Non-Domestic Rating (Multipliers and Private Schools) Bill (Second sitting)
Jim McMahon ExcerptsWednesday 11th December 2024
(1 year, 10 months ago)
Public Bill CommitteesRead Full debate Non-Domestic Rating (Multipliers and Private Schools) Act 2024-26 View all Non-Domestic Rating (Multipliers and Private Schools) Act 2024-26 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 11 December 2024 - (11 Dec 2024)
David Simmonds
Q
Dr James: I have every sympathy with the families of children who have a variety of special needs, and I do not want to see them suffer in any way, but I want to address one of the points that private schools make, which is that the parents are virtuous and self-sacrificing because they pay again for education and thereby relieve the state of a burden.
In this country, unlike countries in the eurozone, we have a sovereign Bank of England, which creates the pound sterling. It is not revenue constrained, even though the Government usually tend to behave as if it were by convention. There are real economic factors that restrict the amount that it is wise for the Bank of England to produce, or to allow the Government to spend into circulation, but the availability of money is not a limiting factor. There is therefore no inherent reason why the state cannot provide education for children with special educational needs; it is just that various Governments of various complexions have chosen not to do so.
The question is always about the transition, because whatever we do, things are not going to change overnight. You do not want to disadvantage pupils who are currently in the system or will shortly go into the system, but there are workarounds. I do not know whether you remember this, but the parent of a child with special needs was going to be one of the people put forward to front a judicial review to challenge this proposal, and she pulled out when significant funding was found, so there are workarounds if the will is there. In the longer term, there is no inherent reason why it has to be done by the private sector.
The Minister for Local Government and English Devolution (Jim McMahon)
Q
Dr James: I am sorry; I am having a bit of difficulty hearing what you are saying distinctly.
Jim McMahon
I think that rather than hearing a case from the evidence sessions that asserts that this does not need to happen, which we have just spent five minutes doing, it would be helpful to get a sense from you, given that the decision has been made to do this, of your assessment of the impact and the mitigations you would propose, within the scope of what is being proposed, to counter that.
Dr James: For schools providing for special educational needs, you can always amend the Bill to exempt certain types of school, or certain situations with certain pupils. There is a bigger question of social justice: it is well known that the alumni of private schools are disproportionately represented in all sorts of professions, including Parliament. I have a quote here from a paper that that says that parents know that what they are paying for is lifelong membership of an exclusive and superior club. Talk about saying the quiet bit out loud! We can provide scholarships and exemptions for special educational needs, but—
Jim McMahon
Q
Dr James: That indicates how far there is a problem with this and how far this is being used as a stalking horse to try to frustrate the bigger objective of reducing social inequalities.
Jim McMahon
Q
Dr James: I am sorry; I am having difficulty hearing what you are saying.
Jim McMahon
These are evidence sessions where we try to glean insights that we have not previously had to inform the Bill and any potential changes. But I am struggling to get from the evidence so far a real sense of the impact. If there is a pound for pound impact with this measure—the business rate treatment for private schools—it amounts to, on average, just over £300 per pupil if it is passed on in its entirety, which is less than £1 a day. On that basis, what assessment has been made on the impact of that from your perspective?
Dr James: I have not actually looked at the impact of this particular measure in detail. I have looked at the impact of the taxation in general, but—
The Chair
If we speak closer to the mike, it will pick us up—the witness is not hearing.
David Simmonds
Q
Steve Alton: Building on that point from a pub perspective, it is about rebalancing taxation overall for pubs, and making it fair. We have always consulted with Ministers and officials across Government on solutions. Our members will always argue for VAT to be reduced on pub sales, because they saw that support in the pandemic and it was an instant injection of cash into their business. It was not about profiteering. Kate alluded to the fact that a pub is a low-margin business. It needs to be profitable because pubs need to continue to evolve the model and invest in what they are doing. We all want to go to great pubs, which do exist. Some of them, despite all these challenges, are doing very well, but they are the outliers. It is the mid-pack operators, who have been doing this for decades and have had long-term viable businesses, who now, frankly, face some very tough decisions.
We are incredibly concerned. At the moment, pubs are all busy looking after customers, which is great; you will see pubs at their best. In January, when it gets quiet and they reconcile the numbers, and there is a head-over-heart moment, I fear that we will lose a lot. If it is one in four, that could mean that we lose up to 15,000 pubs. They will not recover, because they will get boarded up. You see them in all the communities that you represent. They do not come back. When that happens, you have a whole rack of associated issues involving social deprivation and disorder. We work closely as an industry with schemes such as Best Bar None, which is all about creating safe spaces for socialising and, through that, seize the positive impact of hospitality—increased footfall, lower crime, lower social disorder and people feeling safe, because people are out and about in those communities and high streets. That is absolutely key.
Kate Nicholls: Some elements are there. This is a really welcome first step, but the pledge is for root-and-branch reform of business rates, and that is what high street businesses have been calling out for, for 20 years, really. I think that there is need for further reform of the system—you asked particularly about the business rate system—where support could be provided.
Three key elements are included within the wider package of reforms in the consultation paper that was published with the Budget. First, we in the hospitality sector often get penalised for investing in our premises. That delivers higher turnover, but then you get taxed—it is a tax on success and it happens frequently. The suggestion is for a longer period after a significant investment is made before the Valuation Office Agency can come to do a revaluation and look at taking an additional chunk in business rates. That would be incredibly welcome. We suggest that that should be at least as long as the first revaluation period post an investment being made, so that you do not get that significant change.
