Local Authorities (Changes to Years of Ordinary Elections) (England) Order 2025

Jim McMahon Excerpts

Wednesday 26th March 2025 General Committees

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

It is a pleasure to serve under your chairmanship, Ms Hobhouse. This Government have been clear on their manifesto commitment to widen and deepen devolution across England. We have moved at pace to realise the benefits of devolution for more people in more places. However, a lot of change is being undertaken at the same time. That requires focus and capacity. We have been clear on our vision for simpler, more sustainable local government structures and the transfer of power out of Westminster through the devolution revolution. Taken with the work being undertaken to fix the broken audit system, introduce a new standards regime and rewrite the local government funding formula so that it truly takes into account needs and resources, we are doing the hard work of rebuilding—not simply returning to what was there before, but using a new approach that is both efficient and more effective.

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

I note that, in his helpful statement released two days ago, my hon. Friend made it very clear that core to the Government’s approach is ensuring that there is a starting point, which is

“to support and empower local leaders and to respect their knowledge, expertise and insight.”—[Official Report, 24 March 2025; Vol. 764, c. 25WS.]

That listening approach was also in evidence in the comments that he made to the District Councils’ Network conference, where he stated clearly that the 500,000 figure was potentially an “average”. Does he agree that the clarity that bids of significantly below 500,000 are acceptable is useful for smaller cities that are engines of economic and housing growth but which have populations significantly below the 500,000 mark?

[Jim McMahon]

We have tried to strike a balance between answering the demand—the fact that all 21 counties have submitted to the interim phase is testament to the support in the system for this—and finding enough of a framework at a national level so that areas know what to report to, while building enough flexibility to take into account that England is very different in its construct and make-up. There are huge variations between urban centres, rural communities and coastal communities. In forming local authorities that have a clear anchor that can be understood and respected by the local community, we have to allow for flexibility in that system.



The statutory invitation that went out was clear that that means population sizes of 500,000 as a starting point, but we have been clear with the County Councils Network, the Local Government Association and the District Councils’ Network, and in trade press interviews, that we will see a range. Some will say that the mid-300,000s is right for them, and we are seeing some city districts looking at moving their boundaries outwards. But others will say, “Actually, our county does not have that characteristic—we haven’t got that city anchor or coastal issue that might be present elsewhere—and we think the best option for our place is maybe 600,000 or 700,000”.

We want to be flexible enough to take into account local representations as we receive them. Our working assumption is that when all that balances out, we will end up with an average of 500,000, but who knows? We need to see the submissions that come in, but flexibility is important, and it challenges the idea that this is a top-down, mandatory system of uniform councils that all look the same, regardless of local circumstances. It is not that. It is very important nationally that we give the framework and direction—and we have done that—but this is about co-operation and partnership. I appreciate that that point has been picked up on.

We have been clear about our willingness to drive forward to deliver this vision, and to work with local councils to support communities to fix the foundation of local government in delivering that ambition. Alongside the English devolution White Paper, I wrote to all places in the 21 areas inviting them to express a clear commitment to delivering to the most ambitious timeframe, and to flag any requests for a delay in elections to take place.

Where authorities made such a request, we have judged it to meet a very high bar that was rightly set, and we have kept our commitment that clear leadership locally would have to be met with an active partner at a national level. We have taken the necessary decisions to postpone local elections where it will help to smooth the transition process and deliver the benefits of mayoral devolution, supported by strong and stable local government reorganisation as quickly as possible. We are now working with those areas to prioritise in parallel the necessary steps to explore the establishment of new mayoral authorities in time for the May 2026 mayoral elections, and to deliver plans for new unitary local government.

On devolution, public consultations are already under way, running from 17 February to 13 April in these areas. More than 12,500 responses have already been received in that process. We are getting on with delivering reorganisation as well. All district and county councillors in the two-tier areas, and their neighbouring smaller unitary authorities, were invited, and I am pleased to say that every area—comprising of councils of all political stripes—has responded to the invitation to reorganise. They shared with Government an interim plan containing updates on their thinking about options for creating new unitary councils. The response demonstrates without doubt the groundswell consensus from communities that change is overdue and needed. Earlier this week, I made a written statement setting out the details of this, providing parliamentary transparency and supporting the commitment we made to ensure there was active reporting during the course of the process.

Local engagement with Members of Parliament, public sector providers, residents and other key local partners will now be led by the councils as they develop detailed proposals to establish strong, stable unitary councils that are fit for the future. This order is essential to allow the first wave of this ambitious programme to be delivered. It grants postponements for 12 months only, and only for the nine councils whose requests met the high bar we set.

We are extremely clear that these decisions were made on the basis of local requests to free up capacity and enable the practical steps needed, which would not be feasible so quickly if the 2025 local elections went ahead in those areas, for reasons that are self-evident. These areas have demonstrated the clear and strong local leadership and the necessary ambition to drive forward the programmes to the timelines that the Government have set out to deliver for those areas, including taking the difficult decisions that are needed.

Let me address the points that have been made. I sense that a lot of the debate today has picked this process out as being unusual in English local government, but it is not. Members will know that between 2019 and 2022, 30 sets of elections were cancelled: 17 to allow preparatory work for local government reorganisation, which is what we are talking about here, and 13 as part of legislation to allow the unitarisation process to take place after the proposals had been submitted. So this is not unusual; it is a natural part of the cycle to free up capacity and enable those proposals to be developed— I can go through the list, and provide the details in writing.

But I do think we need to be careful here. First of all, we absolutely believe that this is the right thing to do, and that is not because we have an ideological view about how local government should sit. All the Members in this room are here because we care about local government and local communities, and we cannot have a hand-to-mouth funding regime where local government is just not sustainable. We have to find a solution that really fixes the foundations, and this is one small part of that—there is a lot more we need to do—but it is important. If we did everything else but not this, it would just not hold together. I think that it would devalue—I will be honest and direct about this—the work that local leaders have put into this at a local level to build consensus and show leadership. I am not talking about exclusively Labour leaders; in many areas, they are Conservative, Liberal Democrat or independent. We have a collective responsibility to at least mirror the leadership that they have shown across political parties in the interests of their communities, and to reflect that here in the national Parliament. I do not think that is too much to ask.

[Vikki Slade]

For clarification, I do not think we would object to the process or intent of reorganisation— I have been through it as a local leader, but the process was quite different. I am thinking about the suddenness and the shortness, and my concern is about consultation in advance of the decision to take this particular route. When Bournemouth, Christchurch and Poole and Dorset were merged in 2019, I think the process started in 2016, and then went through a local referendum in one place, which actually said, “No, thank you.” That went ahead anyway, but the decision was taken after a period of consultation. I ask the Minister to reflect on whether local consultation in advance of a decision to cancel an election would have been a better option, had time allowed.

[Jim McMahon]

To be clear, there is not time to do that. In the finance settlement this year, I think we have done a good job in building a bridge to the multi-year settlement, but it is only a bridge. That does not answer the fundamental, underlying questions that are leading to the financial vulnerabilities of local councils.

We have had a cash injection—£5 billion of new money is not insignificant—and it has made a significant difference. Introducing £600 million for a recovery grant gets the money to areas that need it most. That is reflected in the fact that we have not had a single section 114 notice issued as a result of financial distress. But let us be clear: 30 local authorities needed exceptional financial support through the budget process, so a lot of work is required here.

