I welcome the fact that Mayor Chris Cooke, the Labour council and the new chief executive, Erik Scollay, have established the Middlesbrough priorities fund, worth over £4 million, and initiatives such Middlesbrough’s empty homes strategy, which will use £6 million of Government funding to purchase and refurbish empty homes for emergency accommodation.

While the settlement is under way, many authorities continue to face a shortfall, and the Minister has been very candid that this is not a done deal. We look forward to the three-year settlement later this year, because councils will not be able to rely on the additional funding being repeated. As colleagues from across the House have said, the three-year settlement gives councils the ability to plan much further ahead. I hope we can extend our commitments to wider investment in our services on a longer-term basis, through a fairer funding system that delivers long-term financial stability across all council services.

The position of our wonderful councillors has been raised. They do a terrific job, with very little reward, and they are sometimes on the receiving end of the ire of members of the public—sometimes justly, but sometimes unfairly and unkindly—so we need to address that.

[John Slinger (Rugby) (Lab)]

I am a serving councillor at Rugby borough council. I agree with my hon. Friend that councillors and council officers go out of their way to serve the public, which is extremely difficult when councils have faced 30% to 40% cumulative cuts. We need to remember that they are often trying to deliver services with one or both hands tied behind their backs, which is why the reforms set out by the Minister are so important.

[Andy McDonald]

I could not agree more with my hon. Friend. It is incumbent upon everyone in politics to recognise the work of our local councils and to treat them with the respect that they deserve. Some of the comments that I have heard in recent times run contrary to that. Councillors in my area have been put in harm’s way by careless and irresponsible comments made by people in this House who really ought to know better.

I will finish by talking about not only councillors, but the local government workforce and the issue of pay. The Minister will be aware that local government workers have missed out on the higher wage settlements paid out to workers in other parts of the public sector in the past year. Overall, they have seen 25% wiped from the value of their pay since 2010. In drawing the House’s attention to my entry in the Register of Members’ Financial Interests, I note that Unison, the GMB and Unite have said that a substantial pay award for local government staff is essential. Will the Minister therefore take steps to address those concerns and look to the upcoming spending review to deliver the finances and provide a long-overdue £15 minimum hourly rate for those workers who served us so incredibly well—I think of the covid days of maintaining those public services—so that they are properly compensated for their work?

20:00

[Robbie Moore (Keighley and Ilkley) (Con)]

I rise to speak on behalf of my constituents across Keighley, Ilkley, Silsden, Craven, Worth Valley, and indeed my wider constituency area. I want to focus on a specific part of the Government’s announcement and the real frustration that all my constituents will now face, as a result of the Government’s decision, a 9.9% increase in their council tax. That comes as a result of a request put forward by our Labour Administration, which runs Bradford council, for a 15% increase in council tax. The Government have instead decided to instigate a 9.9% increase without any opportunity for a referendum to allow my constituents to choose whether they deem that to be reasonable. That is a choice by this Labour Government to impose a significant council tax increase on hard-working families, and not only in my constituency but across the wider Bradford district.

[Several hon. Members rose—]

[Robbie Moore]

I will give way to my neighbour, the hon. Member for Shipley (Anna Dixon). I hope that she will join me in opposing the council tax rise.

[Anna Dixon]

As the hon. Gentleman well knows, the cuts made to local government by the Conservatives when in government, through the grant, hit councils such as Bradford district and those mentioned by other hon. Members the hardest. That is why Bradford council was pushed into exceptional financing, has had to borrow and has had no choice but to put up council tax. Even with the council tax rise, it will still be below average. Does the hon. Gentleman agree with my assessment?

[Robbie Moore]

I am pleased to see that the hon. Member has been given her Labour Whips’ handout note. It is interesting that not once did I hear her oppose the Labour Government’s increase in council tax. Not only that, but she did not call out the mismanagement of the Labour-controlled authority. I am referring to the whopping £50 million of taxpayers’ money spent on the music venue Bradford Live. It was promised that it would open for district of culture—we have been awarded city of culture in Bradford district, but I refer to it as district of culture because that money should be benefiting all the constituents across the Bradford district—and was estimated to cost around £25 million, but Labour councillors signed off an expenditure of £50 million. It is not even open to the public yet, even though it is city of culture now.

[Anna Dixon]

Will the hon. Gentleman give way?

[Robbie Moore]

I will not give way, because I do not think the hon. Lady will agree with me and many of the constituents across the Bradford district in opposing a nearly 10% increase in council tax. I hope that her constituents are watching.