The second element is the interrelation between business rates and other tax factors for investment in the premises. Again, that is about the penalisation. At the moment, that is around capital allowances, but capital allowances do not extend to leased property. Only about a third of the products that are invested in when upgrading a pub or hotel are capable of being covered by capital allowances. As Steve said eloquently, you only pay corporation tax when you make a profit, and if you are not making a profit, capital allowances do not really help you. We need to look at other ways—perhaps research and development tax credits or discounts off the business rates for investment in green technology, but things that help to incentivise rather than penalise people for making an investment in their premises.
The third element is not in the scope of the consultation, but it does need to be taken forward. There is a very delicate balance between rent and rates, and they are supposed to be self-correcting. In our sector they are not, because rental and lease periods are long, and there are upward-only rent review clauses in most high street and city centre premises. That means that your rent and rates bills cannot reset themselves when there are changes in the market, in the same way as with retail in the high street. There was an outstanding consultation on commercial leases, which was looking at a ban on upward-only rent review clauses. It would be significantly helpful if the Department took that forward separately, as part of a high street strategy.
Jim McMahon
Q
There will always be limitations on just how far any Government action can go, but we believe that this is a comprehensive package that gets the right balance between the online retailers and large distribution warehouses, and those on the street and in communities. On the quite stark warning that was issued about the potential for one in four pubs—15,000, potentially—to close, how would that compare with the past 10 years, say, so that we can put it into the context of the number of pubs that have closed in that period?
Steve Alton: It would be a huge acceleration. The smoking ban was a huge intervention that drove habits and change. In essence, our operators would accept now that it had a silver lining, in a sense, because they had to modernise and make pubs far more open and accessible to all, but this would be an acceleration in the magnitude of failure. We are currently losing about 50 a month. You have seen that in the figures and in the insolvency numbers. You will also see that in your local communities. It is clearly a significant acceleration if you annualise that rate. It will be a cliff edge. Certainty is important.
I will give you an example of—Kate is spot-on about this—penalising success. There is a great operator who runs a brilliant bar in the centre of Manchester. He has tripled his turnover in the past few years from £350,000 to £1 million. He employs 30 people, including a lot of part-time staff and students. He has seen business rates rise in line with that, and that has not given him a breathing space. He currently makes about £60,000 to the bottom line on a £1 million-turnover business. The Budget change will wipe all that out. People will come to a decision about whether running a pub is the right thing to be doing. As you articulated, many of our operators have a social purpose. They want to be in their communities, adding value. For them, it is not an overt commercial play. If it were, the head-over-heart decision would already have driven some of them out. They just need certainty and a little bit of hope.
We are encouraged by the direction of travel. Having the two multipliers specifically for hospitality is fantastic. I encourage applying the maximum in the Bill because it is needed now. We have got a revaluation coming up. As Kate intimated, it probably will not reflect the reality of rents because it will not take into account what happened in the Budget, how that drives the market and the pretty rapid impact that will have. By the time the revaluation comes round, it will not reflect that. There is a consideration about the underlying multiplier, from which the 20p is applied, being dropped, and that being kept under continuous review.
We do not want to penalise operators who invest money and put their heart and soul into these businesses. They want to do many things and they can do them very quickly. One of our platforms is the Sustainability Champion award. We write to all you guys about it—hopefully you will have had some letters from our organisation—applauding the efforts of operators in your localities. They do amazing things rapidly, but some of that is capital restricted. They want to move to fully electric kitchens, and they want self-generation systems and recharging points in their car parks. Some have made that leap, but they are the outliers who can afford to do it. Access to capital is a huge issue in our marketplace. A mid-tier operator cannot get it right now. Banks are just saying no. If we look at the profit and loss, we can perhaps understand why they are saying that, but it creates a negative corkscrew.
We see the direction of travel positively, but I implore the Committee to apply the maximum on the two lower thresholds and keep the overriding multiplier firmly in your sights and make sure it goes down. We want to reduce the tax our pubs pay, not because the money will go into their bank accounts but because it will unlock investment and surety. On tenure, you will know publicans who have been there for 10 or 20 years—they want to commit to those ventures long term. It is not a short-term money-making exercise. It is far more purposeful than that.
Kate Nicholls: May I answer your question about the number of closures most recently? Last year, there were 3,000 closures in total across hospitality as a whole. Since covid, there has been a reduction of about 20% in neighbourhood independent restaurants and 30% in neighbourhood independent nightclubs and late-night music venues. Closures are not just a pub issue. It is hitting across the board. It has also hit a large number of guest houses, bed and breakfasts and independent hotels.
One driver is investment in openings. Unfortunately, a small number of closures will happen every year. It is a devastating human tragedy for those involved, but business failures happen. What drives the numbers is the lack of new openings and investment coming through to reopen premises and get businesses moving again. Business rates are a significant factor in that. I have so many discussions with people about investment in the sector, whether that is foreign direct investment, major private equity or small-scale bank investment. Corporation tax never comes up. Business rates are always an inhibiting factor for investment, so this is really significant.