As we move to the multi-year settlement, we have to reconcile reorganisation within the lifetime of the three-year multi-year settlement, so that at the end of the settlement, the transition has been completed, the funding has been settled and all councils in England are on a firm footing for the future. Had we waited, we would not have achieved that, and we would have allowed the reorganisation to go beyond the multi-year settlement. I think that would have provided more uncertainty for a system that is quite fragile at the moment, when actually, it needs certainty and direction. We are not doing this because we are gung-ho, but because we believe that these structural reforms are needed and necessary.

I absolutely believe not just in consultation, but in collaboration and co-operation. That is about how ideas and proposals can be co-produced. It is for local areas to do that. There will be a statutory consultation on the proposal, and that will happen as a matter of course. But in the end, it is for local areas to make sure that they are having those local conversations and are coming forward to the Government with proposals that mirror what the local desire is, within the art of the possible. I have confidence that local leaders have that shared commitment, too.

This order, which was laid on the 11 February, is essential to delivering the Government’s commitment on devolution and reorganisation to the fastest possible timescale, for the reasons that I have set out. The order was made using delegated powers, which have been given in primary legislation granted here, and have been previously used in the same way. All the appropriate steps were taken, and both process and precedent were carefully followed. Nothing is being imposed on local areas—the Government are committed to the devolution priority programmes, and the emerging proposals for the new unitary councils are, by their nature and result, bottom-up. All requests for election delays to deliver reorganisation and devolution to the fastest possible timeframe follow direct requests from local leaders of the affected councils.

Devolution and strong councils with the right powers will mean that hard-working councillors and mayors can focus on delivering for their residents on a stable financial footing. It will strengthen the democratic accountability of local government to local residents. A final point that I have not covered is the ordering of by-elections that will take place. The guidance will set out that by-elections will be dealt with in the usual way; they will not be affected by this order.

[Lewis Cocking (Broxbourne) (Con)]

It is a pleasure to serve under your chairmanship today, Ms Hobhouse. I draw Members’ attention to my entry in the Register of Members’ Financial Interests as a local councillor.

I have just a few comments. The delay in elections for these local authorities was not really a choice for them; it was a mandate from Government. The Government’s White Paper set out their expectation for all two-tier areas, regardless of their personal views, to move to unitary structures. The Minister said that 21 areas have replied to the Government’s letter in support of that move, but the Government’s letter was intended to make them come forward with proposals. The Government have quite clearly said, “If you do not come forward with proposals for your area, we are going to do this to you.” They will introduce a managerial direction within the White Paper.

[Jim McMahon]

I think it is important that the record reflects the actual situation. First, there was no mandating, because this is about postponing elections to allow reorganisation; it is not about the reorganisation process itself. To be clear, 18 councils applied to have their elections postponed and we agreed to nine, because not all met the high bar that we have set. Also, to be clear, 24 of the 33 elections that were due to take place in May 2025 are going ahead as normal.

[Lewis Cocking]

I thank the Minister for his intervention. However, if the Government’s White Paper sets out their expectation for two-tier areas to reorganise, those two-tier areas do not have a choice. They either get on that train and do what the Government are telling them, or they wait by the sidelines and get forced to do it by the Government. This is definitely a top-down approach, not bottom-up.

The decision to delay elections should not be taken lightly. Other Members have touched on this, but nine councils have asked for delays in elections because the Government are making them reorganise. What happens if they are delayed for longer than 12 months? When we were last in government, three areas were done over three years, so the Government are very ambitious in doing nine.

If we are to believe what is in the news about a 15% reduction in the civil service, how will the MHCLG cope and get those nine councils done within a year? As has been alluded to already, how will the MHCLG get consensus within the local area, and how will it take those councils through that process of reorganisation? The process should be thought about over a longer period of time, rather than rushed through over 12 months. I have concerns that some of these elections, which we may agree today should happen in a year, will actually need longer.

I also have concerns about what the Boundary Commission will do with these delayed elections, and its capacity to draw up new boundaries for whatever authorities come forward. We have touched on the half a million population figure; but I have seen very little evidence to show that that is an appropriate figure for a new authority. The Minister’s own authority is well below half a million people, so I do not understand where the Government have got that number from—I think they have just plucked it out of thin air.

Lastly, it has been suggested that, when we go through this process, there will be loads of money for local government, as local government will save millions of pounds. I ask the Minister to comment on this: Somerset council has gone through reorganisation to a unitary structure; it has asked the Government to increase council tax bills by 7.5%, which was accepted, yet it is still in financial difficulty. So if reorganisation is the answer to all of local government’s problems, why do we have a council that has just gone through the process still asking for extra money, and still in financial difficulty?

--- Later in debate ---

[Jim McMahon]

All those are fair questions. On the timetable, there are in effect three tranches. The first tranche is Surrey, which is being brought forward because there cannot be devolution as a single county unless we do the reorganisation and create a combined authority after that. This is fairly well covered, but it has quite significant issues of debt that need to be reconciled as part of that process. Surrey has 9 May as the deadline for its final proposals.

Areas that have had their elections postponed are in the devolution priority programme. They have until 26 September to submit their final proposals. All other areas have until 28 November to submit their final proposals. I will just say that there is sufficient time. Surrey is clearly the exception, and that is an accelerated timetable by agreement with the local authorities in that area—we will ensure that adequate resources are provided to meet that challenge. For all other areas, however, we believe that there is sufficient time. I should also say that the difference between September and November as the end date takes into account the election period, recognising that the preparatory work that would take place otherwise would not take place then.

[Martin Wrigley]

The issue with most such situations in the past has been not only a short period of time for councils to respond, which they typically have managed to do, but the prolonged period of radio silence once those responses have been sent to Government. Can the Minister assure us that the Government will respond quickly to the proposals, so that councils can get on with them?

[Jim McMahon]

We absolutely understand that that gap of silence can be undermining to the process. Even conflicting advice or information allows people to fill in the gaps or exploit the situation. Clarity is needed. I think we have done that. Whenever we have brought a statement to the House, it has been extremely well attended. I think that the two on this issue have run for more than an hour, in terms of parliamentary interest.

On the interim proposals, the deadline was on Friday and we submitted the written statement to Parliament on the Monday; we submitted that the minute that Parliament reconvened. So we do want to ensure that that communication is there.

We will marshal departmental capacity. We are speaking to the LGA, to the County Councils Network and to the District Councils’ Network, and we appreciate the leadership that they have shown. They have been quite challenging in their representations at points, but I think they have done an excellent job in reflecting the on-the-ground reality back to us, and we have appreciated that.

On the areas in scope, we have provided an additional £7.6 million to enable proposals to be developed, so it is not a financial pressure entirely on local government to do that. We want and expect, in some areas, that they will have a unified proposal that they can rally around and for which there is broad support, as that would make everyone’s lives easier. We also live in the real world and understand that there may be different views on what a good outcome is. I think that is legitimate, and it should be allowed for in the process. The Government’s role at that point will be to take a view on the proposal that best meets the criteria set out in terms of efficiency, sustainability and, importantly, identity, as having that local anchor is a very important part of that too. With that within the process, we can take into account the range of different views.

