Local Government Finances: London

Andrew Rosindell Excerpts

Wednesday 26th March 2025 Westminster Hall

[Andrew Rosindell (Romford) (Con)]

It is a pleasure to serve under your chairmanship, Ms Lewell. I thank the hon. Member for Leyton and Wanstead (Mr Bailey) for rightly raising this issue for debate. I am grateful to him, as I am sure we all are.

I endorse the comments of pretty much all Members who have spoken, but especially my hon. Friend the Member for Hornchurch and Upminster (Julia Lopez)—we share the borough of Havering. Members have highlighted what we all know: the local government funding system is fundamentally broken. No matter what borough we come from, the current system simply is not working. We are all suffering local services that are inadequate. Funding is not there for things that are essential, and we are seeing money spent on things in local government that I believe are wasted.

Particularly in Havering, as well as in Bromley and in Hillingdon, which is represented by my hon. Friend the Member for Ruislip, Northwood and Pinner (David Simmonds), we also say that our boroughs are spending a lot of money to fund the Greater London Authority, and most of that seems to be spent in inner-London areas. Outer-London areas are funding inner London. We have been doing that for many decades, not just since the Greater London Authority and the mayor were created, but under both Governments.

I would like to depoliticise this issue a bit. We can blame each other—[Hon. Members: “Ah!”] We can blame each other, but the last Government did not deal with it, and I hope this Government will attempt to deal with it. Without fundamental change, the problem will go on and on. What we need is less, but more effective, government. We need spending on the right things. We need to give control back to our local areas and to have less control by central Government and the Greater London Authority.

I will not repeat all the arguments made by my hon. Friend the Member for Hornchurch and Upminster, because all the points she made were absolutely correct, but Havering has particularly suffered from underfunding and an unfair funding formula for many decades—in fact, all the way back to when the London boroughs were created in the 1960s. When the London boroughs were created, the outer-London areas, which were considered to be wealthier, were effectively putting money into the centre, and they did so for many decades. As hon. Members have said, that has changed. As the hon. Member for Leyton and Wanstead said, outer-London areas have altered and the demographics have changed. But the funding formula remains the same.

We need to completely change how we deal with this issue. Fiddling around with the figures at the edges will not solve it; we need root-and-branch reform of how local government operates in the Greater London area. We need more flexibility in areas such as Havering, which are not really in London—we orbit London, but we are far more linked to Essex areas than we are to inner London—and fundamental reform of the whole system.

Outer London has always been poorly funded and unfairly treated. In Havering, which has a large older population and a large younger population, and changing demographics, we particularly need more support. I hope the Minister will pledge that support, because all our constituents need change.

[Emma Lewell (in the Chair)]

Order.

--- Later in debate ---

[Rachel Blake (Cities of London and Westminster) (Lab/Co-op)]

It is an honour to serve under your chairship, Ms Lewell. I thank my hon. Friend the Member for Leyton and Wanstead (Mr Bailey) for securing this important debate. I also thank our friends and colleagues from the London local government family who are here listening to the debate. Their tireless work, day in, day out, is not unappreciated, and we are really happy to see them here today.

It has been good to listen to the cross-party support for the debate, but I was a little disappointed not to hear a bit more reflection from Opposition Members on how we got here, despite our having much shared experience as local representatives. That includes the slashing of housing investment by the previous Conservative Government and the slashing of genuinely affordable homes by the previous Conservative mayor—where is he now? Let us not forget the failed fair funding review that the hon. Member for Bromley and Biggin Hill (Peter Fortune) referenced, which hung over local government for years and prevented meaningful planning.

In the last 14 years, we have seen an 173% increase in rough sleeping and a 69% increase in temporary accommodation —that is shameful—as well as rising rents and falling investment. Let us not forget that the cause lies firmly with the Conservatives. The hon. Member for Bromley and Biggin Hill tempts me to remind us what happened in 1997. Labour halved temporary accommodation, made record investment in the condition of homes through the decent homes programme, and introduced the historic 2008-11 programme of new, genuinely affordable homes, which benefits many families now.

[Andrew Rosindell]

Will the hon. Lady give way?

[Rachel Blake]

No.

Let us come to the matter at hand. I would like to talk about temporary accommodation costs, special educational needs and the specific challenges of managing the visitor economy in the very centre of London.

--- Later in debate ---

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

It is a pleasure to serve under your benevolent gaze, Ms Lewell. I thank the hon. Member for Leyton and Wanstead (Mr Bailey) for securing this important debate, and I point to my entry in the Register of Members’ Financial Interests, which shows that I still proudly serve as a councillor in my constituency in Sutton borough.

