Local Audit Backlog in England: Non-compliance Lists

Jim McMahon Excerpts

Tuesday 4th March 2025 Written Statements

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

Effective local audit provides transparency, accountability, trust and confidence in local bodies to spend taxpayer money wisely. Close to 500 local bodies in England are required to publish their audited accounts annually.

However, the Government inherited a broken local audit system in England, evidenced by an audit backlog that peaked at 918 outstanding unaudited accounts in September 2023. More recently, the whole of Government accounts for financial year 2022-23 was disclaimed in autumn 2024, primarily due to a lack of audit assurance on local government accounts.

In July 2024, I outlined proposals to clear this unacceptable backlog and give taxpayers’ the confidence they deserve. These measures were implemented in autumn 2024 via amendments to the Accounts and Audit Regulations 2015 and through the Comptroller and Auditor General’s new code of audit practice. Without these measures, audits would continue to be delayed, and the local audit system would move further away from timely, effective audit, with significant additional cost to the taxpayer. The measures are supported by all key local audit system partners.

The Government appreciate the efforts that bodies and auditors are undertaking to support the drive to fix the foundations. The outcome of the 13 December 2024 backstop shows a shared commitment to restoring sound financial practice to the sector.

Backstop publication requirements

The 2015 regulations, as amended, require bodies to publish audited accounts (including the audit opinion) on their website by the statutory backstop dates below:

Draft Non-Domestic Rating (Levy and Safety Net) (Amendment) Regulations 2025

Jim McMahon Excerpts

Monday 3rd March 2025 General Committees

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

I beg to move,

That the Committee has considered the draft Non-Domestic Rating (Levy and Safety Net) (Amendment) Regulations 2025.

It is a pleasure to serve under your chairmanship, Mr Dowd. The Government are working to fix the broken foundations that have left councils of all political stripes in crisis and as a result will put them on a more secure financial footing. In particular, we have already set out the objectives and principles on which we will reform the local government finance system, and held an open consultation on them. However, as we work to rebuild local government, we must keep delivering now, to ensure that councils have the certainty that they need to set budgets and carry on providing essential services.

The business rates retention system is a well established part of the local government finance system. It allows councils in England to keep a fixed proportion of the business rates that they raise locally, and hence to benefit from increases in business rates income in their local areas. The system is underpinned by straightforward principles, yet it operates via a series of necessarily complex administrative arrangements between councils themselves and between local and central Government. Those arrangements are governed by secondary legislation, which must be updated regularly for the system to carry on running in the way it was intended to do and so that councils receive what they are entitled to.

The amendment regulations before the Committee make the updates that are necessary this year. Although the changes are technical, the reasons for them are simple. Seven principal sets of regulations govern the business rates retention system, and these amendment regulations make changes to one of them—the Non-Domestic Rating (Levy and Safety Net) Regulations 2013. Those regulations describe how councils are protected from significant falls in their business rates income via a safety net and how, in part, that is paid for via a levy on the growth in their business rates income. Three changes are needed in the regulations this year. All affect the calculation of the measure of income—known as retained rates income—against which we calculate eligibility for the safety net or requirement to pay levy.

First, we adjust this measure of income to continue taking into account authorities that have a higher level of retention. We do that each year. Under the rates retention system, there are a number of councils that in 2025-26, as in previous years, will retain more than 50% of the growth in their business rates income. In other words, they benefit from enhanced rates retention arrangements. It is important, in performing the levy and safety net calculation, that the calculation is made at the normal—50%—rates retention level for all councils. That ensures that where there are additional safety net arrangements for those councils with enhanced retention arrangements, that does not disadvantage councils that run at the 50% level. These regulations do that by adjusting a figure set out in the local government finance report for each council with enhanced retention arrangements to what it would have been had the council been operating at 50% rates retention.

Secondly, each year we amend regulations to mitigate the impact that changes in the underlying tax have on the rates retention system. This year we need to adjust authorities’ income for two reliefs: supporting small business relief and the retail, hospitality and leisure relief. These regulations will make sure that major precepting authorities—generally county councils and fire authorities —are not doubly compensated, through the levy and safety net, for a reduction in business rates income resulting from awarding those funded business rates reliefs.

Major precepting authorities will be compensated via grant for that loss. However, the grant is not automatically accounted for in their retained rates income. That income would therefore appear lower than the amount they have in year, which would affect the accuracy of levy and safety net calculations. These amendment regulations add back the value of compensation for the new business rates reliefs to major precepting authorities’ retained rates income. That ensures that the compensation is taken into account and therefore a more accurate measure of each council’s income is used to calculate levy and safety net payments.

Finally, these regulations correct a figure used to calculate the amount of small business rates relief compensation to add back to North Northamptonshire’s retained rates income, for the purpose of levy and safety net calculations. An error was made in the Non-Domestic Rating (Levy and Safety Net) (Amendment) Regulations 2022 following the set-up of the council in 2021. A figure of 67.4% was included, rather than the correct figure of 67.8%. This error was recently discovered and we are taking the first opportunity to rectify it.

Several aspects of the rates retention system rely on councils submitting their certified or audited data, which we use to make calculations, including the levy and safety net calculations. Where such data is outstanding, we make interim calculations to ensure that no council loses out, or is required to provide for future payments of levy, because it is waiting for its accounts to be audited. That is the case for North Northamptonshire, whose interim calculations were based on the intended 67.8% figure.

Now that we have discovered the error, we must correct it. The rectification of the error will not affect the council’s requirement to pay levy or its eligibility for the safety net for 2021-22 or 2022-23. That is because North Northamptonshire is not required to pay any levy, nor is it eligible for any safety net for those years, a situation that the rectified figure will not change. However, the council will pay a levy from 2023-24, due to the impact of the 2023 revaluation of business rates, so changing the figure will have an impact the amount of levy paid going forward. The amendment ensures that that levy will be calculated on the correct basis, and my officials have notified the council of the change.

These technical regulations make several important updates to the administration of the business rates retention system and, if passed, will mean that councils receive the business rates income they are expecting and thus have budgeted for. I commend them to the Committee.

--- Later in debate ---

[Jim McMahon]

I thank the Opposition spokesperson for his typically constructive response. On the matter of structural reform, there is agreement that it is far better that local government has long-term security and stability, and that, as much as possible, we tie down tax that is raised at a local level with the local accountability that comes with it. That is as important for council tax payers as it is for the local business community.

We also recognise that the groundwork that was done on devolution has the business rates retention scheme hardwired into it. The financial construct of many devolution agreements was based in large part on the business rates retention scheme being able to better reflect that, when areas come together and organise for growth, they ought to benefit from the proceeds of that growth. The business rates retention system has been built up over a period of time, and I would say it has maintained cross-party support on that basis.