Not only that; it also comes down to the absolute mismanagement of children’s services by Bradford council. Let us not forget that the previous Conservative Government had to step in and take children’s services off Bradford council because multiple damning Ofsted reports indicated that it was not through the fault of those providing children’s services and the level of care needed on the ground that the services were failing; instead, the disconnect in management at the very top of Bradford council was so bad and was failing our children that the Government had to step in and set up a children’s trust, which I must say is now having benefits.

Is it not ironic that the Labour Government will refer to our 14 years, but in 2021 the Labour administration at Bradford council submitted, as part of its statutory duty, a report stating that the council was in a “sound financial position”? Yet now the council is claiming that it is £150 million in debt and seeking a council tax increase of 9.9%, despite having requested a 15% increase. What on earth are this Government doing to hold to account local authorities that are failing constituents in the delivery of services? Where on earth is that accountability?

Bradford Live is not the only place on which huge amounts of taxpayers’ money has been misspent; One City Park, in the centre of Bradford, is another such venue. Car parks are being knocked down. That is not the job of a local authority. We should be relying on private sector inward investment to pay for regeneration projects. The job of a local authority is to focus on providing statutory-based services, not dipping in and out of regeneration schemes, and failing, at the cost of my constituents. Now we see through our city of culture status, which does not seem to be benefiting many of my constituents, the council wanting to construct a fancy art piece in Centenary Project. Who on earth in the Keighley and Ilkley constituency is benefiting as a result of that work?

[John Lamont (Berwickshire, Roxburgh and Selkirk) (Con)]

As ever, my hon. Friend is doing an excellent job of standing up for his constituents in Keighley and Ilkley, and exposing the failures of Labour-controlled Bradford council. In Scotland, this finance settlement will not affect my council, but my council is having to deal with a £265 million hit, along with all the other councils in Scotland, because of the national insurance rise imposed by the Labour Government. As well as all the mismanagement by Bradford council, does he agree that many local authorities across the UK are having to take money away from vital services to fund this tax hike by the Labour Government?

[Robbie Moore]

I absolutely agree. That point has been made not only by my hon. Friend, but by many Conservative Members. They say that the Government may, on the one hand, be passing down finance to local government, but they are, on the other hand, taking it away through the increase in employer national insurance contributions. This is a classic socialist policy: they are taking with one hand and telling councils how to spend it with the other.

Not only are my constituents going to be exposed to an increase of just about 10% in council tax, without the opportunity for a referendum to decide, but they are experiencing vast cuts to local services. We have had two household waste and recycling centres close in my constituency. The council is selling off assets. There are assets that have not yet been protected, despite the warm words coming from our Labour local authority. Assets such as the Ilkley lido, Keighley market and shops are now being considered for disposal, creating added worry to many of the occupants of those shops that the council own.

We have seen parking charges rise in villages such as Addingham, which means that the shops, which need those people to buy their products and to benefit their local economy, are now facing detrimental impact. Where does the issue of fairness kick in? In my constituency, the local council, which has increased council tax, spend that hard-earned money on a huge amount of mismanaged projects, wastage projects and projects that are not even open.

I submitted a freedom of information request to find out whether my constituents were getting a fair level of spending in the constituency. I asked the local authority how much had been spent on highways in my constituency over a two-year period. There are five constituencies across the Bradford district, so one would expect the figure to be about 20%, but it was about 7% on average over the two-year period. No wonder the state of potholes in my constituency is far worse than in the inner-city centre of Bradford. How can I justify backing any increase in council tax when the spending is so dire?

I want to come back to the issue of accountability. The last chief executive of Bradford council, Kersten England, held that post for a long period, and oversaw the mismanagement of finance and the diabolical handling of children’s services before the last Conservative Government stepped in, but—jobs for the boys—what is she doing now? She is chairing city of culture. What an absolute disgrace, in terms of who is being held accountable by the Government.

Let me quote some of the concerns that constituents have raised with me about council tax being raised by 9.9%. One said, “I will be 70 next year, and I am still having to continue to work to make ends meet.” Another said, “I am disabled and now, as a result of this council tax hike, will have to use my own savings to look after myself.” Another said, “I am a single mother with three children and I simply can’t afford this.” Another said, “I didn’t ask the council to throw money at a concert venue that is not open”—and therefore not benefiting my constituents—“yet they have done that and are expecting me to pay the price.” Another said, “It’s difficult to see why I would like to live through my retirement, having to spend this much more.” The list goes on.

There is only one long-term solution, and I will be interested to see what the Government have to say about it. I have long been campaigning, along with the former Member of Parliament for Shipley, Philip Davies, to pull our two constituencies out of Bradford council and create our own unitary authority away from the mismanagement of Bradford city.

[Anna Dixon]

Will the hon. Gentleman give way?