I have covered the population size issue, in terms of that being a starting point. That does not mean that it is the end point for every area; but we do not want to reset that number. I can guarantee that if we were to say, “Right, it is not 500,000 any more; it is the mid-300,000s, and that is the new starting point,” I would get a queue of councils asking, “Can we have a conversation about the mid-100,000s?” That completely undermines the principle for doing local government reorganisation and takes us back to square one. Having a starting point that can be flexed, with some give—I think going to the mid-300,000s is give, but let us see, given that the other way is give too—is where we need to be.

Even though this SI of course deals with the election postponement in these county areas, district council elections will follow, and with a fair wind—I accept there is a way to go yet, and we are still in the consultation phase, which is important—they will also have mayoral elections in those areas for the first time. For the first time, they will actually be able to receive further powers and further budgets from central Government in a way they have not before. So, this should be welcomed. For democrats in the room, this is additional democracy, accountability, freedoms and flexibility, which is genuinely rewiring the way that we govern England. It is long overdue.

Non-Domestic Rating (Multipliers and Private Schools) Bill (changed to Non-Domestic Rating (Multipliers) Bill)

Jim McMahon Excerpts

Consideration of Lords amendments
Tuesday 25th March 2025 Commons Chamber

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

I beg to move, That this House disagrees with Lords amendment 1.

[Madam Deputy Speaker]

With this it will be convenient to discuss Lords amendments 2 to 19, and Government motions to disagree.

[Jim McMahon]

First, I am grateful to Members of both the Commons and the Lords who have so diligently scrutinised the Bill throughout its passage. Before I address the amendments tabled by the Lords, allow me to remind the House of why we introduced the Bill in the first place. This Government have committed to transforming the business rates system, and the Bill is a first step on that important journey. We want to achieve a sustainable system that is fit for the current economic landscape, and where business growth is supported and ratepayers pay their fair share. I thank the noble Lord Khan of Burnley for taking the Bill through the other place and for being so thorough in his approach. I also thank officers of the Ministry of Housing, Communities and Local Government and my private office for all their work on the Bill.

The Government oppose all the amendments before us today and I will provide further explanation as to why. At the Budget, the Government explained that we wanted to introduce new lower multipliers for qualifying retail, hospitality and leisure properties from April 2026 to address the uncertainty of the temporary, stopgap support provided by the annual RHL relief. Business rates represent a stable source of revenue for local government, meaning that this permanent tax cut must be sustainably funded. That is why the Government also announced our intention to introduce a higher multiplier for all properties with a rateable value at or above £500,000. This Bill makes provision to enable the introduction of those new multipliers, so this is the first step towards delivering on the Government’s manifesto commitment to transform the business rates system to one that is sustainable, protects the high street and is fit for the 21st century.

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

On a point of detail, the Minister says the Bill is a “first step”, so will there be further reforms, following these reforms, to the rest of the business rates system to meet his manifesto commitment to replace the current business rates system completely?

--- Later in debate ---

[Jim McMahon]

I am not going to pre-empt any further decisions on this, other than to say that this represents an important and significant step forward. As a constituency MP, he, like me, will have heard from many small businesses—retailers, hospitality providers or leisure providers—who appreciated the support during covid, but were very clear that there was a cliff edge and that that support was coming to an end. The previous Government did not provide any certainty about what followed, so the Bill ends that uncertainty and hardwires in a permanent relief system to ensure those important businesses that are the foundation of our communities and our economy are supported through the tax system.

[Kevin Hollinrake]

The Minister has already said, as he has in previous speeches, that this is a “first step”, but now he says it is a “permanent” measure. I agree with him that business wants certainty, so it is important that businesses understand: is this now a permanent position that will not be changed, or a first step?

[Jim McMahon]

The answer is that it is both, as I will go on to explain in more detail. It is an important first step, and the relief that is provided, funded through the higher rate properties, will be hard-baked into the system, notwithstanding any future support that may well follow, which we are not pre-empting today.

Lords amendments 1, 6, 7 and 12 would remove qualifying healthcare hereditaments from the higher multiplier, and Lords amendments 2, 5, 8 and 11 would do the same in relating to anchor stores. Considering the challenging fiscal environment, it is vital that this permanent tax cut is funded sustainably. The Government have been clear that they will do that by applying the higher multiplier to all properties with a rateable value at or above £500,000. That accounts for less than 1% of all properties and is the fairest approach. The impact on healthcare properties is limited. As set out in the other place, of the 16,780 properties at or above the £500,000 threshold based on the current rating list and rounded to 10, only 350 are in the health sub-sector. Of those, 290 are NHS hospitals and only 30 are doctors’ surgeries or health centres.

At the autumn Budget, the Chancellor fixed the spending envelope for phase 2 of the spending review. The Government are considering the full range of departmental priorities and pressures as part of the spending review, and that includes any impact of the higher multiplier on public sector properties, such as schools and hospitals. I urge the House to disagree with those amendments.

We recognise the importance of anchor stores, and we are doing a great deal to support the high street in this Bill and elsewhere. While the largest anchor stores may be caught by the higher multiplier, they are often part of large retail chains that will have a number of properties with rateable values below £500,000. Those businesses will, therefore, benefit overall from the lower multipliers.

[Suella Braverman (Fareham and Waterlooville) (Con)]

I appreciate the points that the Minister is making. In Fareham and Waterlooville, we have some fantastic pubs, including the Golden Lion in Fareham, the Chairmakers in Denmead and the Heroes in Waterlooville. Many pubs are hubs of our community and make a valid contribution to the local economy, but they have been trading under challenging circumstances and have been asking for a cut in business rates. What will be the effects of the Minister’s position today?

[Jim McMahon]

The Bill provides a cash saving for exactly the types of business that the right hon. Member talks about. We all understand the importance of pubs to our towns, villages and estates, not just as businesses in the economy but as places for the community to convene, to meet and to build relationships and networks. That is exactly why the measures are being brought in, and in a permanent way, because pubs needs certainty. They know the rising costs of supplies, carbon dioxide and energy have put significant pressure on pub operations, and these measures provide long-term stability that bakes in the support the Government can offer into the system.

Many pubs will be free houses and they will be independent. However, a number of pubs will be part of a brewery chain with managers in place. The measures take away the cash cap of £110,000 per business, allowing, for the first time, multiple operators to benefit. That will benefit pub chains, as well as high street stores, such as Home Bargains, Boots and other retailers. Those businesses draw in footfall, which then supports independent retailers as well. The proposals are rounded and provide long-term stability that is properly funded in a responsible way. On that basis, the Government oppose the Lords amendments as laid out.

Lord’s amendments 3, 4, 9 and 10 are concerned with bringing manufacturing properties into scope of the lower multiplier. If we widen the scope of the lower multipliers in that way, it will dilute the support available to RHL properties or jeopardise the ability of the Government to sustainably fund the lower multipliers. We need to be clear that this is not a wide-ranging offer, but targeted deliberately at supporting our communities, high streets and town centres. That is why the Bill focuses on RHL support. The Government are supporting the manufacturing sector through other means. For those reasons, I urge the House to oppose the amendments.

