Local Government Finance

Clive Betts Excerpts

Wednesday 11th February 2026 Commons Chamber

[Steve Reed]

At core, what we are hearing from all parts of the House at the moment is people’s views on the fact that under the previous Government, the alignment between funding and deprivation was broken, and this Government are bringing it back. Because the previous Government did nothing about it for 14 years, funding became extremely detached from deprivation. We are putting that back in and making sure that funding goes where the need is greatest, so that stealing money from the poorest communities to pork barrel Tory areas—which the former Prime Minister bragged about—can no longer go on.

[Mr Clive Betts (Sheffield South East) (Lab)]

My right hon. Friend is being a little unfair to the Tories. The biggest cuts under austerity from 2010 to 2024 came from 2010 to 2015 when the Lib Dems were in coalition, so perhaps they should share some of the blame.

[Steve Reed]

I certainly agree that the Lib Dems should share the blame for austerity. I was a council leader while the Lib Dems and Tories were in coalition together. I think they cut our council by a third just over the first one or two years that they were in power. Now they have the chutzpah to stand up and complain that this Government are putting some of it back. I really think they should reflect on that.

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[David Simmonds]

My right hon. Friend is absolutely correct. When Ministers talk about additional resources being provided to local government, we need to reflect on the fact that two thirds of the funding in this settlement comes from the maximum possible council tax rise across the country, and a large chunk of the rest comes from a huge rise in business rates.

[Mr Betts]

It is interesting to hear the hon. Member completely remove from his memory what happened in the 14 years of his Government. I ask him to remember back to when this began in 2010, when council tax generated about 20% of council funding, and how it has grown over the years under the Conservative and coalition Governments to deliver more than half of local government funding. How can he say that this is a problem when his Government originated that process?

[David Simmonds]

Madam Deputy Speaker, I am sure that you will be pleased to know that that prompts me to move on to the next part of what we need to say. Let us recall for those who cry austerity at Conservative Members that the last Labour Government spent on average 10% more in every year of its final decade in office than they raised in taxes, which left a colossal legacy of debt that we have scarcely begun to repay. Millions were squandered on projects such as building schools for the future that were cancelled at the tail end of the last Labour Government by Alistair Darling, as they ran out of money. When we look at the reports of what this means at constituency level, councils such as Surrey, which embraced this Labour Government’s devolution agenda, have now lost the opportunity for the mayor that they were promised. They report that they have been left £60 million a year short. Members will be ill-served by the consequences of the Budget.

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[Gideon Amos]

I certainly agree with my hon. Friend, who champions Torbay on a regular basis in the Chamber. Councils are suffering reductions in their funding settlements across the country, which is one of the reasons we cannot support the amount of support they are getting from central Government.

[Mr Betts]

There is again memory loss on the Lib Dem Benches. It was the coalition Government who made the biggest cuts to local government funding and started passing funding responsibilities over to the council tax system—that all began with the Lib Dems in the coalition Government. Why does the hon. Gentleman not apologise to the Chamber and to people up and down the country for what the Lib Dems did to them when they were in government?

[Gideon Amos]

The hon. Gentleman is right that massive savings were made after the financial crash in 2008—some would say around £40 billion over the coalition years. He would be horrified to learn that the only people suggesting cuts greater than £41 billion were those in the Labour party in their 2010 manifesto, which proposed £56 billion in cuts. [Interruption.] If the hon. Gentleman does not believe me, he can look at the headlines of the time: “Alistair Darling: we will cut deeper than Margaret Thatcher”. That was Alistair Darling in his 2010 Budget. Who began austerity? Who began the cuts? It was the Labour Government, who were planning to go further, faster and deeper, according to Alistair Darling, than the Liberal Democrats or the coalition did.

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[Mr Clive Betts (Sheffield South East) (Lab)]

I first congratulate my right hon. Friend the Secretary of State and my hon. Friend the Minister for Local Government on this settlement; it is a welcome change. I also thank the Minister’s predecessor, my hon. Friend the Member for Oldham West, Chadderton and Royton (Jim McMahon), for his work in both opposition and government to get us to this better place.

I am now the deputy Chair of the Public Accounts Committee, and we recently produced a report on local government funding. I want to read out our cross-party conclusions:

“Local government finance is in a perilous state…Funding has not kept pace with population growth, demand for services, complexity of need, or the rising costs of delivering services. As demand for targeted services such as social care, special educational needs, and temporary accommodation has grown, there has been a significant reduction in spending on commonly used discretionary services, such as street cleaning and lighting, parks and gardens, and leisure services.”

That is a truth that councils up and down the country have experienced and dealt with for many years.

I congratulate councillors of all parties, in all councils across the country, for how they have performed during the years of austerity—they have continued to work, and to deliver efficiencies that some central Government Departments, as the PAC can testify, would do well to emulate.

