London Boroughs: Financial Support
(1 day, 21 hours ago)
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Lord Bailey of Paddington
To ask His Majesty’s Government what plans they have to provide further financial support to London boroughs.
The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Baroness Taylor of Stevenage) (Lab)
My Lords, we will deliver fairer funding for all local authorities, including in London. This financial year, we made available up to £13.35 billion of core spending power for London. The spending review provides over £5 billion of new grant funding over the next three years for local services that communities rely on. More details on the upcoming multiyear settlement and the Government’s response to the fair funding review will be published later this year.
Lord Bailey of Paddington (Con)
I thank the Minister for her Answer. Due to rising demand, London boroughs have overspent on children’s social care by £150 million annually for the past two years, yet the Government’s proposal for funding reforms assumes that London’s share has dropped by 40%. This could leave boroughs with a £1.5 billion cut, despite London being the region that uses emergency borrowing the most. Given that the fair funding review aims to match resource to need, will the Minister commit to correcting the children’s services formula or delaying its implementation until a proper review can be carried out?
Baroness Taylor of Stevenage (Lab)
The noble Lord raises an important issue around social care. He will know that the Government are committed to delivering reform to children’s social care and breaking the cycle of late intervention so that every child is safe and can thrive. We have already invested £500 million from the transformation fund to bring total funding over the spending review to more than £2 billion, and we are updating the formula to assess the need for children’s social care. The new children and young people’s services formula is based on the latest available data, has been developed in partnership with academics and is supported by the Institute for Fiscal Studies. I know that there are various factors driving the reductions in need share for some London boroughs. We will support local authorities by making sure that there are transitional protections in place if they see their funding fall as a result of the fair funding reform.
The Lord Speaker (Lord McFall of Alcluith)
My Lords, I call the noble Lord, Lord Campbell-Savours, who is participating remotely.
Lord Campbell-Savours (Lab) [V]
My Lords, does Westminster City Council in particular need additional support when a band H house worth £60 million in the borough carries a council tax of £2,100 a year, while a similar band H house worth £300,000 in Cumbria, in my former constituency, carries a tax of £4,600 a year—double Westminster’s? Worse, how can a band C local authority house in Cumbria’s Keswick pay more in council tax than that same £60 million-worth house in Mayfair? The system is discredited. We need new higher tax bandings and a fairer distribution of the burden.
Baroness Taylor of Stevenage (Lab)
My noble friend has illustrated why we are setting about this fair funding review. It is for local authorities to decide at what rate they set their council tax. Of course, it has to reflect the service needs of each area, taking account of other sources of income and historic council tax decisions made over the decades. We want to make sure that we make this a fair funding review, which is why we have been consulting on it and looking at the formulas to make sure that they operate effectively. I am sure my noble friend would not expect me to comment on the new higher council tax bands in advance of the Chancellor’s next fiscal event—
Baroness Taylor of Stevenage (Lab)
That has to be done at the next fiscal event. The Government remain committed to keeping all taxes and elements of the local government finance system under review.
Baroness Pinnock (LD)
My Lords, I have relevant interests as a councillor. The recent statistics published by the Government have pinpointed the areas of the country that suffer from immense deprivation. The current funding formula does not properly recompense those councils with the highest levels of deprivation. Do the Government intend to redistribute in order to help the councils across the country, including in London, that have the highest levels of deprivation?
Baroness Taylor of Stevenage (Lab)
I hope the work we have done so far will illustrate to the noble Baroness and other noble Lords that we are committed to improving how we assess need to make sure that central government funding is distributed fairly to the places that need it the most. Our proposals use the best available evidence so that we can more effectively capture variations in demand for services. A particular bugbear for me over the years—I am sure the noble Baroness will have heard me say this—is that we need to identify in local authorities pockets of high deprivation within generally more affluent areas. We continue to explore and review the new data that comes forward on measures of deprivation, and a final decision on the inclusion of the 2025 index of multiple deprivation will be made in the autumn, when we set out our funding plans for local government.
Lord Jamieson (Con)
My Lords, I declare my interest as a councillor in central Bedfordshire. This Government have said that their priority is growth. The previous Conservative Government incentivised councils to grow their local economies through a share of business rates growth and the new homes bonus, which many councils use to support economic growth. The new homes bonus has already been removed, and now this Government are resetting business rates, causing a severe financial squeeze on high economic growth councils. Are this Government no longer interested in growth?
Baroness Taylor of Stevenage (Lab)
The exact opposite is true. We are supporting our councils, which is why we have increased the overall spend on local authority funding, providing over £5 billion of new grant funding over the next three years for local services, including economic development services. The other work we are doing alongside that, including the Planning and Infrastructure Bill, which we will debate later today, lays the foundations so that local authorities have a clear run to improve the economies of their local areas.
Lord Sikka (Lab)
My Lords, there is an unacceptable level of social deprivation in all parts of our country, and even more so in the north of England. The city of Liverpool has 12,764 households on its social housing waiting list. It has just five—yes, noble Lords heard correctly—so-called additional social rent dwellings, as local authorities have been starved of resources. Can the Minister explain what targets the Government have set for poverty reduction and for funding local authorities to increase the social housing stock?
Baroness Taylor of Stevenage (Lab)
I hope my noble friend has been in the Chamber when I have spoken before about the £39 billion investment that our Government have made into social and affordable housing. We look forward to working with our partners in local authorities to deliver that housing. I hope that that, along with other adjustments that we are making, including changes to right to buy, will help to improve the situation for those who are currently sitting on housing waiting registers.
Baroness Altmann (Non-Afl)
My Lords, I think the general feeling in the House is that funding for local government is in urgent need of reform but any reform will take some time. I suggest to the Minister that an option that could be available in the shorter term is to use the fact that there are huge pension fund surpluses in local authority pension schemes as a reason to have an employer contribution holiday or significant reduction in the £10 billion put into these schemes every year, so that some of that money can be redistributed to the urgent needs of the local populations.
Baroness Taylor of Stevenage (Lab)
There is much to be done in looking at local authority pension funds—I agree with the noble Baroness on that. We are working through that process. Of course, there is a balance to be struck between how you might use that for capital spending, which would be an investment that there may be a return on, and using it for some of the pressures that we are experiencing on revenue spending, which is the real pressure for local authorities at the moment. It would not be a long-term solution for that, but the noble Baroness makes a very good point. We are exploring what more can be done around the pension funds and using that money for local spend.
Lord Young of Cookham (Con)
My Lords, further to the reply given to my noble friend about transitional relief, if, as is widely forecast, there will be substantial losses in the London boroughs, can the Minister guarantee that in any one year no London borough will have to reduce its expenditure by more than 5% to safeguard essential services?
Baroness Taylor of Stevenage (Lab)
The noble Lord will have to wait for the announcement of the funding for local government, because that work is still under way. We have done extensive consultation and, as I said, we are keen to make sure that, where there is a need for transitional relief, it will be paid for by additional funding for those local authorities suffering from that.