As I said, these are generally very technical measures, but I completely take the point that local authorities need notice to be able to prepare. Most local authorities will be preparing on the basis of the information that has come in, and the measures will not be a surprise to them. I can assure the hon. Gentleman that officials have been in regular contact with North Northamptonshire council to let the local authority know that the adjustment is coming, so that it can prepare the ground. I hope that that gives him comfort.

On the hon. Gentleman’s points about local government reorganisation, we are now at a point where the statutory invitations have been sent out to the remaining 21 counties. Interest has been high, and we expect all—or perhaps the vast majority—to submit some kind of proposal about that process. We fully accept that that will require a significant amount of resourcing, from both the Department and local government itself, and we also recognise that in bringing together a range of different funding streams for councils at different layers of government and different geographies around the country, we will have to work to ensure that the alignment of assets, liabilities, revenue and so on is taken into account. I can assure the hon. Gentleman that officials are working on that.

It would be naive of me to say that I can absolutely guarantee that there will never be an error—the fact that we are here to reconcile an error shows that errors sometimes happen in very complex calculations—but I can say that we are doing all we can to ensure that we work that through that system. If the hon. Gentleman would find it useful, I would be happy to arrange a technical briefing with officials about how we are gearing up for that.

[David Simmonds]

I am grateful for the Minister’s offer—I am sure we will take him up on that—but can he give the Committee an assurance that such technical programmes are encompassing all of those Departments that have a direct stake in local government? For example, previous reorganisations have sometimes resulted in special educational needs and disability school facilities being entirely within one of the resultant local authorities, with another having a significant general fund revenue cost—which would be visible in the Ministry of Housing, Communities and Local Government—in transporting children across the border to access those schools that have, in fact, always been the traditional schools enabling that county. That can have a significant financial impact, and it would be good to know that those kinds of measures are being considered fully across Government.

[Jim McMahon]

I share the shadow Minister’s observation about the complexity of the system; it only takes a small part of it to throw quite wild numbers out in different parts of the country, because there is a lot of commonality in local government but different types of councils are affected very differently by different elements of public service pressures. County councils, in particular, are affected far more on home-to-school transport, for instance, than those in more urban areas. I completely understand that point.

I will say that we are eyes wide open as to the amount of change that is going through the system. Just on business rates, we have the business rates reset, the business rates relief work being done in terms of retail, hospitality and leisure, and the revaluation that is taking place at the same time. We then have a number of devolution agreements coming, and I am sure that retention will form part of those discussions and negotiations. On top of that, we have the more fundamental review of local government finance, where the funding formula is being looked at again.

There is quite a lot of change in the system, and I am very alive to the need to ensure both that the data is accurate and up to date and that we take local government expenditure in the round, to make sure that, in the end, every council has the resources needed, on a fair basis, to deliver decent public services. We are on with the political work, in terms of the outcome, but also the technical work, in terms of the process, to make sure that it is robust.

In conclusion, these technical amendment regulations are required to make sure that the business rates retention system operates as it should. I hope that the Committee will join me in supporting them.

Question put and agreed to.

Oral Answers to Questions

Jim McMahon Excerpts

Monday 3rd March 2025 Commons Chamber

[Charlie Dewhirst (Bridlington and The Wolds) (Con)]

6. What discussions she has had with the Chancellor of the Exchequer on levels of non-domestic rates for pubs.

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

Given the importance of business rates to both local government finance and local communities, and particularly to our high streets, our two Departments engage regularly on these matters. Pubs are eligible for the retail, hospitality and leisure relief scheme, and in the 2025-26 financial year pubs will benefit from a 40% relief on their bills, up to a cash cap of £110,000. For 2026-27, the Government intend to introduce a permanently lower rate for qualifying retail, hospitality and leisure businesses, including pubs. Those rates will be set by the Chancellor in the 2025 autumn statement.

[Charlie Dewhirst]

The highest pub in the Yorkshire wolds, the Wolds Inn at Huggate, is a great success story—Mr Speaker, I would be delighted to buy you a pint there the next time you find yourself on the right side of the Pennines—but, like many pubs in my constituency, it faces a crippling rise in non-domestic rates at a time when margins are very tight. Local pubs are not just businesses but much-loved community assets, so will the Minister reverse this tax grab and start supporting the great British local?

[Mr Speaker]

If I return as a missionary, I will bear that in mind.

[Jim McMahon]

Well, if it is intended to be a tax grab on pubs, we are not doing a very good job of it, because when the permanent scheme comes in, 99% of pubs that are under the £500,000 threshold will benefit from it. We absolutely recognise the importance of our community pubs in propping up the community and giving them places to meet, and to the economy and the good jobs that they provide.

[Chris Webb (Blackpool South) (Lab)]

The Armfield Club in my constituency is a fantastic local boozer that is run by, and was created by, Blackpool FC supporters. Venues such as the Armfield are the beating heart of our town, providing jobs and bringing local communities together. What steps will the Minister take to ensure a bright and sustainable future for clubs such as the Armfield?

[Jim McMahon]

I thank my hon. Friend for the work that he is doing to champion pubs in his constituency. Like all of us, he recognises just how important they are to the economy, and probably even more so to local communities. The Government can do a lot on business rates and on things like the community right to buy, which gives the community the right to step in when pubs might face closure, as part of the package.

[Stephen Gethins (Arbroath and Broughty Ferry) (SNP)]

7. Whether she has had discussions with the Secretary of State for Scotland on the Arbroath town plan.

--- Later in debate ---

[Kevin McKenna (Sittingbourne and Sheppey) (Lab)]

22. What steps her Department is taking to ensure areas with higher levels of deprivation receive adequate funding.

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

We of course recognise the challenges that local authorities face, as demand increases for critical services. That is why the final settlement for 2025-26 made available over £69 billion for local government in England—a cash increase of 6.8% in core spending power on 2024-25. The most relatively deprived areas of England will receive 23% more per dwelling than the least deprived. Of course, spending decisions beyond this year are a matter for the upcoming spending review.

[Andrew George]

I am grateful to the Minister for that response. He will be aware that since the Conservatives took control of Cornwall council four years ago, they have transformed that authority from being financially sound to staring down the barrel of bankruptcy. Cornwall is a rural authority with urban levels of deprivation and a super-ageing population. What assurance can the Minister give that, through the funding formula and plans for local authorities, the Government will have due regard to the escalating costs for these local authorities, not least as a result of the national insurance contributions hike?

[Jim McMahon]

The hon. Gentleman and all Members of the House have our absolute commitment that when we revise the funding formula, we will ensure that it takes into account all the matters he mentions. The multi-year settlement is intended to give stability. We have to make sure that councils are on their feet at the end of that. We recognise entirely that deprivation is a driver of cost, but so is the cost of rural service delivery.

[Kevin McKenna]

The 48th most deprived locality in England and five of the 10 most deprived localities under Kent county council are in my constituency, yet the council struggles to understand the levels of deprivation and to adequately resource those localities. Can the Minister assure my constituents that devolution and reorganisation of local government in Kent will ensure that their needs are not ignored like this in the future?

