Local Government Finances

Baroness Scott of Bybrook Excerpts

Thursday 21st March 2024 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Scott of Bybrook) (Con)]

My Lords, I thank the noble Lord, Lord Shipley, for bringing forward this important debate on the current state of local government finances and the impact on local communities. I also thank all noble Lords for their considered and insightful contributions today.

The Government are clear in their support for councils—there is no decline in that support—and the vital work they do to support local residents in all corners of the country. It is important to start by recognising some of the things that are happening. In Bolton, Stoke and Wandsworth, the councils have all recently renovated or opened new library spaces to the public. In Warwick and North Yorkshire, we have seen the opening of new leisure centres in Kenilworth and Knaresborough, and in Sandwell, Knowsley and Rushmoor, levelling-up funding will deliver improved leisure centres and facilities for local residents.

The Government are committed to delivering for our towns. In October of last year, we announced the investment of £1.1 billion into 55 towns across the country, with each town receiving a £20 million endowment-style fund to invest over the next decade. This will allow our towns to develop long-term visions and to deliver change for their residents, such as the regeneration of Ashburner Street, in Bolton. Finally, in Blackpool, the central regeneration scheme is scheduled to get under way, following planning approval, with an estimated 1,000 jobs set to be created as a result.

That is only a very small sample of the achievements and developments that councils across this country have made in recent months and years, all of which have made a positive impact on their local communities. All local authorities across the country should know that we place the utmost importance on the partnership between central and local government, and recognise the crucial work they do in delivering day in and day out for our local communities.

However, as has been mentioned, the Government recognise the pressures that some places face in delivering this work. We have heard from the noble Lord, Lord Shipley, and the noble Baroness, Lady Pinnock, that we are letting it get worse. We are not letting it get worse, and I will mention more about what we have done this year to help local authorities. Many of the problems that these places face, and that we all face as a country, are driven by global economic factors and the resulting higher inflation. That is why the Prime Minister has prioritised and successfully delivered on his commitment to halving inflation. However, we are all aware that demand for key services that councils provide, and the costs of those services, continue to rise steeply as well, not least because of an ever-aging population that, quite rightly, requires increasing social care support.

In February, the Government announced the local government finance settlement for 2024-25. This settlement makes up to £64.7 billion available to local authorities next year, an increase in core spending power of £4.5 billion on last year, equivalent to 7.5% in cash terms. This above-inflation increase demonstrates that the Government are standing behind councils up and down the country and are listening to them.

We have additionally taken action to provide further support to local government to enable continued delivery while wider system reforms for social care are implemented. At the final local government finance settlement, the Secretary of State announced that we are providing £1.5 billion in additional grant for social care through the settlement for 2024-25 compared to 2023-24. Having listened to the views of local government, this includes an additional £500 million for the social care grant.

While being mindful of the level of adult care provision, where possible councils should use this uplift to invest in areas that help also place children’s social care services on a financially sustainable footing. This includes investment in expanding family help and targeting early intervention, expanding kinship care and boosting the number of foster places.

Further to this, in the Budget earlier this month the Chancellor announced £165 million to support councils to improve the quality of, and increase capacity in, residential children’s homes, so that children with the most complex needs can be cared for in a provision that meets those needs. This funding will boost local authority-run provision and, in doing so, respond to concerns that excessive profiteering—as we heard from the noble Baroness, Lady Taylor of Stevenage—and often poor quality is threatening the sustainability and outcomes of local government children’s services.

Nevertheless, we recognise that, sometimes, private placement costs are too high, and that council tax payers are stuck footing the bill. The Government’s position is that this is an issue with profiteering rather than profit. Through reforms to children’s social care, they will continue to explore what action is needed to best support councils. The Government will be developing proposals on what more can be done to combat profiteering, bring down costs and create a more sustainable market for residential placements, which they will publish later this year.

