Local Government Finance

Florence Eshalomi Excerpts

Wednesday 5th February 2025 Commons Chamber

[Florence Eshalomi (Vauxhall and Camberwell Green) (Lab/Co-op)]

I welcome the real-terms funding increase in the settlement, in the context of a decade of cuts and financial mismanagement. The Minister outlined the additional funding for the children’s social care prevention grant, which will help provide vital services for children in their formative years, which is really important. There is the £660 million recovery grant for places with greater need and demand for services. It is important that we continue to focus on prevention, to stop us getting to a situation where many councils are asking for a bail-out later on.

I would like to remind Members of the consequences of the situation that our councils face up and down the country. For some councils, it means the end of community programmes that keep people active, or that mean people can go out and speak to others. I hosted an event last week on loneliness. Many of our constituents report feeling lonely, and those vital community services keep them active. Because of the situation that councils face, some children who are in need of an education, health and care plan are not getting that support, and we see some parents and carers having to quit work just to get adequate provision for their young people. It means that more and more families are ending up in completely unsustainable temporary accommodation, and we hear stories of families having to travel three to four hours every day just to get to school or work. No one should have to go to bed at night and be unable to sleep because they fear that the accommodation they are in could harm their family. Seventy-four children have had their deaths linked to temporary accommodation in the last five years. We are one of the richest countries in the world. This should not be happening.

People rely on our council services for their wellbeing, and we need to end the chronic underfunding of those vital services. We must remember that what we see today is the result of a false economy of underfunding local government for over a decade. For years we have had to see councils cut vital prevention services just to make ends meet. The result is that more and more people are in dire need of those services, which are far more costly not just to the local authority, but to the livelihoods of the people who need them. We see that in private rented sector inspections, in maintaining and repairing our housing stock, and in providing the vital youth services that my hon. Friend the Member for Croydon East (Natasha Irons) referenced, which boost the life chances of teenagers and young adults. If we are honest, the tragedy of the last 14 years is that it has seen more costly services for our local residents.

This settlement is a welcome step in the right direction to help councils meet some of the pressures they face, but again, if we are all honest, many of our councils will still struggle to provide the vital services that residents need and deserve. I am sure that many Members eagerly anticipate the start of the Housing, Communities and Local Government Committee’s inquiry on local government finances. As Chair, I do not want to pre-empt what we will discuss over the next few months, but I want to raise a few specific points with the Minister today.

The Minister knows—he has received representations on it and Members have raised it—that because large councils are big employers, they will be impacted by the rise in national insurance contributions, as the shadow Minister, the hon. Member for Thirsk and Malton (Kevin Hollinrake), referenced. He also referenced the LGA data, which indicates that even with the additional generous funding outlined by the Minister, councils will still be short by over £100 million to cover the extra cost for directly employed staff. The Minister touched on the service expenditure cost, but there is still a gap that needs to be filled. Is the Minister considering the impact that will have on staffing pressures in our councils, and have the Government considered the effect of indirect costs through the commissioned providers? Our councils do not exist in a bubble. The impact of other Government spending areas, such as health and welfare, will have a drastic effect on the costs that our councils face.

I come back to an issue that I have raised multiple times, as the Minister knows. I remain concerned about the impact of freezing local housing allowance at a time when private rents have gone up by nearly 10%. That could create extra and significant burdens on the vital and well thought-out homelessness prevention work that our councils do. Will the Government finally confirm what work they have done to assess that risk; whether freezing LHA will impact on families who are struggling with rising rents; and what pressures—unintended, maybe—that could place on homelessness services across the country?

[Mr Betts]

My hon. Friend raises an important point on local housing allowance. When we considered that issue in the Public Accounts Committee, it was pretty obvious that officials had not done any proper assessment of the impact that freezing the allowance would have on homelessness. Something ought to be done. If the Government take the major step of freezing an important allowance, they ought to know what impact that will have on other services.

[Florence Eshalomi]

I thank the former Chair of the Housing, Communities and Local Government Committee —I know of the work that his Committee did on this issue. The reality is that we need to build more homes. The Government have an ambitious target, but our residents need somewhere to live in the interim. That will mean more strain on the private rented sector and on rents. I hope that the Minister is considering that impact in his work with officials from other Departments, including the Department for Work and Pensions.