Lord’s amendments 13 and 16 require the Government to undertake a review of how the provisions to introduce new multipliers may affect businesses whose rateable value is close to the £500,000 threshold for the higher multiplier. The review would need to be put before Parliament three months prior to 1 April 2026 in order for clauses 1 to 4 of this Bill to come into effect. These amendments probe around the way the multipliers in the business rates system currently operate. Those hereditaments on the standard multiplier, or in the future on the higher multipliers, pay rates on that multiplier calculated on all of their rateable value, and not just the rateable value above the threshold. That, of course, generates cliff edges in the rates bills for hereditaments as they move between thresholds, and we acknowledge the presence of those cliff edges—it is a matter of fact.

At the autumn Budget, the Treasury launched a discussion with business on the “Transforming Business Rates” paper. This specifically highlights these cliff edges in the system and considers whether they may act as a disincentive to expand, so I can assure the House that we are already looking at the precise issue identified in the amendment. Reforms are being taken forward through the transforming business rates work and will be phased in over the course of the Parliament. Therefore, we believe Lords amendments 13 and 16 are unnecessary.

Lords amendment 14 would require the Government to commence a review that examines the merits of creating, within three months of Royal Assent, a separate use class and associated multiplier within the non-domestic ratings for retail services provided by fulfilment warehouses in England that do not have a material presence on high streets. The noble Lord Thurlow, who put forward the amendment, made it clear that this use class would apply only to business rates. As he explained in the other place, the key task is to identify those warehouses, as distinct from warehouses used by, say, high street retailers—warehouses that may otherwise look the same.

The Lords amendment would bring together the Government and professional bodies working on business rates to identify those warehouses. We are already exploring that objective through an existing project. The digitalising business rates project will allow us to match property-level data with business-level data from His Majesty’s Revenue and Customs to improve the way in which we target business rates, and to identify property and businesses in the way that the Lords amendment envisages.

[Chris Vince (Harlow) (Lab/Co-op)]

I did not intend to intervene, but I was looking through the amendments, and I see that a lot of them focus on exemptions from the business rates. Does the Minister agree that the way to look at supporting businesses in, for example, the manufacturing industry is through other means, not through changing the business rates?

[Jim McMahon]

We welcome scrutiny through amendments and the insight that the other place can provide, just as we welcomed scrutiny in the evidence sessions and Committee sittings; it adds value. We need to be honest: it is natural for Members to want to widen the scope of legislation during its passage, and to include more. In Government, we have to deal with the art of the possible, which means balancing a number of competing interests, not least the impact on taxpayers in the round. The Bill is targeted at those who need it the most—communities and local economies—and it is fully funded to ensure that it is sustainable. We cannot draw the legislation so wide that it does not stand the test of time and does not cover its own cost. That would not be responsible, and certainly would not be sustainable.

Lords amendment 14 would require the Government to implement the recommendations of the review. Given that we do not know what those recommendations would be, I trust the House will understand that we cannot accept an amendment to accept them blindly in advance.

Finally, Lords amendment 15 and consequential Lords amendments 17 to 19 would strike from the Bill the clause that removes charitable rate relief from private schools that are charities. We are unable to accept these Lords amendments. This Government made a manifesto commitment to raise school standards for every child, break down barriers to opportunity and ensure that every child has the best start in life, no matter where they come from or their financial background. Achieving our ambition involves meeting our commitment to removing the VAT and business rates charitable relief tax breaks for private schools; the approach and design of this policy has been carefully considered in the light of that. The measures are necessary in order to raise the revenue to deliver on the Government’s commitment to education and young people, and to improve the state sector, where—let us be clear—90% of children are educated. This Government are prepared to take the tough but necessary decisions to deliver on those bold commitments, so, as with all the other amendments brought here from the other place, I cannot accept these Lords amendments. I hope that the rest of the House follows suit.

[Madam Deputy Speaker (Caroline Nokes)]

I call the shadow Secretary of State.

Local Government Reorganisation

Jim McMahon Excerpts

Monday 24th March 2025 Written Statements

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

This Government was elected on a manifesto that pledged to fix the foundations of local government alongside a transfer of power and funding out of Westminster through devolution. That means creating clearer, more sustainable local government structures to unlock crucial efficiency savings, with more resources directed to the frontline. This reform will mean more accountable structures, making it much clearer for residents who they should look to on local issues, with fewer, but more empowered local political leaders, who can focus on delivering for residents. This Government will not waste this opportunity to achieve stability for local government across England and increase value for money for council taxpayers, so they are no longer paying an inefficient two-tier premium. I would like to update the House on progress on local government reorganisation.

Interim plans

Last month I invited all councils in two-tier areas and their small neighbouring unitary authorities to work together to develop proposals for reorganisation. I requested interim plans by Friday 21 March to contain updates on thinking in areas about their options for creating new unitary councils.

I recognise the challenges of producing these plans and I would like to thank members and officers in district, county and unitary councils for their hard work in preparing these documents. This demonstrates the commitment of colleagues across the local government sector to drive forward better outcomes for their citizens. We know that in many areas, local leaders have been working together on their plans for reorganisation for many years and are pleased to be invited to work with Government to seize this opportunity.

All district and county councils in two-tier areas and their neighbouring small unitaries were invited, and I am pleased to confirm that every single area—comprising councils of all political stripes—have responded to the invitation to reorganise, demonstrating without doubt the groundswell consensus from communities that change is overdue and needed. These areas are: Cambridgeshire and Peterborough; Derbyshire and Derby; Devon, Plymouth and Torbay; East Sussex and Brighton and Hove; Essex with Southend-on-Sea and Thurrock; Gloucestershire; Hampshire, Isle of Wight, Portsmouth and Southampton; Hertfordshire; Kent and Medway; Lancashire, Blackpool and Blackburn with Darwen; Leicestershire, Leicester and Rutland; Lincolnshire, North Lincolnshire and North East Lincolnshire; Norfolk; Nottinghamshire and Nottingham; Oxfordshire; Staffordshire and Stoke-on-Trent; Suffolk; Surrey; Warwickshire; West Sussex; and Worcestershire.

Criteria for delivering new authorities

The Government have set out their criteria for these changes to provide confidence that new councils are right for individual areas. On the population size, the guidance is clear that new councils must be the right size to achieve efficiencies, improve capacity and withstand financial shocks. As set out in our “English Devolution” White Paper, we outlined a population size of 500,000 or more—this is a guiding principle, not a hard target—we understand that there should be flexibility, especially given our ambition to build out devolution alongside local government reorganisation.

The published guidance sets out that “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.” In discussions with individual councils and parliamentarians, and in interviews given throughout the process, the Government have reinforced this position to aid local discussions. Equally, it may be decided that population sizes around this figure, or greater than it, are the best fit locally. Instead of presenting a top-down solution for each area, our starting point is to support and empower local leaders and to respect their knowledge, expertise and insight. This approach is in line with the new partnership between Government and local government.

There is a clear expectation that though councils will change, the communities they serve remain, along with the strong sense of history, identity and belonging which gives them the character local people hold dear. That matters, and it will not just be accepted, but celebrated for the pride of place it instils.

Support

Local government reorganisation is a complex process, and we are at the beginning of this journey. We will continue to reset the relationship and work in partnership with the sector to ensure they receive the necessary support as we work together to deliver this ambitious agenda.

Councils need our full backing and support to drive these changes forward—and this Government are acutely aware of the difficult financial situation facing all councils following a decade of financial mismanagement by the previous Administration. I am pleased to announce that £7.6 million will be made available in the form of local government reorganisation proposal development contributions, to be split across these 21 areas. This is the first time that capacity funding has been made available for reorganisation proposals, recognising the priority that this Government attaches to this. Further information will be provided on how this will be allocated and we intend to make payments as soon as possible.