The Government recognise the significance of special educational needs pressures on councils. This is why the Spring Statement committed £105 million towards a wave of 15 new special free schools, to create over 2,000 additional places for children with special educational needs and disabilities across England. On top of this specific funding for social care and SEND, the Government have committed to a 4% funding guarantee that will ensure that all councils receive at least a 4% increase in their core spending power before any local choices on council tax, efficiencies or reserves. We have listened to the many councils and the many things they told us. They would otherwise have experienced cash losses in funding next year, and we have stepped in to prevent that.

We are committed to supporting councils wherever they are in the country. This is in answer to the issue raised by the noble Lord, Lord Hussain, about Luton. The most relatively deprived areas of England will be receiving 18% more per dwelling in available resource through the 2024-25 settlement than the least deprived areas; those councils, such as Luton and others, will be getting more. We understand that those councils have faced historic challenges in tackling deprivation. It is also why we have increased the value of the rural services delivery grant—as mentioned by the noble Lord, Lord Foster of Bath—by over 15% to £110 million, to support rural authorities dealing with the unique challenges of serving very dispersed populations. That is a second successive year of above-inflation increases for this grant.

The action we have taken to support local government in this financial settlement and beyond demonstrates our commitment to the sector. We recognise and thank those in the sector for the important contribution they make in delivering local services for their communities, up and down the country. We have worked in partnership with representatives, sector leaders and local councils, to ensure that this settlement helps to meet the needs of local government. This engagement has been a vital part of the decision-making for this settlement. When local councils speak to us, we listen, and this includes those councils that face the most significant challenges.

The Government also work closely with councils to understand the specific pressures that local government is facing. They are looking at a range of data on demand for services and the costs faced by councils. As a result of the local government finance settlement, the vast majority of local authorities will be able to set balanced budgets in 2024-25. We have published details of exceptional financial support agreed with a small number of councils, but the vast majority of this support relates to six councils where there has been severe local failure. The Government have had to step in there and take the most serious action through statutory intervention.

A small number of other councils requested financial support on an exceptional basis, due to specific local pressures that they were unable to manage themselves. We stand ready to speak to any council that has concerns about its ability to manage its finances or faces pressures it has not planned for. Our door is always open to them.

Before I conclude, I will answer as many of noble Lords’ questions as I can. If I do not get through all of them, obviously I will write. First, the noble Lord, Lord Shipley, and the noble Baronesses, Lady Hamwee and Lady Bull, brought up local government funding reform. We remain committed to updating the system in the next Parliament, and will work closely with local partners to take stock of the challenges and opportunities that they face. Of course we will consult with them before any potential funding reforms, but we talked to councils last year about any of the reforms we could make and they did not want any disruption or uncertainty at that time.

The noble Lords, Lord Shipley and Lord Hussain, brought up council tax reform. The Government continue to protect local tax payers from excessive increases. We believe that our approach strikes a fair balance and is an additional local democratic check and balance on local authorities. We are not allowing council tax to increase in place of increased funding; it is provision for a balanced package that includes a substantial increase for this coming year, as I said.

The noble Baroness, Lady Scott of Needham Market, and the noble Lord, Lord Shipley, brought up audit issues and the backlog. Local audit is vital in supporting democratic accountability and providing assurance for local people and their elected representatives. At the time of its abolition, we believed that the Audit Commission was too centralised and that it encouraged local bodies to focus more on the views of the commissioner than on local people. The Government are working with the Financial Reporting Council to tackle a significant backlog of local audits and put the system on a sustainable footing for the future.

[Baroness Taylor of Stevenage (Lab)]

Does the Minister think it acceptable that 99% of local authorities did not clear their audits in time last year?

--- Later in debate ---

[Baroness Scott of Bybrook (Con)]

No, I do not. We will work with local authorities on that issue.

The Government have invested £5.5 billion on highways maintenance since 2021. In 2023, we provided an additional £200 million to fix the equivalent of 4 million potholes. In October last year, the Government announced £8.3 billion of new funding, over a 10-year period, for local road resurfacing. We are putting in extra money and not asking councils to find it in their base budgets.