I echo Steve’s point about the importance of using the maximum for the two rates—the standard rate and the lower rate. There is often a misapprehension that the lower rate is small business and the standard rate is large business. That is not the case. We have many independent, single-site businesses that will be in the upper rate. Applying the 20p discount to both is therefore important. About 30% of hospitality businesses that pay business rates are in the standard multiplier tier, and they account for 60% of employment and 60% turnover.
Let us not kid ourselves, either, that the super-rate charged at £500,000-plus will not have an impact. A small but significant number of hospitality venues are caught within that multiplier. I am not sure that that was always intended, given that—as you rightly say, Minister—it was designed to capture online businesses, so we could look again at some of those higher rates. The Bill gives scope for different businesses to be treated differently in that £500,000-plus tier, and we urge you to make use of that, as well as of the maximum 20p discounts below.
Jim McMahon
Q
Kate Nicholls: We have done an annual benchmarking survey across the hospitality sector as a whole over the past 15 years. We look at the common site operating costs. In the past 15 years, business rates across hospitality as a whole have gone from around 4% to 5% of turnover towards 7% to 8%, so they are creeping up. That is important. They are a relatively small cost—by far and away the biggest is labour costs, which are the engine of our business—but they are creeping up. The issue is that business rates are a fixed cost: you have to be able to cover them before you can open your doors; if you cannot, you are not a going concern.
Rent depends on the part of the sector. Across the sector as a whole, it is on average around 11% of turnover, but it is lower than that in the leased and tenanted pub estate. That will largely be part of the regulated estate and covered by the pubs code. There, you have a ban on upward-only rent reviews, and therefore you can get the adjustment that we were talking about. In the rest of the sector, where you need to have long leases to get the refit costs, you do not; rents may change in the market, but they only go one way once you are in. That area needs to be looked at as part of the Department’s ongoing review of commercial leasing and the high street strategy.
Jim McMahon
Q
Kate Nicholls: The overwhelming majority of my members will benefit from the measures being taken, if they are taken to the maximum, but I reiterate exactly what Steve said: in the current circumstances, it needs to be 20p. It cannot be “up to”; it needs to be 20p for both tiers. A number of hospitality businesses across the UK—about 700—fall into the super-rate. That might sound like a very small number, but it is a large proportion when it comes to employment: those businesses account for about 7% of employment. That will be particularly impactful. Those will tend to be larger hotels, pubs, bars and restaurants, either in city centres—around 400 of them are in London—or in coastal communities, where we have our large hotels. Those will be very large premises.
You asked about margins. Over the period since covid, margins in the sector have eroded by 40%, and many of our businesses are now operating at a net profit margin of between 4% and 6%. In Cornwall, Devon and deprived coastal areas, the big hotels will be the biggest employers by far: 20% of employment in those coastal areas is in the hospitality and tourism sector. If we hit those businesses and apply a super-rate at £500,000-plus, that will have a material impact on them, particularly when combined with the NICs increase.
My final point on those 700 businesses is that we are going through the revaluation process at the moment, and we estimate that there are a further 300 in the band of £400,000 to £500,000 rateable value. Given that the revaluation is looking at 100% to 200% increases in their rateable value as covid support falls away, you could bring a further 300 business premises into that super-rate.
As we read the Bill, there will be different rates above £500,000 for different types of premises. We urge you to keep that at zero for hospitality businesses, if you choose not to exempt them totally. There are two options: you can exempt them on the face of the Bill or you can apply a zero rate so they just pay the standard rate. Otherwise, you will further exacerbate closures across the big hospitality businesses in city centres and coastal tourism communities.
Steve Alton: From a pubs perspective, a small number of those it will affect are subject to the small business rate relief, and we are obviously keen for that to stay in place, because they are small, essential community pubs. It will have a material impact.
I also ask the Committee to look at the real impact numbers that the proposal will generate. It comes down to our objective of getting fairer taxation and a reduction in what those businesses pay. The maximum application—the 20p—is key, but you should also look at the multiplier alongside the revaluation. If that rises, which is highly likely, we need to think about the overall impact, and ultimately what the bill will be. We have a profitability issue right now. To come back to the Minister’s comment, rates are part of an unfair tax burden that we need to equalise.
Jim McMahon
That was not my point. I did not use those words.
Steve Alton: But having that assurance is a key part of it. Uncertainty has been impactful on business rates. It has stopped small operators from taking another site. If they take another site, you are talking about £300,000 to £400,000 of capital investment to build a new team of 40 employees, and there is a compound impact on the supply chain locally. A lot of people have held a station and have the ability to do it, but it is just not viable with the business rates bill as it is now. You could unlock some significant investment and growth, and, as we have shown previously, you could do so rapidly.
David Simmonds
Q
Is it your view that there should be discretion on the part of the billing authority so that if they need a sustainable hotel sector in order to meet temporary emergency housing need, or to accommodate significant numbers of refugees arriving, pending onward placement elsewhere, they are able to negotiate? If those businesses go to the wall because of a lack of profit margin, the taxpayer will have to be billed significantly more because those people will have to be placed in accommodation at a higher cost elsewhere.
Kate Nicholls: May I just say that the overwhelming majority of hotels are used by visitors for leisure and business purposes? Our hotel sector is a vital component of our tourism industry and is our second-largest service export earner, in the form of tourism. That is just to put your question in context.