Beyond funding, we understand that practical support and learning from those who have undergone reorganisation before is crucial. My Department has been working closely with the LGA, trade unions and sector bodies to develop support for areas. The LGA Hub will host a central repository for practical advice and support. A programme of webinars and events will be available and the LGA and other sector bodies will be launching networks for peer support.

Next steps

The submission of interim plans is not a decision point. It is the next stage in the process and enables councils to engage with the Government on the issues that matter locally and receive support to develop their full proposals. We expect local leaders to continue working collaboratively and proactively with each other, including by sharing information.

In the coming weeks my officials will follow up with areas to discuss their interim plans, provide feedback and understand the collaboration and information sharing arrangements. The Department will be speaking to Surrey as a priority in the coming days, then with councils on the devolution priority programme during April, and other areas after the local government elections in May. For Surrey, the deadline for proposals is in May and for other areas later this year in September or November.

My Department will consider these proposals against the criteria set out before consulting and taking a decision on which of those proposals will be taken forward and implemented. This is a statutory process, and affirmative legislation will be needed to establish new councils and abolish any of the predecessor councils.

Conclusion

I acknowledge this is a significant undertaking—the largest structural reform of local government in half a century and a fundamental part of our project to reform the British state, so that it delivers for working people. We need to push forward together and deliver these changes, so communities can see the benefits of simpler structures and so councils can deliver better value for money public services. Local leaders are central to our mission to deliver change for hard-working people in every corner of the country through our plan for change, and our councils are doing everything they can to stay afloat and provide for their communities day in, day out. I will update the House after receiving full proposals and explain how they will be taken forward.

[HCWS545]

Council Tax Reform

Jim McMahon Excerpts

Wednesday 19th March 2025 Commons Chamber

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

I congratulate my hon. Friend the Member for Hartlepool (Mr Brash) on securing this Adjournment debate on the important issue of council tax. I am grateful for the work and research that he and the all-party group have put into their argument for council tax reform.

The Government take seriously the issue of how councils are funded, and the impact on local taxpayers. Council tax is an important part of the funding that councils require to deliver a range of over 800 vital services. For 2024-25, council tax makes up over half of councils’ core spending power. Individual councils are responsible for setting their own level of council tax, taking into account their local circumstances. Indeed, council tax is the balancing item in the local council budget.

As my hon. Friend will know, the ability to raise revenue from council tax is determined by the number of domestic properties within a local authority area, and by the value of those properties in 1991. That means that places with a high number of more valuable properties are often able to raise more than an area with lower-value properties, despite setting the same or commonly a lower level of council tax. However, as he said, the Government have ruled out a revaluation of council tax in this Parliament. That means that we must find other ways to address the discrepancies in tax-raising ability through other means.

The last Conservative Government committed to improving and updating the way in which councils are funded, through the fair funding review, but that work was not delivered. We will make good on that commitment and implement long-awaited funding reforms through a multi-year settlement in 2026-27—the first in over a decade. We have recently consulted on the proposed objectives and principles for local government funding reform. In that consultation, we propose to update the way we account for council tax in determining local authority funding allocations, so that future allocations more effectively account for the differing ability to raise council tax income across the country.

As my hon. Friend has pointed out, that means that somewhere like Hartlepool, where the tax base is weaker because of the high number of homes in bands A to C, will not be treated the same as an authority in the south-east that has a high number of homes in bands E to H and therefore has greater council tax revenue-raising power. That will be part of a wider set of changes to improve the approach to funding allocations within the local government finance settlement by ensuring that they reflect an up-to-date assessment of need and, importantly, local resources. Those funding reforms are part of a comprehensive set of reforms for public services to fix the foundations of local government. That will be done in partnership with the sector and on the principle of giving forward notice and certainty to allow time for councils to plan for the future.

Although the Government recognise the arguments in favour of council tax revaluation and reform, there are currently no plans to reform council tax in this Parliament, as I have said. Significant changes to local government structures, governance, accountability, audit, standards and financing are taking place alongside an ambitious programme of devolution and, of course, local government reorganisation. I say that because we cannot overstate the amount of change taking place in a very short time within a system that has been left quite fragile, as my hon. Friend will know, after 14 years of mismanagement by the previous Government.

[Sarah Dyke]

Somerset council is in the position of having to raise council tax this year, but a recent external assurance review reported that a significant proportion of the council’s budget shortfall was attributable to decisions taken by the previous Conservative Administration, who recklessly froze council tax for a record six-year period. In the light of the pressures on councils across the country, will the Minister commit to giving us a timetable for reform so that councils can plan well ahead and deliver essential services?

[Jim McMahon]

That is an important point. In a sense, we can draw up a fairer and more balanced system, and build more security into it. What a system can never do is accommodate every localised decision and how it presents. In the end, there has to be local checks and balances, and that must come through the ballot box. It sounds as if voters in the hon. Member’s area have cast that judgment.

We are committed to reform and to moving at pace, but we recognise in doing that that the system is fragile. We are undertaking reform of the business rates system and revaluation, and a lot of devolution deals will come forward where intricated settlements are being worked towards, which will be important. All that, of course, rests on local government being strong and stable enough to support it. We completely recognise all the issues around adult social care, children’s services and temporary accommodation, which mean that councils are being overwhelmed. There is £69 billion available through the funding allocation this year, £5 billion of which is new money, and for the first time ever there is £600 million through the recovery grant, which is about bridging to the multi-year settlement. We have recognised the urgency and depth of the crisis that many councils find themselves in, but we are also honest in saying that it will take more than seven months to repair 14 years of harm. We are getting on with the job, and we are determined to get it right.

[Richard Foord]

Shire counties have had their settlement funding cut from more than £300 per person in 2015 to less than £200 per person now. Does the Minister recognise that counties such as Devon have huge road networks to maintain, and that that difference in funding helps to explain why roads in Devon are falling apart?

[Jim McMahon]

I think that after the last 14 years, roads in quite a lot of England are falling apart. That is why we injected another £500 million into pothole repairs this year, because we know that local people feel that issue acutely. We also recognise, as I said before, that this will take longer than seven months.

On financing, we are clear that the current formula needs to be reviewed. It is not good enough any more to keep on having a formula that is not fit for purpose, and which is supplemented by top-ups that change depending on the whim of the Government of the day. If this is a genuinely fair funding formula, it must be fair when tested. That means that wherever someone is in the country, and whatever their local circumstance, they know that those issues have been taken into account. Some of that will involve deprivation or the ability to raise tax at a local level, but some of it will involve demand on services, including rurality. We must ensure that in the review we rebuilt trust and confidence as well as sustainability, and the hon. Gentleman has my commitment that we are determined to ensure that that work is done with integrity.

We recognise the urgency to fix the foundations, and to tackle the underlying issues that we have talked about. For all the criticisms of the current council tax system—many of which are completely legitimate—it has some advantages. First, it is a settled tax that taxpayers understand, and notwithstanding the uncollected element that was mentioned earlier, pound for pound it has a high collection rate. On that basis, revenues are relatively predictable, which means that local authorities have greater certainty for their financial planning. Council tax is genuinely local. The money is collected locally, retained locally, and authorities will make decisions on the band D level based on their local requirements and delivery priorities.