Will the Minister inform the House about the details of the public health grant for 2025-26? That will play such a vital role in addressing major health inequalities, which we all want to see reduced in our respective areas. We are talking about treatment for drug and alcohol services and smoking prevention, for example. I declare an interest as a co-chair of the all-party parliamentary group on HIV, AIDS and sexual health. Vital sexual health services help to address health inequalities, so it is vital that councils get funding—and certainty about it.

Extra money is only part of the solution. Some residents will yet again face higher council tax bills next year. They have the right to scrutinise, ask and ensure that every penny of that is spent in the right places, but the reality is that accountability in local government is far too often not fit for purpose. As the Minister knows—he referred to it—the situation got so bad that the National Audit Office refused to sign off the whole of Government accounts for the first time ever in November last year. Only one in 10 councils submitted reliable data for 2022-23, and over 40% did not submit any data at all. The Minister outlined the mess that he inherited, and the measures that the Government are taking to deal with the backlog, but we must ensure that we do not find ourselves in this position again.

The Minister also referred to the local audit office. Will he confirm what additional long-term steps the Government will take to address local government auditing? The consultation closed recently, on 29 January, and I would be grateful if he would outline a timeline for updating the House on that. I know that he shares my desire to give councils the support and flexibility they need. The first step in that is to fix council finances. We welcome the Government’s commitment to multi-year settlements from 2026-27 to give our councils the certainty that they have lacked for so long. I hope that he and the Government will remain open-minded to some of the reforms that our Committee will look at, so that we can all see councils up and down the country delivering the effective services that our residents need and deserve.

[Madam Deputy Speaker (Judith Cummins)]

I call the Liberal Democrat spokesperson.

--- Later in debate ---

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

I am pleased to say that this is one of the first occasions for many years when in speaking in this debate, I do not have to stand up and say how badly Sheffield is being treated, because we have got a fair settlement for the first time in 14 years. Sheffield is a well-run council, and I congratulate Councillor Tom Hunt, the leader of the council, and Kate Josephs, who is the chief exec. We are not at a financial cliff edge. This settlement will not resolve all the problems and difficulties that the council has, but it does mean that the cliff edge is a bit further away, and the council has a bit of room to look at and take serious decisions about resource allocation and trying to continue with—and in some cases hopefully improve—some of the services.

In this settlement, Sheffield council has received £16.5 million from the recovery grant, which is right. We have lost out in so many settlements, because we are a deprived community, and deprived communities had the biggest cuts of all during the years of austerity. That is the reality. Some 60% of our properties are in band A. Putting council tax up does not bring in the same amounts of money as it does in more affluent areas, and it is right that the Government have recognised that.

We have an increase in the grants for social care and homelessness provision, and that is welcome, though I have to add a caveat. The council is saying to me that those grants still do not cover the increased costs it is facing in those two areas. Indeed, the national insurance increase has not been totally compensated for by Government. There are some challenges and issues in the settlement. It is not 100%, but it is an awful lot better than where we have been previously, and that is what we must remember.

I am sure the Minister recognises that this is the easy year. We come to the real challenges next year with the longer-term settlement. A three-year settlement is absolutely right. Fair funding will be looked at, and that is absolutely right. It cannot carry on. The previous Government were going to do a fair funding deal 10 years ago, but they never got around to implementing it. Clearly that review is needed; it is just a question now of getting on and doing it. We recognise that is a massive challenge.

If we are going to get that settlement right for the three years, we have got to address children’s social care, SEND provision, homelessness and the fight for temporary accommodation between different Government Departments, which drives costs up. Those issues need resolution. We also need a resolution to adult social care, although I understand that may not come until a couple of years afterwards. If we can at least sort the other issues out, it will be a significant step forward.

I will raise three other issues briefly, because I appreciate the shortage of time. I can see the Chairman of the Public Accounts Committee, the hon. Member for North Cotswolds (Sir Geoffrey Clifton-Brown) on the Opposition Benches, and he will probably recognise this point. We have been told clearly by the Treasury that from next year, Departments must not spend money allocated for capital projects on revenue. The way that local Government has had to be bailed out in the past few years is by capitalising revenue expenditure. What happens if the Treasury locks down that activity? Has any thought been given to that? It clearly needs some thinking about.

The Chair of the Levelling Up, Housing and Communities Committee, my hon. Friend the Member for Vauxhall and Camberwell Green (Florence Eshalomi) mentioned public health. Why is the grant late once again? I accept that is probably not the Minister’s responsibility, but he referred to prevention being important, and it is, and that is exactly what public health is about. From next year at least, can we get the public health grant at the same time as the local government grant?

