Local Government Finances

Baroness Taylor of Stevenage Excerpts

Thursday 21st March 2024 Lords Chamber

[Baroness Taylor of Stevenage (Lab)]

My Lords, I draw attention to my interests in the register. I thank the noble Lord, Lord Shipley, for securing this vital debate and for his excellent and thorough introduction. I thank all noble Lords who have spoken so powerfully. It clearly demonstrates the very rich nature of our sector.

Your Lordships will know that I was a local government leader for nearly 17 years. Distressingly, because of local government funding cuts, I had to cut the council’s budget every single year of those 17. In the first years, this was a very specific technical adjustment which only affected a small number of councils—unfortunately, mine was one of them. After that came a torrent of funding cuts which saw millions of pounds taken from our budget in cash terms—and that is before unfunded inflation is taken into account.

Councils across the country have had the same experience. In spite of the constant refrain from Ministers on the Government Benches that more funding is going in, the fact is that it is not meeting either the rising demand for services, the increasing demand due to failures in other public services, inflationary costs, or the costs of dealing with multiple government initiatives.

I am afraid it is just not good enough to say that this is just a few councils which have been badly managed, or to say that, if councils cut back their budgets for consultants and equalities programmes, as the noble Lord, Lord Shipley, referred to, the problem would go away. In fact, the Hunger Games approach to funding taken by DLUHC, which sets councils and their communities against one another in competitive bidding rounds, has driven much of this expenditure. It would be interesting to know—across all government departments, but DLUHC would do—what departments have spent on consultants and equalities training in the last three years.

LGA analysis shows that, by 2024-25, cost and demand pressures will have added £15 billion to the cost of delivering council services since 2021-22. Despite increased funding in both of the last two years, mostly from council tax, there is—as the noble Lord, Lord Shipley, and the noble Baronesses, Lady Eaton, Lady Scott, and Lady Bull, have all said—an ongoing gap of £4 billion. There is a dreadful built-in impact here, too, that sees the poorest areas the worst affected. Many noble Lords have referred to that, as did the right reverend Prelate. The broken local government finance system means that those areas get the same cuts and are least able to fill the gap through council tax or retained business rates. As noble Lords have pointed out, the double whammy here is that these areas are likely to have the highest levels of increasing demand, too.

UK councils have fewer powers to raise revenue locally than any other G7 nation, with 95% of the UK’s tax revenue and 75% of public spending controlled centrally. So, when the Minister tells us about the increase in core spending power, as I am sure she is about to do, please remember that 44% of the additional core spending power available to councils will go solely to fund the cost increases in commissioned adult social care, due to the national living wage increase. This leaves a reduced amount of funding to address the impact of national living wage increases on other parts of the local government workforce and outsourced services that are highly exposed to the national living wage, such as waste collection and disposal, let alone the impacts of inflation, demand pressures and other cost drivers across all services.

As the right reverend Prelate mentioned, every aspect of our community life has been impacted. Every service has been affected. The noble Baroness, Lady Hamwee, pointed out the impact on our local democracy; it is not what people become councillors to do. This is not what communities expect; they are paying more in council tax and getting less back in services. We know that people truly value the services that impact on their lives every day, as soon as they walk out of their front door—but look at what has happened to them. Net spending on cultural services has been cut by 43%, with sport and leisure facilities down by 44%. England has lost almost 400 swimming pools since 2010.

Sport development and community recreation has been cut by 59% per person, and spending on parks and green spaces has been cut by 30%. Community centres have been cut by 39% and libraries by 50%—800 libraries have been cut. Museums and galleries have been cut by 40% and theatres and public entertainment by 38%. The noble Baronesses, Lady Bull and Lady Miller, the noble Earl, Lord Clancarty, and the noble Lords, Lord Foster and Lord Freyberg, all spoke very powerfully about the impact of local government cuts on cultural services.