[Grahame Morris]

Reforming council tax is an enormous problem and I do not underestimate the scale of the task, but does the Minister recognise that council tax is even more regressive than the poll tax it replaced? The system particularly affects my constituency, Hartlepool and the north-east, and other regions as well, where people are paying a premium for living in the poorest communities with the fewest services and facilities. Does he accept that council tax is widening inequalities in our country?

--- Later in debate ---

[Jim McMahon]

I accept that there are inherent issues with council tax, not least the way that the banding system works. Because of the inherent land and property values in less affluent places, people in a lower-band property in a poorer part of the country will pay more for public services than those in more affluent properties elsewhere. Those more affluent places can collect sufficient amounts to fund local public services, where other areas clearly cannot do that. The situation has been made significantly worse by a Government who removed that central support over a decade, so council tax is taking on a significant burden of the weight of local public services. We are keen to address that imbalance through the funding review that we are undertaking.

Members will know that local authorities have control over the discretionary working age council tax support scheme, and the council tax system also includes a range of discounts and exemptions to reflect the personal characteristics of occupiers and to support those less able to pay. These include the single-person discount, exemption for student and disregards for carers, the mentally impaired—a term I would not choose to use, but that is the term used in legislation—and apprentices. The Government will consult on the administration of council tax later this year and consider the case for modernising support in the system for those who need it.

However, I recognise the challenges that council tax creates for some taxpayers and local authorities. I therefore want to reaffirm that this Government are keen to continue working with my hon. Friend the Member for Hartlepool and his APPG to understand the issues in the council tax system and what options for reform are available to us.

Question put and agreed to.

Spelthorne Borough Council: Best Value Duty

Jim McMahon Excerpts

Monday 17th March 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 which provide essential statutory services local residents rely upon. Local councils must be fit, legal and decent and this Government are aiming to fix the foundations of local government. Today I am updating the House on the statutory inspection of Spelthorne borough council and the steps I am proposing to ensure a focus on reform and recovery, alongside and within the wider context of having invited proposals for unitary local government in Surrey.

Best value inspection report

It is a matter of public record that Spelthorne borough council has significant debt leverage. Spelthorne’s debt stands at nearly £1.069 billion—as of January 2025—which is 62.2 times its total service expenditure and is the second highest level of debt for a district authority in England, after Woking.

A capital review by the Chartered Institute of Public Finance and Accountancy (CIPFA) highlighted concerns around governance and decision making. Following this, on 8 May 2024 the then Secretary of State, the right hon. Michael Gove, commissioned an inspection of the council and its compliance with its best value duty. He appointed Lesley Seary as lead inspector, alongside Mervyn Greer, who were later joined by Peter Robinson and Deborah McLaughlin. Inspectors were asked to report their findings by 31 July 2024. The deadline was subsequently extended to 31 January 2025. The inspectors completed their inspection and submitted their report to the Secretary of State for Housing, Communities and Local Government, my right hon. Friend the Member for Ashton-under-Lyne (Angela Rayner) and, as statute requires, provided a copy to the council. I am grateful to the inspection team for their thorough work, and to the council and all participants for their co-operation.

The report identifies some positive features at the council, such as strong resident engagement and positive local partnerships. The report also notes that the council has already taken positive steps to make improvements, including against recommendations made in the CIPFA review, such as the suspension of the planned housing developments and cessation of further borrowing for this initiative after determining it was no longer viable. However, the report documents serious concerns across a number of areas which I consider to be against its best value duty:

On Continuous Improvement: The report describes the council as having a “poor record” of adequately addressing recommendations from external reviews and the inspectors have no confidence in the council’s ability to make the changes “without significant external support”.

On Leadership: The report highlights that the council lacks consistent leadership, strategic direction, constructive challenge and a robust corporate plan. Optimism bias clouds officers’ awareness of risks, and to some degree the council has been “blindsided” by the financial situation.

On Governance: The report concludes that the council’s “poor, late and incomplete reporting, together with a lack of audit and a reluctance to accept and act on challenge” has “severely undermined informed decision-making” and there is a culture of secrecy.

On Culture: The report describes member and officer relationships as poor and deteriorating, with both sides describing a culture of mistrust and broken relationships which are “hindering constructive discussions” on key financial, housing and asset issues. Members and officers do not share an understanding of their respective roles. Inspectors consider the council to be insular and in denial of the situation it faces.

On Use of Resources: The report concludes that a lack of long-term planning, risk management and an “overly-optimistic reliance” on property markets has led to the authority’s financial strategy being unsustainable.

Compliance with the best value duty

I have carefully considered the report and other relevant material, including findings from the CIPFA review, recent reports from the council’s external auditors, and the corporate peer challenge conducted by the Local Government Association. I am satisfied that Spelthorne borough council is failing to comply with its best value duty in relation to continuous improvement, governance, leadership, culture, and use of resources. I am therefore minded to exercise powers of direction under section 15(5) and 15(6) of the Local Government Act 1999 to implement an intervention package that ensures the council’s compliance with its best value duty. The proposed intervention includes the appointment of commissioners to exercise certain and limited functions as required, for five years. The commissioner team, if appointed, would consist of a lead commissioner and commissioners with expertise in finance, commercial investment and governance. The council will be directed to prepare and agree an improvement and recovery plan to the satisfaction of the commissioners. I would like the commissioners to report on progress against this plan after the first six months, and then at six monthly intervals. I need to ensure the council’s compliance with its best value duty: the commissioners’ assessments will provide assurance to residents and strategic partners. The council will also be directed to actively engage with the commissioners while reviewing and implementing any proposals for unitary local government.

Representations

I am inviting representations from Spelthorne borough council on the respective inspection report and on the proposed intervention package by 28 March 2025. I want to provide the opportunity for members and officers of the council, and any other interested parties, especially the residents of Spelthorne, to make their views on the proposal known.

I made clear in my written statement of 5 February that potential proposals on unitary local government must 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: given the potential implications for the proposals currently being developed by councils in Surrey for unitary local government, I have taken steps to ensure that this report will be seen by all relevant parties across the area. I will carefully consider all representations and any other evidence received, before deciding how to proceed with the council.

Conclusion



The proposal to intervene in Spelthorne borough council is not taken lightly. The proposed intervention package is designed to strengthen and accelerate the improvement work needed at the council. I am confident that the proposal will address the failings identified and is necessary to ensuring the council’s compliance with its best value duty. I hope that with focus and oversight, improvement will come at pace and that it will not be necessary for the commissioners to use their powers. However, they must be empowered to do so if they consider that the required improvement and reforms are not being delivered.

I am committed to working in partnership with the council to provide the necessary support to ensure its compliance with this duty and the high standards of governance local residents and service users expect.

I will deposit in the House Library a copy of the inspection report I have referred to, which is also being published on gov.uk today. I will update the House in due course.

[HCWS527]

Local Government: Nolan Principles

Jim McMahon Excerpts

Tuesday 11th March 2025 Westminster Hall

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

It is a pleasure to serve under your chairmanship, Sir Desmond, and to attend this debate. I am grateful to the hon. Member for South Leicestershire (Alberto Costa) for securing it.