[Robbie Moore]

I give way to the hon. Member for Shipley.

[Anna Dixon]

As the hon. Gentleman knows, he and my predecessor put the idea of a breakaway council to his own Government, who rejected it as a complete non-starter. Let us work together across Bradford for the benefit of all our constituents.

[Robbie Moore]

I would be interested to hear what the hon. Lady’s constituents say. She has quoted the previous Administration completely wrongly, because they were absolutely behind the campaign to split the two constituencies apart. Indeed, I had many a meeting with the boundary commission. The challenge is that we have to get consent from the local authority, and we have a Labour-controlled authority that will not go anywhere near this campaign. Why? Because they know that my constituents are effectively the cash cow for the rest of Bradford. We are the dominant contributor to council tax and business rates, which feed city centre projects in the centre of Bradford.

I would like to understand the current Government’s position on my campaign to pull my constituency and Shipley—I believe I speak on behalf of many Shipley constituents—away from Bradford council so that we can have our own unitary authority, spend our own council tax and business rates in our own area, ensure that our local priorities are indeed prioritised, and leave Bradford city to make its decisions. I would be interested to hear what the Minister has to say on that, because that is the only way of achieving a long-term solution for my constituents across Keighley, Ilkley, Silsden, Worth Valley and the wider constituency that I represent.

20:12

[Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)]

How on earth does one follow that? I just wish that the hon. Gentleman had spoken up so we could all hear him. He made points about councils raising council tax, selling assets and cutting services. Does he believe that has happened to Bradford in isolation? Does he believe that his is the only council that has looked at its services and budget and said, “This is tough”? What he actually described is eight years of Conservative rule in Stoke-on-Trent, where council tax went up in eight years out of eight, town halls were closed and put up in fire sales, children’s services were on the brink, and a record number of children were in care. What he has described is a fate that every council faced, and the predominant reason is that his party in government took the scissors to the Budget, slashed the services we all had and decided that they knew better. He may make a fiery speech in this place for social media clips, but perhaps he needs to—

[Robbie Moore]

Will the hon. Member give way?

[Gareth Snell]

No, I will not give way. We have heard plenty from the hon. Gentleman over the last several minutes. He needs to think less about detaching his constituency from Bradford and more about reattaching himself to the reality of the situation that he put us all in.

I welcome the fact that Stoke-on-Trent city council has received £8 million through the recovery grant, and I have listened with great interest particularly to the hon. Members for Glastonbury and Somerton (Sarah Dyke) and for Woking (Mr Forster) about the impact on the rural services delivery grant. I go back to the point I have raised before: we have to move ourselves away from this confected game of Top Trumps that the Conservatives wanted us to have—that deprivation in Stoke-on-Trent is somehow in competition with the needs of rural communities. The Government’s trajectory—with the fair funding review, and a look at how and why we end up with the funding settlements we have—will take us towards that place. I know that it will not be immediate, and I fully accept that there are always winners and losers in everything, but my city is one of the five poorest cities in the country.

Ninety per cent of homes in my city are band A. Every time we raise council tax by 4.99%, it raises less proportionally than when my neighbouring district council authorities and the county council raise it by 4.99%. Not only are we not getting the benefit of having band B through to band E; we are also seeing the difference of what is paid in neighbouring authorities grow every year. That is simply unfair—a system that nobody would design in that particular way.

I was first elected to a council in 2010. In fact, the Minister was the peer mentor appointed to my council by the LGA. I suppose that is why I am here and not running a council. We were shown the “jaws of doom” graph demonstrating just how challenging financing was going to be over the next decade, and the predictions that my party made then have turned out to be true. Had the last Government frozen in cash terms alone—no uprates, no decreases—the amount of money we were receiving in 2010 and kept it at that rate until 2024, we would have had £411 million to spend on various projects. Instead, we lost that money. We then had this perverse idea that suddenly we had to start bidding to get some of it back through a levelling-up fund.

If we had had £411 million over those 10 years, the economic regeneration of my towns and city centres would have happened. We would not have had to come cap in hand to a Government to ask for capital funding to build a car park or a new hotel. We simply would have done the things that we needed to do over time in a way that fitted with the other projects we were seeking to deliver. We did not have that; instead, we got levelling up, which in my city was basically a car park, which now costs the council more money than it raises because of where it is and how many people use it.

We should learn from those lessons. I welcome every penny given to my city by every Department. The disabled facilities grant money announced by the Department of Health and Social Care is helpful, but the council administers that to keep people safe in their homes so they do not end up in A&E. We could look at how we join up public spending, in Total Place based way, in order to drive those efficiencies and productivity gains that will make the system of public sector provision much better.