As I understand it, local authorities will have discretionary powers to apply additional relief to those premises, but not to change the multiplier, which is set nationally. It is important that that is retained so that there is a national multiplier. You get distortions if you have different rates. There is discretion if a local authority wants to support a particular business—if it is impacted by flooding, for example, or the authority wants to maintain the provision of a service. The local authority can apply additional discretionary relief over and above the nationally mandated relief. That obviously comes out of its own funding. That is a better way of doing it than changing the multiplier. There is a question about whether local authorities should retain an element of the business rates so they have the discretion to fund, but that is a bigger discussion and is not within the scope of the Bill.
The Chair
Order. The Minister may have been just about to say this, but we have only five minutes left, at least two more Members wish to ask a question, and this is steering a little out of the scope of the specific contents of the Bill.
Jim McMahon
It is almost the opposite, really. Given the context that has been outlined, this is the respite that the industry has been calling for. If we can keep to the scope of the Bill, and what it provides for, that would be helpful.
Jayne Kirkham
Q
Sacha Lord: Nightclubs will certainly be impacted. Obviously, a nightclub is a much larger space than a pub, so sadly they will suffer under this legislation.
David Simmonds
Q
Simon Nathan: We recognise that there has to be some sort of boundary, and obviously it would not be possible to draw up an exemption based on a tax on property that exempted every pupil with SEN. Our suggestion is that schools where more than 50% of pupils get SEN support would benefit from that exemption. We looked at the numbers, and that would bring in perhaps an extra 100 schools and an extra 4,500 pupils. Clearly, if you are a pupil in a school that has more than 50% SEN, you are going to have a certain level of need, and perhaps the needs cannot always be catered for in a mainstream school.
Jim McMahon
Q
Barnaby Lenon: We have a huge range of types of school. At one end, there are quite expensive boarding schools. Their fees are often quoted, but it is very expensive to run a boarding school. They are not typical, because the average independent school in our sector has 280 pupils—so it is pretty small—and half are smaller than that. I have been a governor of schools with 120 pupils, but the special needs schools we are talking about often have 50 pupils. There are plenty of faith schools, about which Simon will talk in a moment, that also have very small numbers, yet are quite important in their particular faith community.
The average fee for a day school is about £18,000, but half are less than that, and there are some with incredibly small fees—just a couple of thousand a year, which is less than would normally be spent on a pupil in a state school. There is a massive range in terms of fee and size of school. We are particularly concerned about the low-cost and small schools, because those are the most vulnerable. They are already closing. Through our surveys, they have told us that they are going to close if the situation continues as, so far as one can see, it is going to continue.
Simon Nathan: As Barnaby said, there is a range: 1,000 schools, or 40% of the schools in our sector, have fewer than 100 pupils, so they are not always very big schools.
To touch briefly on faith schools, 20,000 children attend Muslim faith schools in our sector, and those schools charge an average of £3,000 per year in fees. There are Orthodox Jewish Haredi schools in our sector—65 schools that educate 20,000 children. On average, those schools ask for about £100 a week or less, and those schools are modelled in such a way that if a family comes in that cannot afford the fees, the school will accept them anyway. It is the community that steps in and fundraises to make up that financial difference.
To give an example, those types of Orthodox Jewish Haredi schools run on a low-fee model, and quite a lot of them are in London where there are high property prices. As Haredi Jewish families tend to have more children on average, a lot of those schools will have pupil numbers of around 800, so they will be in quite large buildings and will have quite large rates bills when this change comes into effect. I have spoken to representatives of those communities who are extremely concerned by the impact that this will have. They use a low-fee model, so they do not get huge amounts of money in fees, but the rates bill could be tens of thousands of pounds, if not more. The only way that those schools can bridge that gap is through fundraising from the synagogues in the community. If that money cannot come forward, those schools just do not have the money to pay the bill, so they are very concerned.
Jim McMahon
Q
The second point I would make is about the quantum if it was followed through. There will be an assumption that, as a business, schools will look to absorb as much of the additional pressures as possible—I will be honest—in the way that state schools have had to over the last decade. These are the choices that every business has to make to try to make the numbers work at the end of the day. Even if every pound was passed on with these measures, by our assessment, it is about £300 per pupil per year, which clearly is less than a pound a day. I understand that you have given a wider context, but within the scope of the Bill, what assessment has been made of the impact of that average of £300 per pupil per year—if it was passed on in its entirety—on people potentially leaving the sector? Also, what headroom might schools have to absorb it within existing budgets?
Simon Nathan: I think your first point was about SEN. I want to say at the outset that we support increased investment in SEN in state schools, and we support a well-funded state sector. At the moment, the situation in which many parents find themselves is that, to cater for the specific needs of their child, they find that they have to go to an independent school to have that need met, and that is the choice currently open to them. I said that, at the moment, we see our sector as providing that additional capacity to support state SEN services, and it is over 100,000 children. Our sector will be there to pick up that need, and often those who come to independent schools have more complex needs, but we wholeheartedly support more investment in state SEN.
David Woodgate: I think the £308 per pupil translates into about £147,000 per school for the business rate relief alone. Our schools have been working very hard to manage their cost bases. Since covid, a lot of our schools dropped their fees by up to 50%, they provided hardship funding, and they educated and looked after children of key workers with no state support. Since then, we have been rebuilding. But I think the sector acknowledges that it cannot just keep putting this on to fees. Many of the parents who choose our education are aspirational parents—two-income families, with the second income going very much on providing independent education—so you cannot load the fees.
