Local Government Finance

Debate between Clive Betts and Jonathan Brash

Wednesday 11th February 2026 Commons Chamber

[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.