Finally, I echo the comments about the hard work of local government staff and councillors in particular. Many councillors lose money, and there is a real challenge about getting younger people to become councillors. I asked the Secretary of State earlier about that, but she did not respond directly to my question. When will the Government look at reinstating the right for councillors to join the local government pension scheme? For many younger councillors, that is a real difficulty. They come in, they lose money, but they also lose their pension in the longer term, too.

[Florence Eshalomi]

I declare an interest as I served as a local councillor, like many colleagues in this House. It is about not just the pension; the additional costs that younger councillors face now to go in and serve their local community may be off-putting. On top of that there is the level of abuse that local councillors face for carrying out their public duty. Does my hon. Friend agree that the Government should look at that?

[Mr Betts]

I do. I welcome arrangements being put in place for the police to give more protection to councillors in that space. Recognising the financial strains, particularly for younger councillors, does not take a lot of money. I ask the Minister to allow that to happen.

I forgot at the beginning to declare my interest as vice-president of the Local Government Association. I am sure that it is pleased with the settlement. The Minister recognises the challenges that have been outlined—they are to be faced in future years, but I thank him for this settlement today.

--- Later in debate ---

[Shaun Davies (Telford) (Lab)]

I declare my interest as a serving unpaid councillor at Telford and Wrekin council and an honorary vice-president of the Local Government Association.

I welcome the Government’s local government finance statement, and particularly the real-terms funding increase of 4.3% for local authorities across England. I am particularly pleased to see the £16.5 million of extra funding for Telford and Wrekin council—a 9% uplift. What a contrast that is with the last 14 years of Conservative Government, during which authorities were, in the words of the Institute for Government, “hollowed out” by austerity, with core funding per resident falling by 18% in that time. We have all felt the impact in our communities. A third of English libraries closed during the 2010s, the number of miles covered by bus routes has fallen by 14%, and the proportion of councils’ budgets coming from council tax has risen from 36% in 2010 to 53% today, hitting working people hard in the pocket. I say to the hon. Member for Thirsk and Malton (Kevin Hollinrake) that it is a bit rich for him to talk about council tax rises, given that council tax doubled over the last 10 years under the Conservative Government.

This settlement is a vital first step—I emphasise the word “first”—in the right direction. However, as we have been saying as a sector, and as I had been saying as the chair of the Local Government Association, local authorities need more funding, but they also need reform and a focus on prevention, because local government is the best preventive service that this country has. When it comes to housing vulnerable children and adults, local authorities and local government provide that housing. When it comes to social care and looking after elderly or disabled people, it is predominantly councils, not the NHS, that support those residents. Councils are essential frontline services that intervene to protect our most vulnerable, but they also keep our villages, towns and cities as places where people want to live and bring up their families.

I will address the financial situation that local government finds itself in. If 10% of NHS trusts anticipated that they would have to declare themselves bankrupt in the next year, it would be on the front page of every single national newspaper. But when it comes to councils, there seems to be a situation of normalisation. Over the last 14 years, more councils have gone bankrupt than in the entire history of councils in this country prior to that, and the normalisation of that needs attention. Councils do vital work in protecting vulnerable people, especially the young. That should be celebrated, but my council, like many others up and down the country, is now spending £8 in every £10 on social care, and some councils are spending up to half of their budgets on temporary accommodation.

[Florence Eshalomi]

My hon. Friend refers to the spend on temporary accommodation, which the Select Committee heard evidence about. He may be aware that, collectively, London councils—the 32 boroughs—are spending £4 million a day on temporary accommodation. Does he agree that that is just not sustainable?

[Shaun Davies]

I agree with my hon. Friend, the Chair of the Select Committee, that it is not sustainable. It is also bad for children, families, councils and communities. If children are in temporary accommodation, they genuinely do not know what school they will go to next term. That is bad for children, who are the next generation of citizens.

We need systematic change. Central Government need to ease the burden on local authorities and spread out the load; build enough affordable homes so that we do not have 354,000 people who are homeless every single night in England; move care into the community, as the Darzi report recommended; and resolve the systemic issues so that social care providers do not face funding crises every single year. I add my modest voice to the calls of other hon. Members: will the Government please communicate the public health grant to local authorities so that they can set budgets for the next financial year in a meaningful way?