It is about looking at the cost base. Costs are being cut back to the bone, and subjects are being dropped. Inevitably, this will result now in redundancies. I was speaking to a school just yesterday that said that the impact of NI and the business rate relief is over £500,000 a year. They will be making eight teachers redundant over the next two terms. That is indicative of what a lot of schools will have to do, which in turn impacts on all the other things a school offers.
Jim McMahon
Q
But I do not want the conversation to be about that; I want it to be about making sure that we fully appreciate the Bill’s impact. A lot has been made of the potential displacement of pupils from the private and independent sector into the state sector. It would be helpful to get your assessment of that. Our assessment, based on May 2023 data, says that, in terms of the capacity to receive children, there are around 1 million unfilled vacancies in primary and secondary schools in the state sector. Of that 1 million, how many could come in from the private sector as a result of this measure?
Simon Nathan: We did a pupil numbers survey this September that asked schools what their pupil numbers were in September 2024, compared to September 2023. That showed that pupil numbers were already down by 10,000. If you translated that into the additional costs to the state sector, it would cost the state sector around £80 million to educate those 10,000 pupils.
Jim McMahon
Q
Simon Nathan: I appreciate that. The point I was making was that some of the money that would be raised to support greater investment in state education will get eaten up by pupils moving over.
In terms of hotspots, it would depend very much on the part of the country—obviously, our schools are predominantly in the south and in certain parts of London, in particular. We fully appreciate that, on a macro level, there is a certain level of vacancy, but our concern is that there will be particular parts of the country where there might be more hotspots.
Vikki Slade (Mid Dorset and North Poole) (LD)
Q
Barnaby Lenon: Before I ask David to answer that, can I just say that there are not a lot of independent schools that have a lot of property. There are a small number that definitely have a lot of property, but if you had visited as many independent schools as I have, you would see that a lot of them are in converted houses, with no other property. Many, many of our schools have far less property than a normal state primary school would have. Nevertheless, your point is taken.
David Simmonds
Q
Rachel Kelly: One positive, which we have heard from other people today, is that having stability, certainty and predictability around tax is important to occupiers and investors alike. Recognising the benefits of those temporary retail and hospitality reliefs to such businesses, and making them permanent, is a good thing, but Government could go a lot further. At the moment, we have a tax system where the tax rate fluctuates at every valuation, so, depending on the relative change in property values, the tax rate will change at each evaluation, and it goes up by inflation every year. That is unlike any other business tax rate. Therefore, if the Government really want to provide certainty, stability and predictability, which is good for business and good for investors, probably the best thing they could do would be to fix the tax rate so that businesses know, year on year, that really the only thing that will change their tax bill is whether their property has gone up or down in value.
Then I would reiterate my other point: we have a property tax burden in the UK that is more than double the OECD average. We are pretty much at the top in terms of the tax we levy on property in the UK. That, in and of itself, is not very competitive.
Similarly, I would come back to the point around more frequent revaluations. If you have a responsive tax system that reflects those property values more quickly, you are more able to support those businesses or sectors that are struggling more quickly, because their valuations will reflect that more quickly. That is actually better for the Exchequer as well because, as different sectors grow and improve, the Exchequer can generate revenues from those sectors more quickly.
Jim McMahon
Q
We have heard from other witnesses today about the relationship between business rates and rent levels, and in the end that is a self-correcting system when it works well. It would be useful to get your insight, from your perspective and from the industry’s, about what headroom exists, certainly for institutional landlords. There are a number of us, I think, who reflect on our own local economies and see very high rent levels being quoted for properties that have been empty for many years and have no prospects of getting tenants anytime soon. It would be helpful for us to get a feel of how the system is working as an industry.
Rachel Kelly: Sure. I did listen in to the sessions this morning, so I heard some of the discussion around the relationship between rent and rates. I will try to pick up and respond to a few of those points. There clearly is a relationship between rent and rates but, as one witness said this morning, the evidence is very thin. We conducted some research about a decade ago that showed that there was a relationship between rent and rates, but that relationship was not as strong in certain asset classes and in certain geographies, and it certainly is not as strong in retail.
We know that, for many of our high streets, where you might have 20% vacancy rates, ultimately the occupiers have much more negotiating power in those environments. So, actually, until the significant supply-demand imbalance rectifies on those high streets, we would expect the benefits of a business rate discount to predominantly fall to the occupiers. That is until such time as that supply-demand imbalance—or the vacancy rate—improves, at which point, arguably, the policy might have worked.
To the point around empty properties with artificially high rents, we represent long-term investors in property—institutional investors in property—and a lot of our investors in property are our pension funds, our insurance companies and so on. They want long-term income returns for their pension holders, unit-holders and ultimate investors, and the only rational decision for an investor is to try to seek those rental-income returns.
Perhaps, at the margins, people do keep their properties empty, but it seems wholly irrational. If I was an investor or a pension fund holder, I would not want somebody managing those assets to be keeping properties empty and not generating rental income from them. I do not think it is a pervasive issue; all I can say is that it is not something we see in our members.
Jim McMahon
Q
Rachel Kelly: I think having more predictability and certainty around the tax bill is important for both occupiers and investors, which goes to my point that the best thing you could do is go further and fix the tax rate. But yes, the greater predictability and stability is good for investors and occupiers alike. Does that answer your question?