[Jim McMahon]

I will not comment on individual councils, other than to say that this is why local government reorganisation is so important. In too many parts of England, the two-tier system is not working for local people. The two-tier premium means that a two-tier system is a more expensive way of delivering public services, and most members of the public have no idea which council is responsible for delivering which service. It is therefore right that we go through this reform. My hon. Friend is absolutely right to say that, in the end, things have to work for local people. All the matters that he covered are on our mind.

[Mr Speaker]

We come to the shadow Secretary of State.

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

The Minister mentions local government reorganisation. On 5 February, the Deputy Prime Minister stated:

“We are postponing elections for one year, from May 2025 to May 2026”—[Official Report, 5 February 2025; Vol. 761, c. 767.]

but on 17 February, the Minister, in a written parliamentary question, said that

“new unitary…government will be established or go-live in 2027”

or 2028. Will the Minister confirm that these elections are not being postponed, and that they are, in fact, being cancelled for up to three years, meaning that councillors will serve terms of up to seven years? Will he also confirm that the Deputy Prime Minister may have unintentionally misled the House, and will he correct the record?

[Jim McMahon]

I can start by confirming that the Deputy Prime Minister did not mislead the House. The Opposition would do well not to muddy the waters. They know better than anybody what local government reorganisation means. Over the past few years, when they were in government, they postponed 17 sets of elections to allow reorganisation to take place. Although elections are being postponed in nine councils, 24 sets of elections will still take place this year. Let us not allow this to be whipped up into something that it is not.

We absolutely want to move at pace on reorganisation. We want to see proposals developed and presented early—the sooner the better—so that we can move to those shadow authorities, and so that local people can elect the new bodies that will deliver public services in their area and be accountable to them. To be clear, nobody will benefit—not the leaders of Conservative councils who have asked for postponement, nor members of the public—if we make the matter more confused than it needs to be.

[Dave Doogan (Angus and Perthshire Glens) (SNP)]

11. What steps she is taking to help ensure that local authority planning processes include fire safety assessments.

--- Later in debate ---

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

That is exactly the reason that there was £3.7 billion of new money for adult social care in the Budget.

[Lloyd Hatton (South Dorset) (Lab)]

T5. Eden Portland is an exciting proposal for my community and, much like the Eden Project in Cornwall and Morecambe, it would be a hub for education and ecology. If delivered, it would boost investment and create well-paid jobs. I know that Ministers agree that this could be a real success story, so will they meet me and the team at Eden Portland, alongside colleagues from the Department for Culture, Media and Sport and the council, to discuss how we can deliver this exciting project?

Local Government Finance

Jim McMahon Excerpts

Monday 24th February 2025 Written Statements

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

On 3 February 2025, the Deputy Prime Minister, my right hon. Friend the Member for Ashton-under-Lyne (Angela Rayner) set out the final local government finance settlement for 2025-26. The settlement makes available over £69 billion for local government, which is a 6.8% cash terms increase in councils’ core spending power on 2024-25. The settlement reaffirms this Government’s commitment to rebuild and reform local government, and to empower local leaders to deliver that change so that the benefits are felt in every community. The additional funding made available in this settlement and the Budget will deliver over £5 billion of new funding for local services over and above local council tax.

The Government are under no illusions about the fragile state of the sector and the pressures councils are facing to deliver for residents. As a result of the 14 years of decline and instability overseen by the previous Government, we know there are large numbers of councils in significant financial difficulty. Our fiscal inheritance means that there will be tough choices on all sides to get us back on the path to recovery, and it will take time. However, we are committed to restoring stability and bringing forward reform to ensure local government is fit, legal and decent and can play its critical role in providing the services communities rely on. We have already taken steps to improve sector sustainability, including targeting money towards areas with greater need and demand for services and less ability to raise income locally at this year’s settlement with the introduction of the new £600 million recovery grant.

The financial legacy of the previous Government has resulted in a record number of councils engaging with the Government asking for exceptional financial support to help them set their budgets. We confirmed in the local government finance settlement that we have already had to consider requests for council tax increases from some councils where this was necessary for their long-term sustainability. As set out in the settlement, we only agreed to this on an exceptional basis, we did not agree to all requests, no request was agreed to in its entirety and we have only permitted additional increases where councils had lower levels of existing council tax compared to similar councils.

The exceptional financial support process has existed since 2020 to support those councils facing unmanageable financial pressures. This Government understand that fragility in the system has left some councils in difficult positions and recognise that support is required in exceptional circumstances to balance budgets. Unlike the previous Government, we have been clear that we do not believe in punishing councils and local residents where this is the case. We are taking a partnership approach to the exceptional financial support process which prioritises protecting the interests of local residents. We have already announced that, where councils deem it necessary to undertake additional borrowing to support their recovery, we will not replicate the previous Government’s punitive approach of making that borrowing more expensive through an additional 1% premium.

On 20 February 2025, my Department wrote to 30 councils confirming that we would provide in principle support to enable them to set balanced budgets. The total amount of support provided is circa £1.5 billion, around £1 billion lower than was announced last year. In some cases, requests relate to support in prior years or to reprofiling existing support agreed in previous years.

Details of the councils and support provided were published on www.gov.uk. This includes six councils whose improvement is being supported via statutory intervention. We are continuing to work with these councils and through the commissioners and panels in place to support the councils’ recovery from more severe financial issues. Support is being provided through financial flexibilities where the Government permit councils, in special circumstances, to treat revenue costs as capital costs. This is known as capitalisation and means councils can then meet those costs through capital receipts, or if necessary, borrowing, in line with the approach of the previous Government. Since capitalisation is a relaxation of normal accounting requirements, it has always been subject to agreement from the Secretary of State.

In taking these decisions, the Government have considered carefully appropriate protections for the public and the public purse—including the protection of treasured community assets. We have set out a clear expectation that where a council is considering financing capitalisation support through capital receipts, this should not be from the disposal of community and heritage assets. Retaining these treasured assets within public ownership is imperative to ensure local communities can continue to benefit from them.

While we are taking a collaborative approach, the Government have been clear on our wider commitment to effective oversight of local government and our expectation that councils deliver value for the taxpayer’s pound. That is why we are working to fix the local audit system and strengthen the standards and conduct framework for councils in England. In line with this, as part of our partnership process, we will seek additional external assurance for councils receiving exceptional financial support that will help support local improvement as well as providing an assessment on action each council is taking locally to help manage its position. I am clear that Government will continue to expect councils to make sure they are doing all they can locally to deliver for residents. We will always act where there is any evidence of failure, including in the management of public money.

We are committed to setting a new relationship with the local government sector. As part of this, we will treat all discussions with councils worried about their positions in confidence, with respect and determination to find a solution together. In making these decisions, we are committed to prioritising the needs of residents.