My noble friend Lady Eaton and the noble Lord, Lord Shipley, brought up the Office for Local Government. Oflog aims to provide authoritative and accessible data and analysis about the performance of local government, which is important, and to support its improvement. It is still in its infancy, but its three aims are: to inform, by improving access to data; to support, by facilitating sector-led improvement; and to seek any potential failures that it can find, getting in early to support our local authorities.

The noble Baroness, Lady Hamwee, brought up the issue of local democracy and devolution. If anybody sat through the levelling-up Bill in this Chamber, they will know that devolution is at the heart of our plans to increase economic growth and level up the whole country. We remain committed to seeing more empowered and accountable local leaders to do this, who can pave the way for that growth and innovate because they know the challenges and what is best needed for their areas.

There was quite a lot of talk on planning authorities and whether local authorities should have the ability to set their own planning fees. This came from my noble friend Lady Eaton, who has so many years in local government—probably more than many of us who have a lot there. I thank her for her speech and her insight. We increased the fees considerably last year, by 38% for major applications and 25% for other applications. We have done another couple of things to help the planning sector. We have what we are calling a planning super-squad: this is an important team of senior planners who can go into a local authority that has a large or complex application and help it with the capacity and delivery issues. We hope that this will get some of our bigger planning applications away much quicker. We have invested £13.5 million in that. We have also put £29 million in a planning skills delivery fund. That is to help local planning authorities with their backlogs. We are doing a lot but, as we said on the LURB as it went through, we will not look at local authorities setting their own planning fees because we feel it might destabilise things, by having different areas with different fees across the country.

My noble friend Lady Eaton also brought up the right-to-buy receipts. At the Budget earlier this year, the Government announced increases in flexibilities available for local authorities to fund a higher percentage of the cost of replacement of affordable homes. That is taking right-to-buy sales from 40% to 50%. We hope that this will allow local authorities greater resources to allocate towards what we know is important housebuilding in the social rented sector.

The noble Lord, Lord Shipley, brought up business rates. We have ensured that all current enhanced business rate retention areas will continue for the next year. During this time, the Government will continue to review the role of such arrangements as a source of income for areas, and their impact on local economic growth and as part of the deeper devolution commitments as set out in the levelling-up White Paper.

The noble Lord also brought up council reserves. The Government consider reserves to be an important part of the resources available to local councils. Interestingly, reserves remain significantly higher since the pandemic, having risen £31.6 billion over that time, but we expect councils to use their reserves appropriately when there are pressures on them.

I am conscious of the time, so I will move to something that most noble Lords brought up, which was quite an interesting part of the debate: culture and the arts. I will ask my noble friend Lord Parkinson, the Minister for the DCMS, to read Hansard—oh, he is here; that is good timing. The debate was wider than just local government, and is something to do with the responsibilities between local and central government, so we will talk about it.

There were some interesting issues. The majority of funding that comes to local government is not ring-fenced in recognition, quite rightly, that local authorities are best placed to make local decisions. I totally agree with all the speakers that arts, culture, sport and heritage make our communities unique and vibrant. They also drive economic growth, give jobs and improve well-being. We encourage councils to reflect on the important role that these sectors play.

We have provided support for the cultural sector across the country. At the Spring Budget in 2024, the Chancellor confirmed the allocation of £100 million for local cultural projects, recognising the importance of pride for the place. This included a number of nationally significant cultural projects such as the British Library North project in Leeds and the National Railway Museum in York. Smaller amounts were also given to places that did not get levelling-up programmes, including Maldon, Erewash and North Northamptonshire, which have all been awarded £5 million of capital funding. I was also interested to hear that a new studio was announced in the north-east last week. The new north-east mayoral combined authority intends to use £25 million of flexible funding to help that scheme.

I am out of time so I close by saying that we recognise the scale of the financial pressures caused by inflation and the wider economic circumstances that have put local authorities across the country under acute strain. To address this, we have listened to the public and engaged with local authorities; this is why we have provided the substantial increase in support above inflation that this funding settlement provides. Once again, I thank the noble Lord, Lord Shipley, for bringing forward this debate and all noble Lords for their contributions. I look forward to continuing discussions with them.