Jim McMahon
Q
Rachel Kelly: I think they will go some way to helping. If the ultimate goal of the Bill is to support high streets, there are probably areas where we would suggest that it is not as targeted as it could be. If you think of a really thriving high street in your area, retail and leisure will form a large part of it. However, a thriving high street also has offices and other businesses that provide footfall to those retail units. It has big anchor stores that might not benefit from this smaller relief but provide really important footfall for the other retail and leisure occupiers. It has car parks that are really vital to bring in customer bases for those high streets. It often has lots of asset classes, such as GP surgeries, libraries and some forms of education—you get my point. A thriving high street has a huge mix of different businesses all supporting each other. It is a really important—and maybe fragile—ecosystem. Yes, this measure will support some of those units, such as the smaller retail and leisure ones, but I am not sure whether that is enough to support the whole high street ecosystem.
Vikki Slade
Q
Rachel Kelly: Whether that can be included in the Bill, I do not know. But yes, the issue of an uncompetitive property tax system is relevant for lots of industries, and manufacturing is the one that you raised. Ultimately, that comes back to the higher rate of tax across the board. If you are alluding to the higher tax rate for the rateable values above £500,000—yes, it strikes me as an arbitrary threshold, and it will capture lots of different businesses and sectors. Maybe there will be some adverse consequences of that, which might be counter to the policy aims, but I am not sure.
It is a tricky one to balance. Ultimately, if this relief for retail, hospitality and leisure will be funded within the business rate system, our instinct is that it would be better to fund that across as broad a spectrum of the economy as possible, rather than narrow down that tax base even further. For context, the proportion of properties with a rateable value above £500,000 is 1% of commercial property in the UK. If we condense that down even further, it is a very narrow tax base to fund these other changes, so I am not sure that is sustainable. I am not sure we can address the issue of competitiveness for other sectors without addressing the elephant in the room, which is the huge tax rate that we have for everyone else—55%, or 50% for smaller businesses. They are very high tax rates compared with any other business tax.
David Simmonds
Q
Professor Green: I do not think it will have a great deal of effect. I offer you a small piece of evidence for that, which is the case of Scotland, which took an equivalent measure to this two and a half years ago. There was much protest beforehand from the sector that this would reduce not only the numbers attending the schools but schools’ ability to finance bursaries, which make a small difference, as you know, to making the schools a little bit less exclusive. The evidence to date, however, shows no noticeable difference whatever. It is perhaps too soon to tell, but we have seen no collapse or catastrophes as was predicted beforehand. That is one small piece of evidence that I offer you. I really do not think that it will make a great deal of difference.
Jim McMahon
Q
Professor Green: I have made no direct assessment of this particular measure, but I have made estimates using econometric studies of the impact of the imposition of VAT—which is not under discussion today, but, in terms of the magnitude of the sums involved, this measure involves much less. The best estimates of the econometric studies suggest that somewhere between 10,000 and 30,000 children might, over the course of time, be switched away from the private sector. If we take that, let us say about one tenth, in terms of the sums, you can see that the figure is relatively small.
I will admit to a certain degree of uncertainty in those estimates. We do not know enough to be precise, but I would be prepared to put my money on it that it will not be a vast number. Probably it could not be tested, because with the small changes that occur, it will be difficult to say, “That is because of this,” rather than because of the many other changes that happen—the circumstances of the particular market.
Jim McMahon
Q
Professor Green: I understand that private schools that mainly or wholly provide for children who have had an assessment are excluded from this. They will continue to receive relief, as before. There may be some children who are not quite over the threshold for an EHC assessment—I do not think that a large number will be affected, but it is hard to tell exactly how many. I do not expect a large impact.
Oral Answers to Questions
Jim McMahon Excerpts(1 year, 10 months ago)
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Sir Ashley Fox (Bridgwater) (Con)
The Minister for Local Government and English Devolution (Jim McMahon)
In July, the Deputy Prime Minister invited places without a devolution agreement, including Somerset, to come forward with proposals for their area, in order to gauge the approaches and forms being considered across the country. We welcome Somerset’s support for this initiative, and look forward to hearing its views on the imminent White Paper on English devolution, which will be released shortly.
Sir Ashley Fox
My constituents have had to endure the Liberal Democrats presiding over the transition from two levels of council, which worked—they balanced their books—to a unitary council that is on the brink of bankruptcy. Can the Minister assure the House that no new council reforms will be forced on unwilling areas, and that local opinion will be at the forefront of his decision?
Jim McMahon
I think we have all had to endure Liberal Democrats, so I can reflect on that. We are in constant dialogue with local councils on our twin-pronged approach. One prong is devolution and making sure that we push power out of this place and into local communities. The other is reorganisation in cases where councils recognise that it delivers more effective and efficient local government. The Department is keen to hear the conversations that local areas are having on that.
Vikki Slade (Mid Dorset and North Poole) (LD)
I hope that you will endure us, Mr Speaker. Dorset council, which covers half my constituency, has agreed to work with Somerset and Wiltshire—all unitary councils—on a devolution arrangement, but residents are already raising concerns that top-down reorganisation will take decisions further away from their homes and communities. They are worried about what a mayoral combined authority might do to them. What assurances can the Minister give that the town and parish councils, on which residents rely so heavily, will not be expected to keep unitary councils afloat, and that my residents will not see back-door council tax rises as a result of the changes?