A key commitment of this Government was to strengthen the standards regime and integrity in public life. Specifically, that means a very active commitment to working together to create a fit, legal and decent local government sector that is equipped to rise to the challenge and opportunity of increased devolution of power and resources from Whitehall. Our proposals to achieve that were set out in the “English Devolution” White Paper, published in December last year, which included measures to fix our broken audit system; improve oversight and accountability; give councils genuine freedoms to work for and deliver in the best interests of their communities; and, with particular reference to the theme of this debate, improve the standards and conduct regime.

We are wasting no time in getting on with the task. The day after the “English Devolution” White Paper was published, we launched a 10-week consultation on strengthening the standards and conduct framework for local authorities in England. The consultation, which closed on 26 February, sought views on reforms to the standards and conduct regime so that the public can have trust and confidence that all councils in England can be effective and well governed.

Although he did not go as far as I might, I think the hon. Member for South Leicestershire was hinting that the previous Government, in the early part of that Government—with the removal of the standards regime and the audit regime, and measures such as the removal of councillors’ pensions in England—engaged in what many of us now reflect were, in large part, acts of municipal vandalism. They took away the architecture that allowed local government to thrive. The challenge is big, but we understand that we need to take significant steps to improve the situation.

All of us here today know the seven principles of public life—honesty, integrity, objectivity, accountability, selflessness, openness and leadership—which have underpinned the ethical standards of all public office holders for the last 30 years. They are, and have been, the foundation of the code of conduct for Members of the House, the ministerial code and all who serve in local government and the wider public sector.

Doug Chalmers, the current chair of the Committee on Standards in Public Life, gave a speech at the Institute for Government in November last year on the 30th anniversary of the establishment of that committee. In that speech, he reflected on the three golden threads that Lord Nolan had set out that need to be delivered alongside the Nolan principles—first, the code of conduct; secondly, independent scrutiny; and thirdly, education.

As Lord Nolan acknowledged, the Nolan principles were not a code of conduct, but the values that would underpin a code. An effective code needs to clearly detail the behaviours that those in public office must observe to repay the public’s trust and confidence, as the hon. Member for South Leicestershire referred to. The principles are a foundation, but the behavioural code is not quite there. There are examples in the councils that the hon. Member mentioned, and actually in some councils right across the country, of bad behaviour being far too common. That cannot stand.

While the standards proposals that the Government have been consulting on are for whole system reform, at their foundation is the proposal for a mandatory code of conduct. We believe that a mandatory code is vital to achieving consistency across all the various types and tiers of local government. The current regime simply requires all local authorities to adopt a code that is consistent with the Nolan principles. Some take the de minimis approach of simply listing the seven principles. Others have very detailed local codes. That lack of consistency is not helpful to the system overall. It is confusing and means that we cannot have confidence that all are judged to the same standard equally across the system.

That does not happen in the devolved nations. Scotland, Wales and Northern Ireland all have mandatory codes of conduct in place, based on the Nolan principles but setting out detailed interpretation of the expected behaviours.

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

Where there are bad behaviours, that often results in significant legal costs to the local authority and settlement payments. The Government are giving more powers to combined authorities. Does the Minister agree that where a combined authority incurs significant legal costs and settlement payments relating to staff who have left, whether employed or interim, that information should be shared in a timely fashion with board members? If so, will he write to me to confirm that that is the Government’s position?

[Jim McMahon]

We have set out a very clear expectation about transparency and all authorities, whether they are local authorities or combined authorities, always acting in the public interest and being up front about information that they hold. That expectation is clear. I can respond in writing in more detail.

[Steve Barclay]

Can I press the Minister on that point? Does that transparency include sharing those settlement payments and legal costs with the authority’s board members? It strikes me as remarkable if those costs are not even shared with board members. He has very helpfully clarified that he expects transparency. I would like that transparency to be with the public—perhaps he can say something on public disclosure—but can he at least confirm that the information should be shared with board members?

[Jim McMahon]

I will follow up after the debate on the example that the right hon. Gentleman is referring to. I commit to finding out a bit more information through the Department and will respond in writing. As a matter of principle, it is not unreasonable to expect that board members, as opposed to the wider public, are informed about matters of financial relevance to the operation of the board. That seems fairly self-evident to me. If he provides more information on the particular case, which I am not familiar with, I will certainly come back to him on that.

I am enormously grateful for the more than 2,000 responses that we received to the Government’s standards consultation. We are working at pace to analyse the results. We will think carefully about how to take into account the views that were expressed for each of the proposals that we have set out. The Government response will be issued in due course, and after its release, we will continue to work actively with local government on developing detailed implementation.

The hon. Member for South Leicestershire mentioned reorganisation, and although I completely acknowledge the examples of poor behaviour that he identifies—I have witnessed such things in some authorities, too—I would be careful not to attach local government reorganisation as an inherent risk to the standards and behaviours of councillors. I think this is cultural, and it is about a lack of framework and, honestly, slightly a result of a standards regime that has not got teeth.

There are some members who know that what they are doing is not right, and that that is not just about free speech, but about abusing the position they hold and the freedoms. We often see that relationship, where elected members who are holding court in the council chamber attack officials on the top table who have no power to respond themselves. We see that power imbalance taking place. I suspect that most elected members who are behaving in that way know exactly that their behaviour is not okay, but they also know that the standards regime has no teeth to deal with that, so what are the consequences? I would be careful not to attach that behaviour to the reorganisation point, because we want to rebuild the system from the ground up, so that every council in England—whether they are part of the 21 counties going through reorganisation or are among the rest—is subject to the same robust standards regime that does have teeth.

Let me return to the subject under debate by dealing with some of the points about not allowing the system to be used for political ends and how it has to be held up to all scrutiny at all levels. This is about having a proportionate system that can hold up to scrutiny and be tested, but it has to be mandatory. It must have sanctions that matter, including the power of suspension, the power to withhold allowances, if that is correct, and the power for premises bans, if there is a safeguarding risk at play. We have examples where councillors can be on police bail for sexual assaults, and during police bail, they can attend council meetings and attend the premises. That clearly would not be acceptable to most members of the public, but the current regime allows that, and that cannot be allowed to stand. Perhaps more controversially, the system should include disqualification in some cases for more serious breaches.

[Dan Norris]

Will the Minister address my point about interim officers, or perhaps write to me if there is not time today?

[Jim McMahon]

I will return in writing to the point about interim officers being able to move around and whether they are held to the Nolan principles as a founding principle. This debate is more about the standards regime that governs elected members in that context, and that is the consultation that we undertook.

I have no doubt that the Nolan principles will continue to be enormously influential in contributing to the effectiveness of local government. They are a prescription for the values to foster a culture of integrity and ethical behaviour. This Government are committed, at the heart of our ambition for the whole of local government, to creating a fit, legal and decent local government sector, and that is what the public have a right to expect. To be effective, local government must serve to foster vibrant local democracy. It must encourage a wide diversity of talented people to step forward to represent their local communities in that position, and we are committed to working to that end.

Question put and agreed to.

Town Deal Funding: Owens in Hastings

Jim McMahon Excerpts

Monday 10th March 2025 Commons Chamber

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

I congratulate my hon. Friend the Member for Hastings and Rye (Helena Dollimore) on securing this evening’s important debate, and I thank her for speaking so powerfully on behalf of her constituents. She is a passionate champion for Hastings, and is leading the charge to ensure that not a single penny of Government investment in that town is wasted. We have a number of things in common; we are both Labour and Co-operative Members of this House, but we were also both in Hastings and Rye on 8 September 2022 when the late Queen passed away. Apart from the profound sense of how important and significant that day was, what was very clear from speaking to those who are now my hon. Friend’s constituents was the high regard she was held in. I am glad that that was reflected in the result of the election.