[Peter Dowd (Bootle) (Lab)]

I thank the Secretary of State and his ministerial team for listening to my representations and those of my council. My experience of Tory Secretaries of State is that having them listen, let alone act, is about as rare as rocking-horse dung. The Opposition, who did not properly fund local government for 14 years, are now complaining and whinging about the position we are in. Does my hon. Friend agree that this is their responsibility, not the responsibility of this Government?

[Mr Betts]

Absolutely. I think that goes for both the Conservatives and the Liberal Democrats, as my hon. Friend will understand.

This Government clearly face a serious situation, and we must say that they have got some things very right indeed. First, we have the multi-year settlement, which has been called for, cross-party, for many years—it was certainly something that we called for when I was on the Housing, Communities and Local Government Committee, and the Committee is again calling for it now. It is good that we have one; it gives councils a degree of certainty, so that they can look to the future and plan ahead.

Fair funding has always been a subjective term; one side will say that something is fair funding, and the other will say that it is not. I just point out to the Opposition that Greg Clark, when he was Housing Secretary 10 years ago, promised a fair funding review on behalf of the then Conservative Government. However, we are still waiting for that review in 2024. The Opposition had their chance, but they did not take it. We now have a review to deal with the simple matter of some figures and data in the funding settlement being at least 20 years old.

[Natasha Irons]

I join colleagues in thanking the Secretary of State and the Minister for Local Government for their work on this matter. We talk about outdated data; places like my Croydon East constituency, in an outer-London borough, have been treated as though we have an endless pot of cash, or are endlessly wealthy. However, my constituency has pockets of some of the highest deprivation in the country—an issue that this funding formula seeks to address. Does my hon. Friend agree that this fresh approach, which brings an end to Tory austerity, is exactly what our councils need?

[Mr Betts]

I certainly do. My next point was going to be that deprivation is properly recognised in the funding settlement. The problem is that councils that have deprivation either across their area, or in part of it, have borne the burden of the cuts over many years. Under previous Governments, both coalition and Conservative, councils with the greatest need—which previously had the largest grants to reflect that need—faced the biggest cuts. This funding settlement gives the biggest increases to councils that faced the biggest cuts under the last Government; we are getting some restitution for the funding reductions that we suffered. The recovery grant is right, because councils need recovery when their funding base has been decimated, after grants that they needed were taken away from them. My one challenge to my hon. Friend the Minister is that the recovery grant lasts for three years, so there is a danger of a cliff edge in 2029, when those councils that now get it may suddenly lose it. The Minister is obviously trying to think ahead, which makes a change from previous Ministers, so let us start to think about that problem before it hits us.

I welcome the settlement for Sheffield. I think the comments made by the leader of the council—which is a cross-party council—were about the council’s concerns and the challenges it faced prior to this funding settlement. The finance director of Sheffield council has said that

“The figures announced in the LGFS back up the Government’s commitment to redressing the unequal cuts seen during the austerity years of the previous Government, and its aim to deliver more funding to deprived areas of the country.”

I think that is a fair statement from the officer responsible for the council’s finances. In this funding settlement, Sheffield has got about £55 billion more over three years than was anticipated under the previous proposals, which sort of fills the hole. In the past, we have been making cuts to essential services, but for the first time in 15 years, we can start a budget process without immediately looking at cuts to those services. Year after year of cuts—that has been the situation. Now, the budget can be balanced without those cuts, which is a fundamental change. We can start to look at some improvements and preventive measures for the future that will bring about the sort of change we all want. I say well done to the Government for getting us to that position.

I also say well done to the Government for dealing with the ringfences—not just in the Minister’s Department but across Government, whether they be in transport, health or education. There are ringfences all around that restrict local councillors’ ability to do the right thing for their communities, so it is good that the Government have moved in the right direction. The current Select Committee and previous Select Committees have called for that change, and the Government have listened. To be fair, when Michael Gove was Secretary of State, there was an agreement that this needed to happen, but not much evidence that it did happen. I think we have moved in the direction that everyone wanted us to take.

This settlement is a good start. It steadies the ship after the cuts that councils with higher levels of deprivation have had to suffer, and it brings in a strong element of fairness. Now, I am going to challenge the Minister—I know she would not expect me to be completely complimentary. I come back to the point that the Chair of the Select Committee, my hon. Friend the Member for Vauxhall and Camberwell Green (Florence Eshalomi), made about the need for change. This is a good start, but there is a need for radical change. We came in with a manifesto of change; we have a large majority, and with willingness, we can deliver on it.

There are major issues in social care. I am still disappointed that we will not make changes to social care funding until 2029, after the review. I think we could make them more quickly. We are clearly moving on special educational needs and disabilities, but we need to move on children’s social care as well. There are things that some councils can do to help themselves; for example, Warrington council has started to build its own children’s home, so that it does not have to send children to very expensive private homes.