We also want to make sure that councils have the information that they need to conduct their business sensibly. For this reason, the decisions highlighted today were communicated to councils as soon as possible after the House had had the opportunity to consider the local government finance settlement. Given that this was while the House was in recess, we wrote to relevant MPs, the Opposition and the Chairs of the Public Accounts Committee and the Housing, Communities and Local Government Committee to inform them of our decisions and confirm that we would make this written ministerial statement once the House returned.

This written ministerial statement applies to England only.

[HCWS461]

Coalfield Communities

Jim McMahon Excerpts

Thursday 6th February 2025 Commons Chamber

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

I thank all Members for a really thoughtful debate. When Members speak about their constituencies in the way they have today, we get a sense of the pride of place. I congratulate my hon. Friend the Member for Newcastle-under-Lyme (Adam Jogee) on securing the debate, and I thank the Backbench Business Committee for agreeing to it. The level of interest in the debate, and the fact that two time limits on speeches have been introduced, speaks volumes.

I know from my own experience of growing up in and representing a constituency with a fierce and proud industrial past, built on the back of the coal that fired it, just how much pride and sense of belonging comes with that. They were jobs—of course they were—but they were more than that; they were about people and place. That identity has stayed with the generations that have come since.

Between 1985 and 1997, the closure of 150 collieries resulted in approximately 250,000 job losses. That was not just about employment; those closures meant the loss of the vital social facilities that the National Coal Board and the trade unions had provided for those communities. That is why the Government are taking concrete action to support coalfield communities and secure the future prosperity of former mining communities while honouring their remarkable heritage.

We really got a sense of that in the debate. My hon. Friends the Members for Blyth and Ashington (Ian Lavery), for Ossett and Denby Dale (Jade Botterill) and for Alloa and Grangemouth (Brian Leishman) spoke about community and solidarity, as well as about heritage. It is that sense of belonging that we need to respect. Quite often—I hear this strongly when I go around the country—people feel not just that Parliament is a million miles away, but that the next town is a million miles away. The isolation that people often feel economically, socially and politically is profound, and we must do far more to meet that challenge.

This Government’s defining mission is growth, and we are determined that our coalfield communities are central to it. That is why we are working in partnership to invest in and empower the nation’s coalfields, so that they can kick-start growth in their area and increase living standards for working people. We have already announced planning reforms, devolution, our plans to make work pay, and settlements to fix the foundations of local government. That will also help coalfields to build their future and realise their full potential.

[Michael Wheeler]

Does the Minister agree that economic growth is only meaningful if it takes everyone in every community with it and people in every town feel the benefits, including the towns that we have talked about today?

--- Later in debate ---

[Jim McMahon]

My hon. Friend makes a very good point. He is sat next to my hon. Friend the Member for Leigh and Atherton (Jo Platt); they are both Greater Manchester MPs, and we are all very proud of Greater Manchester. We all see the red dots on the skyline of Manchattan—as we call it, very proudly—and the booming city centre that is Manchester. However, the truth is that unless the social opportunities are there and people have the confidence and skills to compete in that new market that is emerging, it can feel a million miles away. That is really important, and we do see that.

A lot has been said about the mineworkers pension scheme. We recognise that for too long, our coalfield communities have been an afterthought, which is why this Government have reversed those historic injustices by transferring £1.5 billion to mineworkers pensions. Our manifesto also promised that the truth of Orgreave would come to light. The BCSSS was also mentioned, and I can say that the Minister for trade is taking that issue up with the urgency that Members have called for in this House. It was covered in a lot of detail by my hon. Friends the Members for Bassetlaw (Jo White), for Easington (Grahame Morris), for Amber Valley (Linsey Farnsworth), for Stafford (Leigh Ingham) and for Nuneaton (Jodie Gosling). They all spoke, seriously and rightly, about the urgency that is required to resolve this issue. This Government have heard that message loud and clear, and I know that Ministers in other places are working on that.

[Grahame Morris]

Will the Minister give way?

[Jim McMahon]

Very briefly, please.

[Grahame Morris]

I am grateful for the Minister’s reassurance on the BCSSS. Before he moves off the issue of funding for growth, a number of hon. Members, including my hon. Friends the Members for Alloa and Grangemouth (Brian Leishman) and for Ayr, Carrick and Cumnock (Elaine Stewart), raised the issues of fair funding and the Coalfields Regeneration Trust’s model for community wealth building. It is seeking a relatively modest £500 million in capital investment spread over five years, which it believes could create half a million square feet of new industrial space. Is the Minister minded to look at that proposal favourably?

[Jim McMahon]

We are absolutely committed to ensuring that every part of the country realises its full potential. Let us be clear: everybody in every part of the country has potential, but far too often, that potential is not met by opportunity. We will look at any projects and measures that aim to do what my hon. Friend has described in the coalfields to ensure that potential is met, and I can certainly take up that point and maybe follow up in writing.

The proud history of our coalfield communities must be matched with a proud future. Late last year, we published the English devolution White Paper, and a Bill will follow. That White Paper includes a reformed vision for the long-term plan for towns, which the autumn Budget confirmed will be retained and reformed as part of our regeneration programme. We are proud that through that plan, coalfield communities from Newark-on-Trent to Wrexham will receive a package of up to £20 million in funding and support. Furthermore, this Government are working with mayors where they are to produce local growth plans across their city regions, which sit alongside local coalfield communities, because we recognise that those are vital to our collective economic future.

That regeneration, and the long-term investment and co-ordination that are needed, were referenced by my hon. Friends the Members for Whitehaven and Workington (Josh MacAlister), for Cannock Chase (Josh Newbury), for North Durham (Luke Akehurst), for Leigh and Atherton, for Ayr, Carrick and Cumnock (Elaine Stewart), for Chesterfield (Mr Perkins), for North Warwickshire and Bedworth (Rachel Taylor), for North West Leicestershire (Amanda Hack) and for Airdrie and Shotts (Kenneth Stevenson). They recognise that of course, we can be proud of the history of our place—we all are—but the future is important too, and if we do not put the building blocks in place to rebuild industry and pride, we will miss a trick.

As was referenced earlier, no working-class person is waiting for a handout, but we absolutely deserve a hand up. We are sick and tired of being told to wait our turn, to behave and stand in line and to know our place, hoping that somehow, tomorrow, our turn may just come. Lesson after lesson and generation after generation shows that, for all those promises, it never comes. We cannot have power, wealth and opportunity constantly being hoarded by the centre, to the exclusion of our communities that are impacted by it.

That is why devolution is so important. If we do not break away from the centralising model of command and control, and the hoarding of power and opportunity, we will never make progress with our economy, society or political power in this country. This week, we are proud to be expanding the devolution priority programme, through which more mayors will be created, with the powers and the tools that they will need, as local leaders, to do what is right for their area. They will not have to come cap in hand to central Government, in constant, wasteful bidding wars.