London faces a crisis in council funding unparalleled in living memory. We have a funding system that has been starved for years under previous Conservative Governments. As a result, our councils are now struggling to meet the growing demands of the communities they serve. This is not an exaggeration—this is an emergency. Since the onset of austerity in 2010, per capita Government funding has been reduced by more than a fifth, with boroughs now receiving 28% less funding per resident. Meanwhile, London’s population has skyrocketed, increasing by over 900,000 in the past 15 years. The city’s councils are crying out for a long-term funding solution.

Local government provides critical frontline services to our society. It is where people turn for help to meet their daily needs, and it is how communities are supported. Let us be clear: many councils that put in considerable effort to balance the books are not at fault here; they are simply not given enough financial support in the first place as statutory demands rise. It makes a mockery of our conversations about policy here in Westminster when people’s bins go uncollected and children are left waiting for their EHCPs. Our attention should be focused on helping local government, which is at the frontline of the state, to deliver the basics.

Outer London boroughs like Sutton, Kingston and Richmond are getting a raw deal on Government funding—in fact, some of the worst in the country. We see that in police abstractions and we see it in financial council funding.

[Andrew Rosindell]

The hon. Member mentions that the people of Sutton are getting a raw deal, and I am quite sure that they are. Does he think that the people of Sutton are getting good value for money from the precept we are paying to the Mayor and the Greater London Authority, or would he like some of that money put back into the local communities that he serves?

[Luke Taylor]

I thank the hon. Member for his intervention. Sutton has one of the lowest spends per resident by Transport for London of any of the London boroughs. We have no tubes, no overground, and half a tram stop in the very northernmost part of the borough, which shows how poorly we are served by TfL infrastructure, so I agree with the hon. Member’s point.

Outer London is being left behind, with some of the lowest support per capita. Our broken system means that inner London continues to be prioritised, despite the shifting needs across the city. There is a growing mismatch between funding allocations and local need, worsened by a funding formula that has not been updated since 2013. The data on which those allocations are based—population demographics and deprivation levels—are outdated and no longer reflect the reality on the ground. Research from the IFS in 2022 found a 17% gap between funding need and actual funding across London, the largest gap of any region in England. There is a temptation among many—we have all heard it—to paint London as a city where the streets are paved with gold and the challenges of poverty are less intense, which is nonsense. London has the second highest poverty rate in the country, second only to the west midlands. It has infrastructure problems, growing homelessness and millions of people suffering with the ever-rising cost of living, which is particularly pronounced in the context of London’s overheated property market.

The problem is diffuse, not concentrated in inner London. Indeed, poverty is shifting across London in ways we have not seen before, as working patterns change and jobs and industries ebb and flow. The outdated funding model forces outer London boroughs to tackle what are often characterised as inner London problems with far less support. The Minister must reassess the funding formula to ensure a fairer deal for boroughs like Sutton.

It is time to recognise the significant demographic and social changes that have taken place in London over the last 12 years. The homelessness crisis is an example of how poverty is shifting across London in unprecedented ways. Homelessness in my home borough of Sutton increased by 51% between 2018 and 2023. London is at the epicentre of the UK’s homelessness disaster, with the highest levels in the country. London Councils estimates that one in 50 Londoners are currently homeless and living in temporary accommodation. In Sutton every night 1,200 families are housed at the cost of the council. Nearly 90,000 children in the capital are homeless. That is one in every 21 children in London—at least one homeless child in every classroom.

As the Liberal Democrat MP for Sutton and Cheam, I am proud to live in a borough that is committed to housing the homeless where we can, but for the sake of such boroughs that hold that commitment it is essential that we address the gaps in support and provide long-term solutions to end homelessness for good. The financial strain currently put on councils to fight the crisis is utterly unsustainable. Boroughs are spending £4 million every single day on temporary accommodation, and those costs have shot up by 68% in just one year. If such trends continue, homelessness will bankrupt our boroughs and plunge our city back into the dark days of Victorian poverty and inequality. Municipal government will wither away and the fingertips of the state will succumb to financial frostbite, meaning we will no longer be able to reach out and rescue families from homelessness and communities from disintegration. Our city will be a plaything of the rich and famous—no longer a home, but a cold shell. Let us be under no illusion: that is what is at stake.

We are already seeing councils needing exceptional financial support just to survive. The housing revenue account is under unprecedented pressure, and with cuts to resources, capped social rents, rising inflation and ageing housing stock, London boroughs are being forced to cut £260 million over the next four years, making it harder to build new homes or to maintain the ones we already have. So we on the Liberal Democrat Benches urge the Government to urgently publish a cross-Whitehall plan to end all forms of homelessness and exempt groups of homeless people and those at risk of homelessness from the shared accommodation rate; ring-fence emergency funding for local councils for permanent accommodation of rough sleepers; increase the local housing allowance rates in line with inflation; and ensure sufficient financial resources for local authorities to deliver the Homelessness Reduction Act 2017. If we do not, I fear the consequences for the future liveability of our city will be existential.