Jim McMahon
Central Government have said to local government that we want to reset the relationship and work as partners in power, and it is not unreasonable to expect that councils will do the same at a local level and will work together in partnership. We see that across the country: local councils work in partnership with their parish and town councils in the interests of their community. Whether or not reorganisation takes place, we expect that to continue.
Chris Webb (Blackpool South) (Lab)
Emma Foody (Cramlington and Killingworth) (Lab/Co-op)
The Minister for Local Government and English Devolution (Jim McMahon)
The English devolution White Paper, due by the end of the year, sets out how we will transfer power from Westminster to people who know their areas best. The White Paper will also announce measures that will give local places and communities greater control over shaping their area.
Emma Foody
Libraries, pubs, football, community centres—these are the things that make up a community, but in so many places they have vanished over the last 14 years. I am delighted to hear plans of a community right to buy. What work are the Government doing to ensure that local authorities and community groups have the guidance and expertise needed to utilise this powerful new right once it is realised?
Jim McMahon
In there is the point about devolution and localism: structures matter and the framework matters, but in the end it is about getting the power out to the communities who have skin in the game. That is why we want to ensure that the community right to buy provides an effective means for communities across the country to take ownership of assets that are important to them. We are considering what further support and guidance we will provide to communities and local authorities to support them in this measure, and I know that the Minister for local growth, my hon. Friend the Member for Nottingham North and Kimberley (Alex Norris), is fully engaged in this endeavour.
Lisa Smart (Hazel Grove) (LD)
Many of my constituents would welcome further powers being devolved to their local communities. They are as keen as mustard to see the right homes in the right places, particularly social housing, but one of the things stopping social housing being delivered is the viability calculations that are undertaken by developers, who use them to say that only expensive houses can be built. Are the Government looking at reviewing the use of viability calculations?
Jim McMahon
That is some way from community ownership, but the devolution White Paper is one of a number of measures that we are taking and it will have a clear community strand. This does not sit in isolation, however; it is part of the wider reforms that are taking place to ensure that communities, local authorities and Government work in partnership.
Naushabah Khan (Gillingham and Rainham) (Lab)
Noah Law (St Austell and Newquay) (Lab)
The Minister for Local Government and English Devolution (Jim McMahon)
It was a pleasure to meet my hon. Friend and colleagues to talk about devolution in Cornwall. He will know that we have agreed to a non-mayoral devolution deal for Cornwall as a first step. We recognise the distinct culture, history and identity of the Cornish people. This important step will allow us to unlock deeper devolution in Cornwall and, in time, we hope it will allow Cornwall to take its seat at the Council of the Nations and Regions.
Steve Race (Exeter) (Lab)
Jim McMahon
I thank my hon. Friend for taking the time to meet me to talk about devolution and growth in that region. We are absolutely committed to ensuring that growth is felt in every part of the country, and that requires partnership from central Government, local government and the business community. I would be more than happy to meet him to talk about how we can do that going forward.
Tristan Osborne (Chatham and Aylesford) (Lab)
Jim McMahon
We are working constructively with Medway council as part of our framework to support councils in the most difficulty. This Government are clear that the process will be collaborative and supportive and, on that basis, we are more than happy to meet to discuss it further.
Kit Malthouse (North West Hampshire) (Con)
Councils up and down the land, but particularly in the south-east of England, are frustrated by the high levels of undeveloped consents. It is perfectly possible that the Secretary of State will find that, come the next election, her target has been consented but is nowhere near built. Will she consider allowing councils to have a 10-year housing supply number that includes undeveloped consents, so that when the number is reached, developers have no choice but to build?
John Glen (Salisbury) (Con)
If Wiltshire embraces the opportunity to join Dorset and Somerset in an elected mayoral authority, will there be local elections all-out in Wiltshire next spring?
Jim McMahon
I thank the right hon. Gentleman for his question on devolution. We are absolutely ready to talk to any areas that are keen to take on devolution, particularly a mayoral combined authority. Any decisions on whether elections do or do not take place will be part of future consideration.
Mr Speaker
I call the Chair of the Housing, Communities and Local Government Committee.
Samantha Niblett (South Derbyshire) (Lab)
I am delighted that the Government’s Mayoral Council is handing back powers to local communities. We are already seeing the impact of that. Claire Ward, the Mayor of the east midlands, attended the first meeting in October. She is leading the way: the east midlands is one of the youth trailblazer regions granted £5 million of Government funding to help young people into work or training. What work are Ministers doing to give those who contribute to our country a say in how it is governed?
Jim McMahon
The forthcoming English devolution White Paper will set out clearly our top-to-bottom redistribution of power, and how we include and engage people at a local level to ensure that they can actively participate in the development of their areas.
Martin Vickers (Brigg and Immingham) (Con)
There is growing concern among constituents that planning decisions are being swept aside because of the Government’s new planning reforms. What assurance can the Minister give that there will be meaningful engagement between constituents and their local planning authority, and that decisions will be respected?
Peter Lamb (Crawley) (Lab)
In five years, the cost of West Sussex county council’s Oracle upgrade has risen from £2.6 million to £28 million. Is that the kind of contract mismanagement that the Office for Local Government can look into?
Jim McMahon
We are currently in the process of reviewing oversight, accountability, and checks and balances to make sure that they are in place and fit for purpose, and that the early warning system works. More detail on that will follow in the English devolution White Paper before Christmas.