Like my hon. Friend the Member for North East Derbyshire (Louise Jones), I pay tribute to the late John Prescott, a working-class voice in politics. He took up that charge—that fight—and we all recognise the work that he did. Members of the House have our assurance that we stand with our coalfield communities and the excellent Members of Parliament who have spoken today.

Question put and agreed to.

Resolved,

That this House has considered Government support for coalfield communities.

English Devolution and Local Government

Jim McMahon Excerpts

Wednesday 5th February 2025 Written Statements

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

Today, I am pleased to announce the list of places that have come forward to join the Government’s devolution priority programme, with a view to mayoral elections in May 2026. I will also provide an update on local government reorganisation and local elections.

Devolution priority programme

In December 2024, the Government published the “English Devolution White Paper”, setting out our approach to widening devolution across England, ensuring the benefits of taking back control can be felt by all. It signalled our commitment to change, a change that will bring growth and opportunity to all parts of the country, by putting power into the hands of local people that know their areas best.

To achieve this, I asked places to come forward to express their interest in being part of our devolution priority programme.

The Government received an extremely positive set of responses, and today I can confirm that we will be taking forward six devolution areas on the devolution priority programme: Cumbria (Cumberland council, Westmorland and Furness council); Cheshire and Warrington (Cheshire East council, Cheshire West and Chester council, Warrington borough council); Greater Essex (Essex county council, Thurrock council, Southend-on-Sea city council); Hampshire and Solent (Hampshire county council, Portsmouth city council, Isle of Wight council, Southampton city council); Norfolk and Suffolk (Norfolk county council, Suffolk county council); and Sussex and Brighton (East Sussex county council, West Sussex county council, Brighton and Hove city council).

The first of its kind, this programme aims to deliver a new wave of mayoral elections in May 2026. It will provide a fast-track to mayoral devolution for areas ready to come together under sensible geographies which meet the criteria set out in the White Paper.

Local people will have a real voice in deciding what is right for their areas, and more control over the things that really matter in their daily lives. New mayors will have access to new powers in the devolution framework and, ultimately, proudly represent their area at the Council of the Nations and Regions.

The six devolution areas on the priority programme will receive the full backing of Government to deliver to these ambitious timescales.

The Government will also continue to work closely with Lancashire, who are already committed to reviewing their devolution arrangements by the autumn, including steps to deepen their existing arrangement. This review will consider all options available for the area, including aligning with the devolution priority programme timeline for mayoral devolution.

I was pleased by the response to my letter of 16 December, showing that the country is ready for change. While selecting those areas best placed to join the devolution priority programme required judgments against the criteria set out in the White Paper, the Government want to maintain the enthusiasm and local consensus for devolution in those areas not being taken forward for mayoral devolution to the fastest timeline. The Government will continue to work closely with those areas to develop their proposals further and continue to widen devolution across England in this Parliament.

The Government see devolution as a new way of governing, rooted in the principle that people who have a stake in a place should be the ones shaping it. It will be crucial to delivering our commitment to bring growth and opportunity to communities across the country. This is the first step in delivering on our promise to move power out of Westminster and putting power where it belongs—into the hands of local people.

Every place has something to benefit from devolution, whether it is more regular bus services, more affordable housing, or the simple fact that local people will have a local champion with regional influence. Mayors, regardless of political stripe, have a proven track record of delivering growth.

But the Government are clear that, where a mayor is not using their powers for the benefit of their residents, the Government have the tools to ensure they deliver. Our White Paper set out our intention to explore a local public accounts committee model to interrogate the decision-making of mayoral strategic authorities; and the English devolution Bill will include measures to reform local audit. Taken together, these measures, and the Government’s wider reforms to accountability and scrutiny, will ensure mayors deliver the houses, transport and infrastructure their residents need.

Delivering devolution commitments

Today, legislation comes into force formally establishing three new combined county authorities and one new combined authority.

Greater Lincolnshire combined county authority and Hull and East Yorkshire combined authority will take their first steps as new strategic authorities tomorrow. Both will elect a mayor for their areas in May this year.

I am proud to say that this Government have delivered mayoral devolution to the whole of Yorkshire for the first time.

Combined authorities for Lancashire and for Devon and Torbay will also be coming into existence, helping local leaders in those areas work better together, delivering better services and growing the local economy.

Together with the areas the Government are taking forward on the devolution priority programme, this would bring the total population who will see the benefit from devolution to over 44 million—close to 80% of the country—demonstrating more progress in a shorter amount of time than any Government in Britain’s history.

Local government reorganisation

Devolution must be built upon strong foundations. That is why this Government are delivering on their manifesto pledge to fix the foundations of local government. The Government’s long-term vision is for residents to access good public services without the eye-watering price tag. That means creating simpler structures to unlock crucial efficiency savings as well as making it much clearer for residents who they should look to on local issues, with fewer but more empowered politicians, and more resources directed to the frontline.

Today, I am also writing to all councils in two-tier areas and small neighbouring unitary authorities to formally invite proposals for reorganisation. I am inviting areas to submit initial plans in the spring, followed by full proposals later in the year, and the Government will then follow the established assessment and decision-making process. We are committed to working with areas to make significant progress on these important changes.

Proposals should seek to achieve, for the whole of the area concerned, unitary authorities which:

Are the right size to achieve efficiencies, improve capacity and withstand financial shocks. As a guiding principle, new councils should aim for a population of 500,000 or more. There may be certain scenarios in which this 500,000 figure does not make sense for an area, including on devolution, and this rationale should be set out in a proposal;

Prioritise the delivery of high quality and sustainable public services to citizens. Proposals should show how new structures will improve local government and service delivery and should avoid unnecessary fragmentation of services. Opportunities to deliver public service reform should be identified, including where they will lead to better value for money. Consideration should be given to the impacts for crucial services such as social care, children’s services, SEND and homelessness, and for wider public services including for public safety;

Demonstrate how local councils have sought to work together in coming to a view that best meets local needs and is informed by local views;

Support devolution arrangements; and

Enable stronger community engagement and deliver genuine opportunity for neighbourhood empowerment.

The White Paper is clear that Government will also facilitate reorganisation for those unitary councils where there is evidence of failure or where their size or boundaries are impacting on their responsibilities. While some of these councils will be included in the invitations for reorganisation in two-tier areas, there is a different legal process for mergers of unitaries. The Government are open to discussions with all areas where structural change will help them get on to a more sustainable footing.

Delays to local elections

The timing of elections can affect planning for devolution, particularly when done alongside reorganisation. That is why the Government wrote to local authorities in December setting out that, where it will help deliver both reorganisation and devolution to the most ambitious timeframe, the Government would be prepared to postpone local elections from May 2025 to May 2026.

This follows long-standing precedent. Between 2019 and 2022, the then Government legislated to postpone 17 local council elections for one year during preparatory local government reorganisation work. Most recently, this included the postponement of elections to three county councils—Cumbria, North Yorkshire, and Somerset— from 2021 to 2022.