More than half of areas have made cuts of more than 50% to transport and highways. This is even worse when you look at some areas, such as North Yorkshire, Bath and North East Somerset, and Lambeth, where there have been cuts of over 90% to highways work—no wonder there are potholes. Think of the negative impact of that on local economies.

These are services that everyone uses, but what about the most vulnerable in our communities? Some of the high-demand, high-cost services that local government delivers are used by only a very small percentage of our community. With services such as adult care, children’s services and temporary and emergency accommodation, many people will not realise the extent of the funding gap until they try to use that service. A recent County Councils Network report tells us that children’s and adult care services are consuming two-thirds of their total budgets. Surely, we should judge the strength of our communities and society by the way we deliver to the most vulnerable.

There are rising costs in children’s social care, with budgets up by 13.6%, driven by huge increases in placement costs. LGA research has shown that, in 2022-23, councils paid for over 1,500 placements costing £10,000 or more per week—over 10 times as many as the 120 placements purchased by councils at that price in 2018-19. It is way past time that this private-sector racketeering was brought to an end.

Costs of home-to-school transport are escalating, with budgets up by 23.3% in the last year, equalling a 130% cash-terms increase since 2016-17. Increasing costs and demand in adult social care means that budgeted spend increased by £2.5 billion in the last financial year. Costs of homeless services are increasing, with multiple contributory cost and demand drivers pushing budgets up by nearly 20% last year. Government data shows that more than 104,000 households were in temporary accommodation at the end of March last year, the highest figures since records began. Some district councils are now spending 30% to 40% of their total budget on emergency accommodation.

In most local areas, funding to the voluntary community sector from local government has either been cut or dried up all together, with seven in 10 organisations having withdrawn from public service delivery altogether, according to the excellent briefing from the National Council for Voluntary Organisations. The noble Baroness, Lady Bennett, mentioned this. When authorities issue a Section 114 notice, both the NCVO and Women’s Aid report that all their funding is cut immediately. I do not have time to go into the pressure on housing revenue accounts, but the recent decision to remove councils’ rights to retain 100% of right-to-buy receipts, at a time when we should be encouraging a surge in provision of new social housing, is incomprehensible. We need 90,000 new social homes a year, so that cut was a crazy decision.

Levelling up means nothing if we cannot support vulnerable children and adults, the homeless, the voluntary sector, domestic abuse victims and the leisure and arts sectors. Everything I have outlined will have long-term impacts. There will be pressure on acute services from not funding early intervention properly, and pressure on the NHS when our vulnerable residents cannot be looked after in their own homes. There will be an impact on the health and mental health of people and communities when their leisure and culture opportunities get closed down, and there will be significant long-term impacts of poor-quality, unaffordable and insecure housing. Young people will lose their opportunities and aspirations because their learning needs have not been met. New homes will not be delivered or will be delayed because of cuts to planning departments. There is such a simple solution: just allow local authorities full cost recovery on major planning applications. The noble Baroness, Lady Eaton, and the noble Lord, Lord Shipley, both mentioned that.

There will be a dramatic impact on the economy when local government cannot deliver either the infrastructure or the economic development support to meet business needs. The Government are quite simply closing down the best route—the local, devolution route—towards ensuring that we get the growth that the country needs to fund our public services properly.

I have been in local government for almost 30 years. My colleagues around the country are heroes, from those in parish and town councils—mentioned by the noble Baroness, Lady Scott of Needham Market—to those in the larger metropolitan authorities; they deliver for their communities, even in these most devastating and toughest of times. Please give them the trust and respect they deserve, give them long-term funding settlements, and work with them to reform the broken funding system—I was pleased to hear that the new noble Lord, Lord Fuller, is working on this project. Fix the broken business rates system that fails both businesses and the communities where they operate; give authorities the strong fiscal devolution they need, not the piecemeal approach we have seen in recent years; and then leave them alone to get on with it. Local councils, in touch with their local communities, will always deliver better than any Whitehall directive, even a levelling-up mission.

[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?