Before I turn to the main subject of the debate, I will speak about the funding that the Government are putting into my hon. Friend’s constituency. Last week, my Department announced up to £20 million of funding and support for Hastings through our new plan for neighbourhoods. It will help build a thriving Hastings, strengthen the local community and allow residents to take their own decisions on things that affect them. We are also giving Hastings £15 million for our community regeneration partnerships, which will help provide more affordable housing in the town and fund improvements at the Hollington youth hub. Those investments come on top of the £24.3 million town deal for Hastings.

Our town deals are based on local partnerships and local decision making, and they are led by local town boards. I know my hon. Friend is a member of hers, and I know that she champions her area extremely well. I am pleased to see that the town deal in Hastings is well into delivery and is beginning to deliver results on the ground, although I hear her concerns about Owens entertainment centre, which I will turn to in more detail.

When my hon. Friend raised this issue in the House last year, I was disappointed to learn about the closure of Owens and any money wasted under the previous Government. Although the decision to invest in the project was taken by Hastings borough council and the town board, it goes without saying that it is deeply disappointing when projects fall through. I understand that the project at the former Debenhams site was due to bring the building back into use and create more leisure facilities and, importantly, local jobs. Following the closure and the company responsible going into administration in October 2024, the owner has retaken possession of the building and the space has been re-advertised for lease.

I hear the concerns of my hon. Friend and her constituents loud and clear regarding her constituents rightfully getting their money back. Although the funding comes from the UK Government, the responsibility for local town board management sits with the town board and formally with Hastings borough council as the accountable body for the town deal. I understand that Hastings borough council issued legal letters last year regarding potential action to recover the £150,000 from the towns fund that was allocated to CFEC Ltd, which ran Owens entertainment centre during this time.

I will be direct, as my hon. Friend was direct, and say that there are plenty of unanswered questions. What we do know is that the Conservatives, when they were in government, received £2 million in donations from its owner. We also know that under their watch, this now-closed amusement centre received more than £150,000 of taxpayers’ money. The simple question we do not yet know the answer to is: why? Why might this millionaire Tory donor have needed a top-up from the taxpayer to open a bowling alley? There are concession owners in the dark, ticket holders confused and, importantly, 31 staff members without a job. I am sure they would like to know the answer to that question, too. I am also sure they would like to know whether the Conservatives, given what has now come to light, have any intentions, for the benefit of the local community, of returning all or part of the donations that they received?

Following the news that CFEC Ltd had gone into administration in October ‘24, a claim was lodged with the administrators to recover the £150,000. My officials will continue to stay up to date on the situation through our town deal monitoring and regular conversations with the council.

On town deals more widely, my hon. Friend the Member for Nottingham North and Kimberley (Alex Norris) was pleased to offer an extra year for delivery recently, taking the end of the fund to March 2027. We all want to see quick results, but colleagues in this House and in councils have reiterated how challenging it has been for projects, especially with cost inflation. This Government have listened, which is why there is now an extra year of funding to get those projects over the line. My officials are working with areas where the extra year is taken up to ensure that delivery stays on track.

Let us now look at the broader picture. The last Government tied places up in knots with their short-term initiatives and funding pots, all with very different rules and timetables. Far from driving growth, that bogs places down in bureaucracy, complexity and uncertainty. Moving ahead, we will set out a refreshed approach to local growth funding in the multi-year spending review in the spring—an approach that simplifies funding, with less red tape and more local choice. This Government’s defining mission is growth, and we are determined that nowhere will be left behind. Together, we will work in partnership with people on the ground and with local authorities in Hastings and in every corner of the country.

Question put and agreed to.

Local Government: Best Value

Jim McMahon Excerpts

Thursday 6th March 2025 Written Statements

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

My noble Friend the Under-Secretary of State, Baroness Taylor of Stevenage, has today made the following statement:

All hon. Members will recognise the importance of having well-functioning local councils which provide essential statutory services local residents rely upon. Local councils must be fit, legal and decent, and provide value for taxpayers� money. The 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. I would like to update the House on progress in two such cases: Thurrock council and Woking borough council.

Thurrock

Thurrock council has been under statutory intervention since September 2022. Today I am publishing the commissioners� fourth report which makes clear that the council continues to make tangible progress in its recovery and is working hard to meet its best value duty. The council has developed a corporate plan and concluded its governance review, both significant steps forward.

There is still much to do, and the changes made to date, although positive, remain fragile, and need to become embedded into the council�s business as usual activity to provide assurances that these improvements will bring about the level of transformation required. I recognise there are difficult but essential decisions to be made by the council in the coming months, including delivering Thurrock�s ambitious savings target of �18.2 million for 2025-26.

As we look ahead, and with six months before the current directions are due to end (1 September 2025), it is important to take stock of the improvement journey the council has been on and where further improvements may be required. I am asking commissioners to provide their next report in April, including their assessment of the council�s progress to meeting the best value duty. I welcome the commissioners continuing to support Thurrock council in the development of proposals for unitary local government and in their devolution ambitions.

Finally, I am announcing that I am extending the appointment of Dr Dave Smith, managing director commissioner, to 1 September 2025, and as Nicole Wood has stepped down from her role as Thurrock commissioner to become the chief executive of Essex county council, I would like to express my gratitude for the support, challenge and guidance she has provided to the council since the start of the intervention. I am minded to appoint a new finance commissioner as soon as possible.

Woking

Woking borough council has been under statutory intervention since May 2023 and today I am publishing the commissioners� fourth report. I am reassured by commissioners� comments that the council is committed to achieving the objectives that the council have worked with commissioners to set, which will radically overhaul the operation of the council. I share commissioners� concerns as set out in their report regarding the capacity of the council to deliver this programme of change and encourage the council to continue to work with the commissioners and my Department to consider how we can best enable the council to improve, for the benefit of residents. I welcome the commissioners continuing to support Woking borough council in the development of proposals for unitary local government. As Carol Culley is stepping down from her role as Woking commissioner to become executive director of finance at Birmingham city council, I would like to thank her for her commitment to Woking and the considerable skills she has brought to bear as both a reviewer and a commissioner. I am minded to appoint a new finance commissioner as soon as possible.

Conclusion

I want to acknowledge the diligent and hard-working members and officers of both Thurrock and Working who have continued to do their utmost to provide essential frontline services for residents while driving forward the necessary improvements.

The Government will play their part by repairing the foundations of the sector overall. The final local government finance settlement 2025-26, alongside funding announced at the Budget, has delivered over �5 billion of new funding for local services over and above council tax. This includes an additional �2 billion of grant through the settlement in addition to a guarantee that local authorities in England will receive at least �1.1 billion in total in 2025-26 from the new extended producer responsibility for packaging scheme, and a further �233 million of additional funding for homelessness services. Moving forward we will hardwire stability and security into the system with multi-year settlements and fewer restrictive grants. This will allow councils to focus spending on local priorities, and we will set out and measure progress on the key services and outcomes we expect local government to deliver.

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

[HCWS504]

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.