[Gideon Amos]

We may not agree on the cuts, which began in 2009, but the hon. Member has not yet touched on the removal of the remoteness uplift. Does he agree, in a cross-party spirit, that including a remoteness uplift just for adult social care, but not for children’s services or any other services, is contrary to common sense, and affects remote rural authorities more than others across the country?

[Mr Betts]

I will not go through every detail of this settlement. There is always a balance to be struck in local government settlements, and Ministers have to make their own judgments about that. It is the overall impact that I want to judge the settlement by. For me, this is a fairer settlement for those authorities with high levels of deprivation and some of the worst cuts in the years of austerity.

[Mr Snowden]

It is all very well to say that this is a fair settlement. On balance, councils that have Labour constituencies benefit from it, and councils that are represented by Conservative Members do not. The fairness can be derived from that.

[Mr Betts]

First, there are many more councils with Labour MPs. It might be the case that Labour MPs represent councils with higher levels of deprivation. That might be the simple explanation.

[Danny Beales]

I am an MP with a Conservative council, and a colleague from the Conservative Croydon council area—[Interruption.] Conservative Members cheer; unfortunately, it is a bankrupt Tory council, but luckily this Government are stepping in, have followed the deprivation and the need, and are properly funding that council, regardless of its political colour.

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[Mr Betts]

Absolutely. Councils should be funded according to need, not according to political representation. [Interruption.] Before Conservative Members start, I do not know whether they are old enough to remember Dame Shirley Porter and Westminster council, and how they were stuffed with money over visitor nights, just to ensure Conservative victory at the local elections. But we will move on from that. That was a long time ago.

I say to the Minister that these are big challenges that need to be addressed. We have to get to grips with them. We also have a local government finance system that is fundamentally broken. The Chair of the Housing, Communities and Local Government Committee commented on that in her excellent speech. Moreover, the Select Committee in the previous Parliament made the same recommendations as her Committee did. In the modern age, how can we continue to fund local authorities using a council tax system based on valuations from 1991? It is nonsensical. It is not sustainable. Imagine asking someone how the value of their new house had been arrived at, and them saying, “Well, this is a guess at what it would have been worth in 1991, had it been built then.” This is ridiculous, and we must change it. It is also regressive. Michael Gove, the former Secretary of State, said that the system was regressive, and it is. Poorer households pay disproportionately more in council tax. It simply is not fair.

In every year since 2010, council tax has taken a higher and higher share of local government funding, placing a greater and greater burden on that part of the funding settlement, which is regressive. When the Chancellor made commitments during the election campaign not to increase certain taxes, council tax was omitted. Therefore council tax has been going up disproportionately. It is an unfair, regressive tax that hits the poorest hardest. We simply have to do something about that.

This comes back to the democracy point that the Chair of the Select Committee made. While this is going on, poor families have to pay disproportionately more, but in terms of local government spending, more is going on social care, homelessness and special education needs—the things that are really important, but which most people do not receive. That means that most people, particularly those on lower incomes, are paying more tax every year and getting less in services, because of the cuts to other services, as the Public Accounts Committee recognised. That is not sustainable. It undermines trust in local authorities. People say to me, “The council has put up my council tax, but I am getting less for it.” This really has to change.

[Mr Brash]

In Hartlepool, 70% of every penny the council spends is on social care, and my constituents pay, as a proportion of their property value and as a proportion of their income, far, far more than the more affluent areas of the country. As my hon. Friend has said, they do not receive the services that they need. Is it not time to abolish the council tax system?

[Mr Betts]

The reform needed is so fundamental that the system would not be recognisable from what we have now. That is how we have to try to move forward.

We were promised business rates reform, but what we have had so far is not reform, but some minor changes. Yes, we have had good changes to try to help pubs and leisure facilities, but it is not fundamental reform. We could look at what Denmark and Australia have done to reform their whole system of council finances based on land values. That is one alternative. Let us at least have a look at it. Let us at least accept the need for change, even if we cannot agree at this point on precisely what that change should be.

In bringing about that change, I say to my hon. Friend the Minister that we should look at giving local authorities more power to determine their own levels of taxation. We are an outlier in Europe in how centralised our local government finance system is. That is another challenge. It partly comes from the great inequalities we have between different parts of the country, which are much greater than in most other European countries. I welcome the ability for councils to introduce a tourism tax, but that is a minute step towards more say for local councils about the money they can raise. It is a welcome but very small step.

I congratulate the Minister on the reforms and improvements to the existing system. Those are welcome, and my city and my constituents welcome them. However, big challenges lie ahead in making more fundamental reform to the system and giving more powers back to local councils to determine what money they can raise. The Minister will probably not stand at the Dispatch Box today and say, “We completely agree. We are going to get on with it,” but the Government should at least start thinking about it.