The rationale then, as now, is to enable open conversations about proposals and to avoid elections to a council which will cease to exist and where the future structure is unknown. Instead, existing sitting elected members will have their term of office extended for a short period to allow proposals to be developed for new unitary councils. Once these proposals are agreed upon, elections then take place at the earliest opportunity to the shadow authority.

In response to the Government’s letter of December 2024, 18 councils requested that the Government consider postponement of their local elections. Of these:

The Government agree that for eight council areas, postponement is essential for the delivery of the devolution priority programme and complementary reorganisation—Norfolk and Suffolk; Essex and Thurrock; Hampshire and the Isle of Wight; East Sussex and West Sussex. In these areas plans for new combined county authorities, inaugural mayoral elections, and local government reorganisation will all be concurrent and working to a very ambitious timetable.

The Government agree that for one council area—Surrey—reorganisation is essential to unlocking devolution options and a delay would help deliver both reorganisation and devolution to the most ambitious timeframe. The “English Devolution White Paper” discontinued the mayoral single local authority model of devolution. In that context, and given the specific financial challenges, Surrey’s path to devolution is significantly dependent on local government reorganisation.

The Government will not take forward a further nine requests made. While I am grateful to local government colleagues who have been rapidly thinking through proposals, it is right that elections are delayed only when necessary. These are not taken forward either because:

The area was not considered to currently meet the criteria for the devolution priority programme; or

the area is already part of a—mayoral—combined county authority, so an election delay was not considered essential to delivering both reorganisation and devolution to the most ambitious timeframe; or

some areas need to take forward further discussions to reach agreement on devolution plans and so the postponement of the election in these areas is not considered essential to deliver both reorganisation and devolution to the most ambitious timeframe.

Thirty three council elections are scheduled for May 2025. Following these decisions, 24 will continue to take place in May 2025, with nine delayed to May 2026. In addition, in May 2025, six mayoral elections will be held—four for mayoral combined (county) authorities and two for individual local authorities.

For some areas, the timing of the May 2025 elections affects their planning for devolution, particularly alongside reorganisation, and they made requests that involve postponing local elections to May 2026. There is rightly a very high bar for election delays. I have been clear that elections can and should only be delayed to help areas to deliver reorganisation and devolution to the most ambitious timeframe. For places on the devolution priority programme, the parallel process of devolution and reorganisation requires an ambitious timetable, thereby reaching that very high bar.

Next steps

I will bring forward legislation to postpone these elections when parliamentary time allows.

The Government will launch consultations to start delivering the devolution priority programme, giving local communities the opportunity to share views on devolution in their area. Further information on this will be announced in due course.

[HCWS418]

Local Government Finance

Jim McMahon Excerpts

Wednesday 5th February 2025 Commons Chamber

[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—

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

Housing, Communities and Local Government

Jim McMahon Excerpts

Tuesday 4th February 2025 Written Corrections

The following extracts are from the Public Bill Committee evidence session on the Non-Domestic Rating (Multipliers and Private Schools) Bill on 11 December 2024.

[Jim McMahon]

The permanent relief will come in at 40% in 2026-27, but we have included a transition period.

[Official Report, Non-Domestic Rating (Multiplier and Private Schools) Public Bill Committee, 11 December 2024; c. 77, Q125.]

Written correction submitted by the Minister for Local Government and English Devolution, the hon. Member for Oldham West, Chadderton and Royton (Jim McMahon):

[Jim McMahon]

The permanent reduction will come in 2026-27, but we have included a transition period.

[Jim McMahon]

What the evidence says is that there has been provision to ensure that those schools that are mainly or wholly for pupils with special educational needs will not be affected by these measures at all.

[Official Report, Non-Domestic Rating (Multipliers and Private Schools) Public Bill Committee, 11 December 2024; c. 78, Q126.]

Written correction submitted by the Minister for Local Government and English Devolution, the hon. Member for Oldham West, Chadderton and Royton (Jim McMahon):

[Jim McMahon]

What the evidence says is that there has been provision to ensure that those schools that are mainly or wholly for pupils with an education, health and care plan will not be affected by these measures at all.

Local Government Best Value

Jim McMahon Excerpts

Wednesday 22nd January 2025 Written Statements

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

All hon. Members will recognise the importance of having well-functioning local councils that provide essential statutory services that local residents rely upon. To ensure this, we need to get the basics right, resetting the framework to ensure the sector is fit, legal and decent. Government will continue to work directly with a small number of councils in difficulty, and this should be done in a way that is not punitive and is based on genuine partnership to secure improvements.

Today, I would like to update the House on the steps we are taking to improve governance and local accountability in the London borough of Tower Hamlets. On 12 November, I informed the House that I was satisfied, having considered the inspection report of Tower Hamlets council by lead inspector Kim Bromley-Derry CBE DL and assistant inspectors Suki Binjal, Sir John Jenkins and Philip Simpkins, that the council is failing to comply with its best value duty. They found insufficient evidence that the organisation is open and transparent, and values the constructive criticism required to drive improvement. I proposed a statutory support package to secure the council’s compliance with that duty, and gave the council until 25 November to make any representations it wished on the inspection report and my proposal for intervention.

I have now carefully considered the representations the council has made. I have also considered afresh the inspection report and have had appropriate regard to other representations that I have received about my proposed intervention. While I am grateful for the constructive engagement I have had with the council, who have accepted the inspection report’s findings and are committed to working in partnership with Government to deliver the change needed for local people, I remain satisfied that the council is failing to comply with its best value duty in relation to continuous improvement, governance, leadership, culture and partnerships. I have therefore concluded that it is both necessary and expedient for me to exercise intervention powers in the Local Government Act 1999 as I have proposed, with some minor amendments. Accordingly, I have today given the council the necessary directions under section 15(5) of the 1999 Act to implement the proposed statutory support package.

That support package, to be in place until 31 March 2028, is centred on putting in place a team of ministerial envoys to work comprehensively within the council, acting as advisors, mentors and monitors, to oversee its improvement work. I have nominated Kim Bromley-Derry CBE DL as ministerial envoy, and Pam Parkes and Shokat Lal as assistant envoys—all experienced and talented professionals who understand that transparency and accountability are vital to the functioning of local democracy. Enlarging the team to include two assistant envoys rather than one will bring greater diversity of thought to the team and ensure that their approach to the challenges and best practice for local authorities is current. The envoys will report on the council’s progress against its improvement agenda after the first four months, and then regularly as we agree is appropriate.

In summary, the directions I have issued today require the council to:

Work with the ministerial envoys to reconfigure the council’s existing transformation advisory board and draw on existing and additional members to appoint independent and external leads for leadership, governance, culture and partnerships.

Undertake recruitment of a permanent appointment to lead the improvement work in the council.

Prepare and agree with the board a fully costed continuous improvement plan, and report regularly and in public to the board on its delivery.