When we look at the funding for local government, I urge the Minister as part of the next phase to think about how we stop the shuffling of wooden dollars. As my hon. Friend the Member for Telford (Shaun Davies) said, it is local authorities that provide the youth clubs that stop young people going into crime and antisocial behaviour, which then costs much more through the criminal justice system later on. It is local authorities that do the checks on houses to make sure that they are safe and decent, so that people do not end up in A&E because they have lived in cold, damp houses. It is local authorities that make sure that the restaurants we go to meet the food hygiene standards that we want, and that the products we buy are being checked by trading standards. Those services keep us safe and well, and prevent much greater public sector costs further on, so how we fund the public sector, with a Total Place approach, has to be part of the Government’s thinking.

Let me end my short contribution to the debate with this. We in Staffordshire today received the letter that the Minister sent about reorganisation and devolution. Reorganisation in Staffordshire could be a long, drawn-out process because basically no one can agree on anything, and we all pretend we like each other but the secret is that we do not. The comments from council leaders and other Staffordshire MPs about Stoke-on-Trent have been appalling. We are a lovely place and want to work with everybody. We will undoubtedly end up in some form of North Staffordshire combined authority that makes sense logically, economically, geographically and socially—it is where people live, work, and enjoy themselves.

When the Minister invites new proposals from local authorities and there is an appetite for them but one or two councils are holding out—perhaps because some people are more interested in protecting their jobs as leaders than in protecting the jobs of the people we represent—I urge him to move at pace and make it quite clear that we will not wait for them. My constituents deserve the same level of investment that goes into the west midlands, east midlands, Manchester and Liverpool combined authority regions. Without it, we will get further left behind. My constituency is, as I said, the fifth poorest in England. I do not want to be standing here after the next election saying that my constituency is still the fifth poorest in England. I hope that, with this Government, we can make sure that it is not.

20:21

[Ellie Chowns (North Herefordshire) (Green)]

I welcome some aspects of what the Minister is proposing. It is important to not always fire political shots at each other and to look for common ground and give credit where it is due. I have said this to him before, but I really welcome the moves that the Government are making towards multi-year funding settlements. It is so important to move away from the hand-to-mouth, year-to-year, jam-jar approach to funding—particularly capital funding. That ridiculous competition between local authorities over an ever-decreasing pot of funding has been so damaging, so those moves really are things to welcome.

But—there are quite a few buts about the local government finance settlement, but I will focus on just three. I represent the wonderful North Herefordshire constituency. Herefordshire council has received a settlement that is well below the national average, well below the average for comparator councils, and well below what is needed to provide the services that residents need and deserve. An interesting element of the debate has been some Members seeking to pose a binary conflict between rural and urban authorities. I want to get away from that—it is really unhelpful—but it is important to recognise there is serious deprivation in rural areas, not just in income but in access to services.

The hon. Member for Glastonbury and Somerton (Sarah Dyke) talked eloquently about the fact that sparse populations, long distances and poor transport networks all hugely increase the cost of delivering services such as social care or home-to-school transport. That is the impact of geography, but demography is also an issue. Herefordshire has 50% more over-65s than the national average, which has a knock-on impact on the cost to local government of delivering crucial services.

It is absolutely crystal clear that although the Government have taken away the rural services delivery grant, which they perhaps viewed as yet another jam jar, they have not replaced it in the new formula with a fair allocation of funding on the basis of rurality. I beg the Minister to revisit that issue when he comes up with the multi-year funding settlement. Otherwise, the serious problem of rural areas having their specific elements of deprivation under-recognised in the funding formula will build up so many other problems into the future. [Interruption.] I can see the Minister is nodding. I thank him for that and warmly invite him to Herefordshire so that we can show him, face to face and on the ground, the challenge of providing those services. That was “but” No. 1, regarding rurality.

“But” No. 2, which relates to the impact of the rise in employers’ national insurance contributions, has been referenced previously in this debate. I appreciate the nuance with which the Minister answered questions on this issue earlier, and his recognition that it is a really serious issue and that the funding settlement does not fully acknowledge it, particularly the on-costs, because so much of what local authorities do is done not just through the staff they employ themselves, but through commissioned services. I am sure that Members across the House have been inundated with correspondence from charities and businesses working in sectors such as the care sector that are desperately worried about the effect of the increase in employers’ national insurance contributions on their ability to provide those crucial services—so often commissioned by local authorities—to local people. When the Minister is doing the multi-year funding formula in future years, will he please address that issue and ensure that those costs are fully integrated into the calculation?

