Inner-London Local Authorities: Funding

David Simmonds Excerpts

Tuesday 10th February 2026 Westminster Hall

[David Simmonds (Ruislip, Northwood and Pinner) (Con)]

It is a pleasure to serve under your chairmanship, Dr Murrison. I draw hon. Members’ attention to my entry in the Register of Members’ Financial Interests. I am a parliamentary vice-president of London Councils and a vice-president of the Local Government Association. I would like to thank those organisations for the excellent research that they have supplied to Members to help us prepare for today’s debate.

While I congratulate the hon. Member for Dulwich and West Norwood (Helen Hayes) on securing the debate, listening to her story of being a councillor—one that is reflected, I think, by a good number of Members who were present this afternoon—made me think about where it sits in the context of what is happening with the local government funding formula overall and the particular impact that it is having on our inner-London boroughs.

We know that London’s funding formula has always, to an extent, created a city of two halves. There are the inner-London boroughs, with a relatively generous settlement from that funding formula and, historically, generally lower council taxes. Then there is a doughnut of outer-London boroughs, in which my constituency and that of my hon. Friend the Member for Bromley and Biggin Hill (Peter Fortune) are found, with a funding level broadly in line with the surrounding county and district authorities.

For a long time, it has been a source of concern among London authorities that there needs to be some levelling out to ensure consistency across council tax and funding. To address the longer-term funding issues, however, the Government clearly need to address the nature, scope and purpose of many of the statutory duties that exist across all those authorities, in order to enable us all to live within our means and to set levels of taxation that are reasonable for our constituents to pay.

Sadly, we are not seeing that happening. Instead, as the hon. Member for Sutton and Cheam (Luke Taylor) described, we have a Government who came to office saying that they were the cavalry coming over the hill, and that they could be trusted to inject additional resources into inner London, outer London and other parts of the country that were concerned about funding. In their first Budget, however, local government was left £1.5 billion net worse off through the jobs tax—the national insurance rise—alone.

The consistent feedback from councillors across London is that they feel a sense of shock and surprise at just how fast things have got so much worse. There are also particular significant dynamics in inner London. As several hon. Members have said, in the local government finance settlement, more than two thirds of the additional resources announced by the Government would come from the maximum possible council tax rise being imposed across the board. That is not additional Government funding, it is simply councils being required, as a minimum, to use their maximum possible tax-raising powers on the household budgets of all their local residents.

We also see the impacts of exceptional financial support, a policy that has existed under Governments of all stripes under different names for a long time. It is essentially a measure to allow a council to borrow to get it through temporary financial difficulties. It is a way of avoiding the issuance of a section 114 notice, which is the equivalent of a bankruptcy notice, by the statutory finance officers in that local authority. On an almost weekly basis, this Government make written ministerial statements on local government best value interventions, and on agreeing exceptional financial support to the extent that it is no longer exceptional. It is clearly simply a method of sustaining local authorities to avoid bad headlines, rather than addressing the nature, scope and purpose of statutory duties, which need to be addressed to get budgets back into balance.

Acute pressure has been created by an explosion in rough sleeping and homelessness in inner London since this Government took office. We need to be clear: London has always had a challenge around rough sleeping. Although my constituency does not cover Heathrow, it is a significant factor in my local authority’s activities. The number of people who find their way to an airport that is open 24/7, with showers, toilets and security, means that there are a disproportionately large number of rough sleepers in my local authority’s area.

As we heard, there has been a 27% increase in street homelessness since this Government took office. That contributes to the sharply rising pressure on temporary accommodation that London Councils, on behalf of the capital’s local authorities, has highlighted as the biggest single factor driving inner-London councils to seek exceptional financial support and to look at significant reductions across the capital in the services that our constituents expect local authorities to provide, such as libraries, parks and clean streets. At the same time, according to a recent report by Savills, two thirds of London boroughs report reaching net zero: not net zero in the traditional sense of an environmental target, but net zero new housing starts. In two thirds of our capital’s boroughs, no new homes are being added to the housing stock at a time when the Government have an increasingly unattainable target of 1.5 million new homes. To hear hon. Members from throughout the Chamber talk about the acute pressure from housing need, at a time when housing delivery in the capital has absolutely collapsed, demonstrates that things are not going in the right direction.

We are due to consider the local government finance settlement in the main Chamber tomorrow. More two thirds of local authorities have reported, having crunched the numbers on that funding formula, that they will be left worse off under it. Two thirds of councils in the country are worse off under the funding settlement being introduced by this Labour Government.

There is another significant factor. This week we heard that the SEND White Paper is to be delayed further. It will address the significant long-term structural and demographic concern driven by the increasing numbers of children with more acute needs for whom local authorities have a statutory duty—another duty over which they have no discretion. Although the statutory accounting override—to which Ministers have referred in the past—goes some way to avoiding that becoming an acute problem, we see acute pressure building up across the country, not just in inner London.

All that amounts to a situation where residents in inner London face extraordinarily significant increases in their taxes. The royal borough of Kensington and Chelsea has reported potential increases of council tax of up to £500 a year. Earlier, I met with one of the Conservative councillors from the London borough of Barnet, traditionally one of the less affected outer London boroughs, who reported that a £200 million funding gap is opening up as a result of the changes that this Government are making. Even for those of us in outer London boroughs, where council tax rates are broadly similar to those in the surrounding county and district areas, the combination of the rises in the mayoral precept, referred to by my hon. Friend the Member for Bromley and Biggin Hill, and those acute pressures, mean that in many cases council tax will already be at or well in excess of the £2,000 benchmark that Ministers have set out for council tax across the country.

In conclusion, we see a consistent message from across the sector. The leaders of inner-London boroughs—Labour and Conservative—talk of acute pressures getting much worse much faster than they had expected, and shortfalls in this funding settlement so excessive that no level of cuts could lead to boroughs achieving them and meeting their statutory duties. When she speaks on the local government finance settlement tomorrow, will the Minister announce a more fundamental rethink? Local authorities have a huge range of statutory duties, with more than 800 different services delivered by a typical local authority. The rise in national insurance alone has significantly driven up the cost of those activities.

We do not simply need more sticking plasters. Our residents, hearing a message from the Labour Government that there is more money in the system, find that money is coming straight out of their pockets and wallets, through massive increases in council tax. We need a fundamental rethink about how we deliver local government in the capital, so that it is affordable, deliverable and sustainable for the future.