Local Government Finances: London

Debate between Dan Tomlinson and Natasha Irons

Wednesday 26th March 2025 Westminster Hall

[Natasha Irons (Croydon East) (Lab)]

Councils are at the coalface of politics and are leaders in delivery. From potholes to parks and parking, local councils deliver the things that we care about. For too long, our councils have been failed by central Government. They have been undervalued and underfunded.

In London, where councils receive 28% less funding per Londoner than they did in 2010, boroughs are now at crisis point. London’s housing emergency has pushed an estimated one in 50 Londoners into homelessness and pushed London councils into spending £4 million a day on temporary accommodation.

[Dan Tomlinson (Chipping Barnet) (Lab)]

Barnet council now processes 10 homelessness applications every single day—more than double the number it was processing just two years ago. This, coupled with additional spending on educational needs and adult social care, is crippling councils’ budgets, much as council leaders will try to do the best they can by their local communities. Does my hon. Friend agree that that must change if we are to see a sustainable future for councils in outer London?

[Natasha Irons]

Of course I agree. It is imperative that we solve this crisis.

With overspends in children’s and social care services across London, seven London boroughs require exceptional financial support to balance their books, and Croydon council is one of them. As with councils across the country, poor decisions and failure in governance, mixed with chronic underfunding, saw the council issue its first section 114 notice in 2020.

As an outer-London borough with inner-London problems, Croydon has historically suffered from a financial settlement that does not reflect the demands on its services. The debt built up over successive administrations now costs the council £71 million a year to service, and it borrows £38 million of that from central Government. Although I appreciate that it is not something the Government can just write off, I urge them to work with Croydon council to restructure the debt and find a long-term solution to bring down the cost and its impact on day-to-day spending.

Debt is not Croydon council’s only challenge, because even if the debt were wiped out, it would still need to borrow an extra £65 million from the Government to balance its books. Although there are overspends in the areas that we would expect, such as children’s and adult social care, the council is also grappling with a number of neighbouring boroughs placing vulnerable people in temporary accommodation in Croydon while not funding the ongoing associated costs.

A massive 24% of people in temporary accommodation in Croydon have been placed there from outside the borough, with the highest number of placements coming from Lambeth, Lewisham and Bromley. With families often stuck in temporary accommodation for many months or even years, it falls to Croydon to pick up the further, ongoing costs with regard to demand-led services. With councils across London bidding for accommodation and social care placements in Croydon, the council is often forced into a bidding war to provide support for its own residents.

Will the Government look at funding London councils properly, and introduce measures such as including deprivation in the local government funding formula, or increasing the local housing allowance in line with inflation and removing the cap on how much councils can reclaim to cover the costs of temporary accommodation? Will they also consider ways to reduce profiteering in the marketplace for demand-led services, consider legislating to ensure that a home council continues to fund the costs of care when children are placed outside their home borough, and ensure that a family’s home council continues to fund the costs of placing homeless families outside the host borough? I ask because no one wins when councils are forced into this situation and pitted against one another.

If we want people to see and feel the change that they voted for, on their streets, in their communities and across this country, it is properly funded councils that can deliver that. If we want the services that communities rely on every day to be of the highest quality, it is properly funded councils that can make that happen. If we want to make it feel as if the lights have finally come on in this country, it is properly funded councils that can flip the switch.