My third “but” was also touched on earlier. The Minister expressed doubt about whether cross-party agreement could be reached on this matter, but there seems to be quite a degree of consensus across this House that council tax is a broken tax—it is a broken funding system. It is outdated, regressive, unfair, and way overdue a review. We are charging people based on an assessment of property rates that were set 35 years ago and have never been updated. Council tax is crying out for a fundamental review, so will the Minister please commit to undertaking that review, working across parties and across the House to find a much fairer and more sustainable long-term approach to raising local funding?

[Madam Deputy Speaker (Caroline Nokes)]

I call the shadow Minister.

20:26

[David Simmonds (Ruislip, Northwood and Pinner) (Con)]

Thank you very much, Madam Deputy Speaker. I draw the House’s attention to my entry in the Register of Members’ Financial Interests as an unpaid parliamentary vice-president of the Local Government Association.

It has been an excellent debate, and I applaud the many Members on both sides of the House who have made insightful contributions to the discussion. Not only have they brought up issues affecting their own constituency —as, for example, my hon. Friend the Member for Keighley and Ilkley (Robbie Moore) set out so powerfully in his speech—but Members such as my hon. Friend the Member for North Cotswolds (Sir Geoffrey Clifton-Brown), speaking in his capacity as Chair of the Public Accounts Committee, set out a number of really important points that will affect the detail of how this plays out at local level. I am glad that the Minister touched on those points in his introduction.

As the House knows, local government in the UK spends around £40 billion of taxpayers’ money and over 800 different services are delivered by the average local authority. As a consequence, this issue touches the lives of more constituents than almost any other area of government activity. The starting point that we have to recognise is the one that was made by the chairman of the County Councils Network, who said that from the perspective of local authorities, this was the worst settlement in years. It is clear from the Minister’s introduction that he is a Minister who knows his WOECAT from his BRB from his persnuffle, but the impact of that detail matters so much.

In particular, the most significant element is the imposition of employers’ national insurance contributions in the Budget. According to the estimates of the Local Government Association, local authorities face more than £1 billion in unfunded costs arising from that alone. Harlow council, for example, has set out that this settlement represents a 21% cut in its core funding, within which it will receive £198,000 of revenue support in this year only for over £1 million of additional direct costs from national insurance contributions. That cost will rise to £1.2 million next year, with—as currently projected—no funding provided at all.

The Institute for Government has analysed the Government’s Budget overall, and when it looks at those elements affecting local government, it says that the Budget is “heavily front-loaded”—there is additional funding this year—but that the current plans set out by the Chancellor imply that there will be cuts in every year for the remainder of the Parliament, which will make it very

“difficult for…local government…to improve”.

We need to recognise that although there will be winners and losers, this is a budget settlement for local government that contains an enormous number of challenges, and there remain a number of very significant questions, which I will come to in a moment.

I welcome the point made by a number of Members about the value that we place on our local councillors. I have spoken to the Minister, and I agree with the point raised by a number of Members about restoring the access of councillors in England to the local government pension scheme. We must demonstrate the value that we place on local leadership, and that will be even more significant in the context of extensive local government reform. I know that is something Ministers are considering, and that its cost is minimal in the context of the overall local government finance settlement. As many Members have pointed out, motiving local leadership is vital to getting this right. With the reduction in the number of councillors and local politicians, in a country whose population is projected to hit 72.5 million by 2032, we must ensure that that growing democratic deficit is addressed by engaged, effective local politicians with the ability to make decisions in their area.

Let us look at where the money is going, where it is coming from and how that is changed. As the Minister knows, around three-quarters of council funding is spent on social care, and since the fair access criteria that were introduced by the last Labour Government, that is no longer a matter of local decision making. It is largely a statutory duty, where clear rules are set out in guidance from central Government about how that money will be spent, and how each resident and each constituency can help and will be treated. As a consequence, the bulk of funding going into the system is being spent on what we might describe as the “must dos”, rather than the “nice to haves”, and the fulfilment of clearly defined statutory duties.

If we cast our minds back to the last local government report of this nature under the previous Labour Government, we see a much longer report than the one before the House this evening. That report sets out the relative needs formula, which was the methodology used for the distribution of funding for all manner of different areas of local government activity. In 2010, around 25% of local government resources came from council tax, 27% came from the formula grant, which was essentially a redistribution of business rates, and 48%—very nearly half—came from specific grants, of which around two-thirds was the education budget. One of the big changes that has taken place over that period is the growth in the independence of schools and the rise of academies, and therefore a much larger share of that funding no longer sits within the local authority budget but is paid by the Education and Skills Funding Agency direct to schools. While that funding is no longer part of the council’s budget, it is still being spent locally on the same services that it always was.