Co-operate with the ministerial envoys and board leads to prepare and implement comprehensive programmes of cultural change and political mentoring, and report regularly and in public to the board on its delivery.

Have regard to, and respond promptly and in public to, any recommendations from the board with respect to the continuous improvement plan and its implementation.

Work with the Local Government Association to agree a follow-up review visit to the 2023 corporate peer challenge.

Report to the Secretary of State on the delivery of these directions, with these reports having been considered by full council, at six-monthly intervals, or at such intervals as the Secretary of State may direct.

I have also directed the council to co-operate with the ministerial envoys, and to allow them all reasonable access to their premises, documents, employees or members in support of their work. The council is also required to pay the envoys’ reasonable expenses and such fees as I determine.

This support package acknowledges the political mandate the mayor holds, while recognising the need to tackle deeply rooted and persistent issues. It is designed to strengthen and expand the improvement work that the council has already begun, and demonstrates how this Government are committed to resetting the relationship between local and central Government through genuine collaboration and engagement.

This action is not undertaken lightly, and I remain committed to working in partnership with the London borough of Tower Hamlets to provide whatever support is needed to ensure its compliance with the best value duty. I hope that with focus and oversight, the necessary improvements will come at pace, but I have not ruled out the possibility of further action in the future, in the interests of Tower Hamlets residents, should this prove necessary.

I will deposit in the House Library copies of the documents I have referred to, which are also being published on gov.uk today. I will update the House in due course.

[HCWS378]

Draft Devon and Torbay Combined County Authority Regulations 2024 Draft Greater Lincolnshire Combined County Authority Regulations 2025 Draft Hull and East Yorkshire Combined Authority Order 2025 Draft Lancashire Combined County Authority Regulations 2024

Jim McMahon Excerpts

Tuesday 21st January 2025 General Committees

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

I beg to move,

That the Committee has considered the draft Devon and Torbay Combined County Authority Regulations 2024.

[The Chair]

With this it will be convenient to consider the draft Greater Lincolnshire Combined County Authority Regulations 2025, the draft Hull and East Yorkshire Combined Authority Order 2025 and the draft Lancashire Combined County Authority Regulations 2024.

[Jim McMahon]

It is a pleasure to serve under your chairmanship this morning, Mr Mundell. Regulations were laid before Parliament on 26 November 2024 for Lancashire and for Devon and Torbay. The Hull and East Yorkshire Combined Authority Order 2025 was laid before Parliament on 4 December 2024, and the Greater Lincolnshire regulations on 11 December 2024. Although I recognise that combined authorities and combined county authorities are distinct legal bodies with different enabling statutory instruments, I hope Members will be content for me simply to use the term “the combined authorities” hereafter, unless there is a specific reason to separate them out.

To deliver on our manifesto commitment, in December 2024 the Government published the “English Devolution” White Paper, which sets out how the Government will widen and deepen devolution across England as part of our central mission to drive economic growth and improve living standards. These instruments are part of fulfilling the mission to move power out of Westminster and back to those who know their areas best. They are significant milestones in the devolution journeys of these four areas. The instruments provide for the implementation of the devolution agreements confirmed on 19 September 2024 between the Government and upper-tier councils in each of the areas concerned. On 18 November 2024, all the respective constituent councils consented to the making of these instruments.

The combined authority order will be made, if Parliament approves, under the enabling provision in the Local Democracy, Economic Development and Construction Act 2009. The three sets of combined county authority regulations will be made, if they are approved, under the enabling provision in the Levelling-up and Regeneration Act 2023. All four authorities will be established on the day after these statutory instruments are made. The Greater Lincolnshire combined county authority and the Hull and East Yorkshire combined authority have chosen to adopt a mayor for their authorities, with the inaugural elections taking place on 1 May this year. The elected mayors will take up office on 6 May, with a four-year term, and will take up their seats on the Council of Nations and Regions.

The statutory instruments make provision for the Government’s arrangements for combined authorities. Each authority has specific arrangements, enabled by either the 2023 Act or the 2009 Act and set out in these establishing instruments. In each case, the constituent councils nominate one or more of their members to form the combined authority, sitting alongside the mayor where one is being adopted. District council representation and input into the combined county authorities is determined locally within the framework provide by the 2023 Act. I know from conversations with local leaders, and through commitments they have made, that district councils will play a key role in ensuring the success of devolution in those areas.

The instruments confer public authority and local authority functions on the respective combined authorities, as agreed in their devolution agreements and set out in each area’s proposals. To accompany the order, we have laid before Parliament a section 105B report, as required by the 2009 Act; and we have laid before the House a section 20(6) report for the regulations, as required by the 2023 Act. The reports provide details about the public authority functions that are being devolved to these authorities. They include powers over transport and Homes England concurrent regeneration functions, as well as mayoral development corporation functions for the mayoral combined authorities. Additional funding will be available to the areas through the adult skills fund, which will be devolved to the combined authorities from the ’26-’27 academic year, as well as education and skills functions.

The Department for Education will work with the combined authorities to support their preparations and ensure that they meet the necessary readiness criteria, and we will legislate in due course when the Secretary of State for Education is assured that they are operationally ready and is satisfied that the required statutory tests have been met in each area.

As provided for in the enabling Acts, the constituent councils consulted on the proposals to establish the combined authorities based on their devolution agreements. Those consultations took place between December 2023 and March 2024 for periods of either six or eight weeks. Councils promoted the consultations using social media, communications campaigns, dedicated websites, and online and in-person events with the public. The councils also undertook targeted stakeholder engagement with businesses, the voluntary sector and key institutions in their areas. Responses could be made online via their website or email, on paper via the post or at dedicated events or collection points such as local libraries.

I can report that the necessary statutory requirements under the 2023 and 2009 Acts have been considered, and that the authorities preparing the proposals have provided the Secretary of State with a summary of the consultation responses when submitting their proposals to the Government in spring 2024.

[Lewis Cocking (Broxbourne) (Con)]

I draw attention to my entry in the Register of Members’ Financial Interests. Some of the areas that we are looking at are still two-tier areas. Will the Minister outline the Government’s approach? Can two-tier areas create combined authorities, or is it the Government’s ambition that new combined authorities will be created only in areas that are wholly made up of unitary councils?

[Jim McMahon]

The hon. Gentleman makes a good point about how we manage the transition from where we are today to the situation under the English devolution Bill when it eventually becomes law. We have broad ambitions to widen and deepen devolution, which means that we do not wish to wait for the English devolution Bill to be in place. The expressions of interest that we had had by the deadline last week showed that there is significant interest among local areas that want both reorganisation and devolution. There will be a streamlining of the process between devolution and reorganisation, in which a two-tier area could apply to become a combined county authority today and go through reorganisation, and convert to a combined authority in a single-tier system when that reorganisation has taken place. Those arrangements are transitional. Ultimately, by the time the devolution programme has finished, we expect that in most areas, if not all, the two-tier system will come to an end, with unitary councils forming that combined arrangement.