A lot of debate in the House on local government has been about devolution, and one of the most significant areas of devolution regards financial responsibility. If we reflect on those same formula elements today, 52% of council spending is derived from council tax, directly under local control, and 27% comes from a grown share of business rates pooling, with a focus on incentivising councils to deliver growth. A much lower 22% comes from grant funding, as the Government sought to give local authorities over that 14-year period a much greater degree of control over their own resources. When we reflect on what that formula also tells us, as a number of Members have said, the decision to scrap things such as the rural services delivery grant reflects a criticism of the priorities set out by the previous Government.

We must also reflect that when we look at the list of the lowest funded councils in 1997, in 2010, and today, we find broadly the same set of local authorities on that list. The consequence of that is clear: no Government can cut funding that the council did not have in the first place. While most Conservative, and particularly rural, authorities did not see any benefit, or no significant benefit in funding through the indices of multiple deprivation, for the most part, the Conservative Government for 14 years maintained a significant premium of funding to areas for things such as children on free school meals going into education and in ensuring that deprivation formulas continued to play a significant part in the distribution of social care resources. The rural services delivery grant was a small step towards recognising, in the distribution of local government funding, the additional costs that were faced by places that had never seen any benefit from any Government. Members from all parts of the House—particularly Labour Members newly elected to rural areas—have said how awful it is that their local authorities are challenged by costs such as potholes and maintaining rural roads. Wait until they find out who decided to take away the rural services delivery grant, which would have provided the resources to deal with that.

The biggest challenge that all local authorities face will be dealing in parallel with reorganisation and the tight financial environment. As my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) said in the statement on devolution, it is clear that the Government—I respect the fact that they have been clear about this in their statements to the House—have made a decision in Whitehall about the form that they expect to see local government in England taking. It is also clear that they will ensure that that is implemented initially through local authorities coming forward as volunteers, and subsequently through a statutory invitation to ensure that they do.

I hope that the Minister will address a number of those points in summing up. The report is principally about the revenue support grant: local authorities do not yet know where they stand on the public health grant. They do not yet clearly know where they stand on schools funding. They do not yet clearly know the impact of Government announcements on the housing revenue account or the parking revenue account, all of which will have a significant impact. In particular, the statutory override on the dedicated schools grant for SEND remains uncertain and a significant budget pressure.

Let me finish where my hon. Friend the Member for Thirsk and Malton finished: if the Government can find £18 billion to cover the cost of the Chagos Islands deal, I am sure they can find the funds to make a better fist of it for our local authorities.

21:36

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rushanara Ali)]

It is my pleasure to close this debate. I thank Members from all parts of the House for their important contributions. I also pay tribute to the dedicated public servants working in local government across the country for everything they do to deliver for their communities by providing essential local services, protecting the most vulnerable in our society and helping lay the foundations for a good life for working people. They are doing that with great resilience in the face of significant challenges over 14 years of chaos, under-investment and decline.

Turning the page on the many challenges we have inherited will not be easy, but the settlement we have discussed today, as the Minister for Local Government and English Devolution, my hon. Friend the Member for Oldham West, Chadderton and Royton (Jim McMahon) has said, is a significant step towards rebuilding local government as we rebuild Britain.

Public service is our collective duty, and we are grateful to those who contributed to the consultation on the provisional settlement and to the Members who made representations. Their input is vital, because strong, empowered local government is central to our plan for change and to delivering the higher growth and higher living standards that every community deserves. This is the change and national renewal that this Labour Government were elected to deliver, and we will achieve that by getting local government back on its feet and working with us in the spirit of true partnership.

We are fundamentally resetting the relationship between central and local government by delivering the greatest transfer of power from Whitehall to our communities in a generation through our landmark English devolution White Paper. Crucially, we are fixing the foundations of local government, starting with the broken funding system that has left many councils of all stripes in crisis. The final settlement does what is needed: it provides a 6.8% cash terms increase in councils’ core spending power, bringing total spending for the sector to more than £69 billion for 2025-26, as my hon. Friend the Minister stated. With the settlement and the Budget taken together delivering more than £5 billion of new funding for local services over and above council tax income, we are ending the wasteful and costly bidding wars for funding pots that local councils have had to endure and moving towards secure multi-year financial settlements. We are providing more money for social care, increased funding for special educational needs and disabilities and alternative provision, and a £600 million recovery grant to support councils with the greatest need. We are responding to the drivers of cost that we know are putting authorities under huge pressure. It is clear that there is much more to do, but this settlement marks a turning point for local government after years of neglect and failure.

Many hon. Members have raised important questions about the impact on local authorities in their constituencies. My hon. Friend the Minister addressed many points during the debate, but I will respond to some others. As the distinguished Chair of the Public Accounts Committee, the hon. Member for North Cotswolds (Sir Geoffrey Clifton-Brown) will know, the National Audit Office’s 2021 report stated that core spending power was 26% lower in 2021 than it had been in 2010. Investment in local authorities has been reduced in recent years. Turning that around will require time.

The opening remarks from the shadow Minister, the hon. Member for Thirsk and Malton (Kevin Hollinrake), beggared belief. It is as if we did not have 14 years of Conservative government; as if within the space of seven years we can fix the mess that they left behind, with record cuts and record levels of under-investment. We will not take lectures from a Government who consistently failed local government up and down the country and decimated public services. That is the mess that we have inherited and are working hard to fix. We will work cross-party where people are serious about tackling the root causes, but we will not tolerate hypocrisy and the complete denial of the failure of the past 14 years. That is the mess that we are trying to correct.

In rural areas, investment has gone up by 6%; in urban areas 7%—

[Robbie Moore]

Will the Minister give way?

[Rushanara Ali]

Perhaps the hon. Gentleman will listen. The Minister tried to respond to his comments but he was not interested in the answers, so he will sit down and listen to my closing remarks. I want to respond to hon. Members across the House who have taken these issues very seriously.

This Government have already invested £3.7 billion in social care. We have recognised the need for investment in response to the rise in national insurance contributions —up by £515 million, as my hon. Friend the Minister pointed out. We have invested £1 billion in SEND and £600 million in the recovery fund. That is a snapshot of the investment that we are putting in. Local government and local services were starved of much-needed support under the last Government. That is what we are trying to correct.

[David Simmonds]

Will the Minister give way?

[Rushanara Ali]

The shadow Minister has had his chance to make his points. It is my turn to sum up, and I want to address the points that have been made.

[Robbie Moore]

Will the Minister give way?

[Rushanara Ali]

The hon. Member had his chance to make his point. He should have taken the opportunity to hear the response from the Minister.

On the points about rural funding raised by the shadow Minister and other Members, this Government are absolutely committed to tackling the issues that matter to rural communities. As I said, places with significant rural populations will receive an average increase of almost 6% in core spending power next year, which is a real-terms increase. No council will see a reduction.

My hon. Friend the Member for Vauxhall and Camberwell Green (Florence Eshalomi) raised a number of important points on temporary accommodation and SEND funding, among other things. The final settlement for the new children’s social care prevention grant is worth £270 million. She works tirelessly on her Committee to raise many issues, including homelessness and rough sleeping. This Government have already increased the investment to tackle homelessness and rough sleeping by £233 million, taking the total funding to nearly £1 billion.

My hon. Friend also raised the important matter of the local housing allowance. This Government are focused on increasing the availability of housing and tackling the long-term under-investment in house building, which is why we are determined to ensure we build 1.5 million high-quality homes. We have also invested £500 million in the affordable homes programme, because we recognise that there has been chronic under-investment in social and affordable home building and in the provision of housing over the past 14 years.

The hon. Member for Woking (Mr Forster) raised a number of points on social care, which I have addressed, as well as on national insurance. My hon. Friend the Member for Sheffield South East (Mr Betts) raised important points about investment in SEND, which I have also addressed.

The Chairman of the Public Accounts Committee, the hon. Member for North Cotswolds (Sir Geoffrey Clifton-Brown), made a very thoughtful and considered speech. I have addressed a number of the points he made, including on the rural services delivery grant. He also made a very important point about local audits; it is a scandal that a number of local authorities have not been able to provide the appropriate audits. My hon. Friend the Local Government Minister is working closely with the local authorities to ensure that that happens. It is, sadly, another legacy that we have inherited, but we are determined to work with colleagues, including the hon. and learned Member—my apologies, the hon. Member for North Cotswolds. He is not a KC, although he does have great expertise in his work. We will work together to tackle these issues—we are having to address them, and we are determined to do so.

My hon. Friend the Member for Telford (Shaun Davies) also raised issues around social care, which is a massive challenge that we are determined to tackle in the coming years. We are already investing funding into social care and supporting local authorities that have been struggling.

The hon. Member for Glastonbury and Somerton (Sarah Dyke) raised a number of points, including about home-to-school transport. We are aware that home-to-school transport costs are increasing significantly, in large part due to the pressures in the SEND system, and we are committed to addressing those challenges. The hon. Member for North Herefordshire (Ellie Chowns) raised a number of really important points. The consultation on the multi-year settlement ends on 12 February, and I will welcome her and other hon. Members making their contributions and views heard as part of that consultation.

[Robbie Moore]

Will the Minister give way?

[Rushanara Ali]

No.