In laying the draft instruments before Parliament, the Secretary of State is satisfied that the statutory tests under the 2009 and 2023 Acts are met, namely that the constituent councils have consented to the establishment of the combined authorities, that no further consultation is necessary and that making the instruments would be likely to improve the economic, social and environmental wellbeing of some or all of the people who live or work in the area; would be appropriate, in having regard to the need to reflect the identities of local communities and to secure effective and convenient local government; and, in establishing the combined authorities, will achieve the purposes specified in the constituent councils’ proposals. The making of the draft instruments will shift money from central Government to our regions, as set out in their devolution agreements. That includes capital funding for each area and mayoral investment funds for the areas that choose to adopt a mayor.

I personally thank the local leaders and their councils for their hard work and the vital role they play in making the Government’s critical mission to widen and deepen devolution a reality in their areas. I commend the draft instruments to the Committee.

--- Later in debate ---

[Jim McMahon]

I thank the hon. Member for his contribution and for his support for the measures. One thing that has stood out over quite a long period is that belief in devolution mostly rises far above party politics. It is about a structural change in how the country is governed and where power sits. There may be differences about pace, perhaps, and about focus, and there will always be a conversation about resourcing, but Members across the House absolutely support the direction of travel that we are embarking on to take power away from Westminster and put it into the hands of those who know their areas best.

We talk often about precepts. I believe strongly that a precept is the most transparent way for taxpayers to hold to account those who spend public money on their behalf. The reality is that mayoral functions cost money. It costs money to establish a mayoral office and carry out mayoral functions. The more responsibilities and duties we devolve down—there are significant areas of competence in the White Paper—the more mayors and combined authorities will need to marshal to provide the staffing support and resource to deliver them.

There are two ways of doing that. Either we do it through a levy provided to each local authority—through what I would call the back door—that does not appear on people’s council tax bills and is agreed from council to combined authority; or we do it through a precept. The benefit of a precept is that it increases transparency. It is published on everyone’s council tax bill, and they know exactly what they are paying for. In terms of democracy and accountability, it makes it a lot easier for people to hold the mayor to account for the money that is being spent in their name. I accept that in broaching any idea of new taxation, we must take into consideration the fact that people are reeling from the cost of living crisis and recognise the impact of tax, but we are clear that this is not a new tax in the overall sense. This is about transparency in the tax system so that people can see where their money is really going.

The shadow Minister rightly mentions borrowing limits. We have seen examples of local authorities that have borrowed far in excess of their revenue, to the point that they are now financially unviable. We all know the local authorities in scope for that. Combined authorities will agree with His Majesty’s Treasury what their borrowing cap will be, and they will only be able to borrow within that cap, providing they have the revenue to support that borrowing liability.

I have been a councillor in Greater Manchester, and I now represent it as Member of Parliament. We were able to align locally directed money, some of which was borrowing and some of which was local authority contributions, to extend the tram system. The benefit of the tram system was that it unlocked significant private sector investment, allowed central Government to align their capital programme with what we were doing locally and, importantly, had an earn-back mechanism that allowed the ticket sale revenue to be offset against loan liability. In that sense, it is a self-financing model that can grow and grow. Ultimately, the loan will be paid off, but we will always have a tram system that people will use and buy tickets for, and that will generate revenue, create jobs and be good for the economy. Providing that the HMT cap is in place, Members should be assured that it will not be excessive.

The measure is not being introduced in isolation. We are doing a huge amount on the reform of the local government pension scheme, which I and many Members believe has untapped potential for growth in this country. It is the largest pension scheme in the UK, with £400 billion, and the sixth largest in the world. I do not think we realise the benefit of it in our towns and cities for local investment as we should. If we can unlock even a small percentage of additional investment, that could be transformational. The English devolution Bill puts a duty on mayors and their combined authorities, and on pension schemes, to work together to create a pipeline of investable products.

[David Simmonds]

Previous Governments introduced pensions pooling. There is already a London pool, for example, where 33 London local authorities and the City of London have a pooled pension scheme. Two issues always arise from that. The pension fund trustees have a fiduciary duty in law to serve the best interests of the pensioners. Their obligation is not to seek the best investment from the Government’s point of view, but to do what generates a return so that people can rely on that income when they retire. Having been involved in changing some of the regulations to allow a greater share of the pool to be invested in infrastructure, I am aware that the Treasury has always had considerable concern about that that conflict with fiduciary duty. Ultimately, if there is a shortfall, it will fall back on taxpayers in another form because of the statutory nature of the schemes.

Another issue has to do with the profile of individual pension funds. We know that the London borough of Hillingdon, which serves about two thirds of my constituency, has a much younger workforce profile than the London borough of Ealing next door. The trustees’ investment intentions are therefore based on the need to serve the longer-term interests of a much larger pool of young people who will need those pensions for 50 or 60 years ahead. Ealing’s pensioners are, on the whole, older, and therefore the investment intentions are different.

I would be interested to know what regulatory change the Minister has in mind to address both the conflict between trustees’ fiduciary duties and the Government’s intention to see this as a sovereign wealth fund, which potentially it could be; and the fact that the different workforce profiles of individual pension funds may make their pooled investment choices more challenging.

[Jim McMahon]

I will be careful not to stray too far from the subject, but given that I raised it, I will say that we are out to consultation on pension funds. The exact construction of the requirement to invest via pools rather than via individual pension funds is still subject to discussion. We accept, of course, that pension fund members and boards will always have fiduciary duties. The English devolution Bill does not require blind investment regardless of the consequences; it requires an investable product to be created. That is the test. Is it safe and secure, and does it provide a return on investment that can hold water? That is a requirement.

The investment pot is £400 billion, so even 5% of that—unlocking £20 billion of investment to UK plc—would be significant and could be game-changing. We need to keep that in context, but it must be approached with caution, given that in the end, the fund must be there for pensioners and future pensioners.

The legislation delivers the commitment made in the devolution agreements with Devon and Torbay, Greater Lincolnshire and Lancashire to establish combined county authorities, and to establish a combined authority for Hull and East Yorkshire. I commend the regulations and the order to the Committee.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Devon and Torbay Combined County Authority Regulations 2024.

Draft Greater Lincolnshire Combined County Authority Regulations 2025

Resolved,

That the Committee has considered the draft Greater Lincolnshire Combined County Authority Regulations 2025.—(Jim McMahon.)

Draft Hull and East Yorkshire Combined Authority Order 2025

Resolved,

That the Committee has considered the draft Hull and East Yorkshire Combined Authority Order 2025.—(Jim McMahon.)

Draft Lancashire Combined County Authority Regulations 2024

Resolved,

That the Committee has considered the draft Lancashire Combined County Authority Regulations 2024.—(Jim McMahon.)