We are very serious about working with colleagues both in Parliament and in local areas to tackle these very serious challenges, which local authorities need us to address after 14 years of under-investment.

[David Simmonds]

rose—

[Rushanara Ali]

I am concluding my speech. The shadow Minister has had his chance.

[Robbie Moore]

Will the Minister give way?

[Rushanara Ali]

The hon. Member took the opportunity to make a speech. I am sure he will get his clicks on Facebook and Twitter, so he does not need to continue in that vein.

[John Lamont (Berwickshire, Roxburgh and Selkirk) (Con)]

On a point of order, Madam Deputy Speaker. Please indulge me. Could you give some guidance, on how, under Standing Orders, we can encourage Ministers to debate? This is, after all, a debating chamber. The Minister is either unable or unwilling to debate with right hon. and hon. Members.

[Madam Deputy Speaker (Caroline Nokes)]

The hon. Gentleman knows full well that that was not a point of order. It is at the Minister’s discretion whether she wishes to take an intervention. I am sure she is coming to her closing remarks.

[Rushanara Ali]

Thank you, Madam Deputy Speaker.

Once again, I thank hon. Members for their valuable contributions, even if we do not always agree. The point is that we can all agree that there is much work that needs to be done.

[Sir Geoffrey Clifton-Brown]

I am grateful to the Minister for giving way, because I am about to raise a really important point that has not yet been addressed. A lot of councils are seeing their reserves diminished hugely, and I worry that there are a lot more councils in the pipeline that might well come under a section 114 agreement. Will she commit tonight to her Department working ever more closely with councils to try to prevent them from getting into that situation? As I said in my speech, once we get into that situation it is always more expensive for council tax payers, and they get cuts in their services.

[Rushanara Ali]

An exemplar contribution. The hon. Gentleman is absolutely right about ensuring that local authorities receive expertise and support, which is why the local audit office is so important. I know my hon. Friend the Minister for Local Government and English Devolution will work with him and his Committee to ensure we get it right, so that local authorities get the right support to ensure their finances are carefully managed.

I thank hon. Members once again for their valuable contributions. As I hope has been clear throughout the course of the debate, the Government are under no illusion about the scale of the challenges before us. There is no silver bullet to solve them. After 14 years, the idea that within the space of seven months all the underlying issues can be resolved is for the birds. I hope hon. Members, including the shadow Minister, recognise that we have to take the issues seriously. Just turning up and scoring points will not do the job. We have to recognise that there are serious issues and challenges. Where we can work together, we must.

I am conscious that I did not give way to the shadow Minister. If he wants to work with us, I am very happy to give way.

[David Simmonds]

I am grateful to the Minister. I think most of us, certainly on the Conservative Benches—this was acknowledged with gentle humour by a number of colleagues—are determined to work together in a constructive way, because we recognise that this issue has a huge impact, but I have to ask the Minister a question. She referred to an “investment” of £538 million in respect of national insurance contributions. Does she really argue that it is an investment to raise taxes on one group of people to provide a grant to our local authorities to pay another government tax? Would it not surely be better to go for a lower tax, higher growth agenda, rather than seek to tax our way into prosperity, which does not have the best track record in economic history?

[Rushanara Ali]

Perhaps the shadow Minister did not hear the opening remarks of my hon. Friend the Minister for Local Government and English Devolution, or my remarks, about what the Government have already invested in local government—billions. Does he want me to go over it again? There is not much time, Madam Deputy Speaker, but I suggest that he goes back and listens to the speech and those announcements. He knows that, in a very challenging set of circumstances, we have invested an additional £5 billion in local government. I hope very much that we can work on areas in which we can agree, but where we cannot, let us agree to disagree.

As I have said, there is no silver bullet that will solve the difficulties that we have to address, many of which we have inherited. Today is the start, not the end, of the process of reform and renewal, but with this settlement we have begun the task of putting councils on a sounder financial footing, fixing the foundations, and strengthening the sector for the long term. This will give councils the certainty and stability that they need in order to plan, move from crisis management to prevention, and deliver the change that the country needs: higher growth, higher living standards, more jobs, more homes and more opportunities as we rebuild as part of our plan for change. We are putting more money into people’s pockets, and putting stability, investment and reform first to deliver national renewal. We are putting Government back in the service of working people. I commend this settlement to the House.

Question put and agreed to.

Resolved,

That the Local Government Finance Report (England) 2025–26 (HC 623), which was laid before this House on 3 February, be approved.

Resolved,

That the Referendums Relating to Council Tax Increases (Principles) (England) Report 2025–26 (HC 624), which was laid before this House on 3 February, be approved.—(Jim McMahon.)