Local Government Finance
Jim McMahon Excerpts(1 year, 10 months ago)
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The Minister for Local Government and English Devolution (Jim McMahon)
Today, the Government have published details of the local government finance settlement for the next year for councils across England, and our wider ambitions for the sector over the course of this Parliament.
Councillors, officers and frontline staff are due our respect and appreciation for the work they have done to keep services going through very difficult times. This Government are under no illusion about the scale of the issues facing local government. We know that the demand for, and cost of, services has increased significantly— and that this has made the job for councils in recent years much harder. After a decade of cuts and fiscal mismanagement inflicted by the last Government, compounded by spiralling inflation and a failure to grow our economy, councils of all political stripes are in crisis. Our fiscal inheritance means that there will be tough choices on all sides to get us back on the path to recovery, and it will take time.
We are taking immediate action to address these challenges. The autumn Budget announced over £4 billion in additional funding for local government services, £1.3 billion of which will go through the local government finance settlement. Outside the settlement, the Government have also announced additional funding to support local government across a range of priorities, including special educational needs and disabilities and homelessness services, a guarantee for income from the extended producer responsibility for packaging scheme, as well as funding for local roads maintenance.
However, fixing the foundations of local government requires a programme of reform over the course of this Parliament. After years of delays, we will update the local government finance system. The current funding system is fundamentally broken, wasting taxpayers’ money and starving authorities of the funding needed to provide the services we all rely on. The previous Government agreed with us on the need to reform the system, proposing a similar approach in its fair funding review, but where they were unable to, we will finish the job by consulting on and implementing an up-to-date assessment of needs and resources, starting in 2026-27. This will be the first multi-year funding settlement in 10 years.
Reform of local public services, so that they focus on prevention, is also critical if we are to end the cycle of system failure and cost escalation. We will reform services that have for too long been overlooked by the previous Government to improve outcomes for the most vulnerable residents who rely on them—particularly children’s social care, homelessness and rough sleeping, special educational needs and disabilities, and adult social care services.
We will reset the relationship with local government, working as equal partners to ensure that the sector delivers continuous improvement for its communities, operates at the highest standards of probity, and provides value for money, all while giving the sector greater autonomy, certainty and flexibility. We will rebuild the system of accountability and oversight in local government, including through an overhaul of local audit, scrutiny and standards, and will consult on strengthening the standards and conduct framework for local authorities in England.
Our upcoming English devolution White Paper will set out plans for a new governing settlement for England. This includes our landmark programme of devolution and reorganisation, which will give local leaders with skin in the game powers to generate new jobs, skills and, ultimately, the growth that our public services rely on, and to create more efficient and accountable local authority structures, moving towards suitably sized unitary councils.
There is no magic wand. It will be a long, hard slog, working with councils, to rebuild from the ground up, in order to deliver the services that taxpayers need and deserve. Together, this year’s settlement and our programme of reform mark the first steps towards stabilising and rebuilding local Government.
Local Government Finance Settlement 2025-26
This year’s settlement will begin to put us on the right course, spending taxpayers’ money efficiently, and ensuring that funding goes to the places that need it most. The autumn Budget announced over £4 billion in additional funding for local government services, £1.3 billion of which will go through the settlement. Overall, the provisional settlement will ensure that local government receives a real-terms increase in core spending power of around 3.2%.
In addition, the Government announced at the autumn Budget that they will guarantee that local authorities in England will receive at least £1.1 billion in total from the extended producer responsibility for packaging scheme in 2025-26.
In 2025-26, the settlement will target additional funding at the places that need it most. We will deliver additional funding for a number of priorities, including an additional £680 million via the social care grant; a new children’s social care prevention grant, worth £250 million; and a new recovery grant, worth £600 million, for places with greater need and demand for services (we have used deprivation as a proxy for this) and less ability to raise income locally. This tackles head-on the combination of rocketing demand, low tax bases that restrict the ability of local areas to raise income locally, and weakened resilience in many of these councils after substantial central Government funding cuts during the 2010s. Alongside this, our commitment can be judged against a guarantee that no local authority will see a reduction in their core spending power in 2025-26, after taking account of any increase in council tax levels. This will provide the protections required for all authorities, including district councils, to sustain their services. Taking into account both money allocated to councils through the settlement and the pEPR guarantee, every planning and social care council will have more to spend on services in 2025-26 than in 2024-25; and for almost all authorities we expect this to be an increase in real terms.
The Government are clear in their commitment to tackling the issues that matter most to rural communities. We are focusing on the services that people rely on, such as social care, where pressures have grown across the country in recent years. This will deliver for rural areas, just as it will for the whole country. In this context, funding from the rural services delivery grant will be repurposed, through improved methods for targeting areas with greater need and demand for services, while we invest in the priority services that people care about, such as adult and children’s social care. The Government believe that the rural services delivery grant is outdated and does not properly assess rural need. A large share of predominantly rural councils receive nothing from the rural services delivery grant. Put simply, it does not do as it claims. This is clearly not right, and the Government are keen to hear from councils about how best to consider both the impact of rurality on the costs of service delivery, and demand, as part of our longer-term consultations on local authority funding reform.
Further support for local government
The Government are under no illusions about the scale of the issues facing local government, and this settlement will begin to address the pressures that councils are under. We recognise, however, that we may see some continued instability as we adjust to the new system. Any council concerned about its financial position or its ability to set or maintain a balanced budget should contact the Ministry of Housing, Communities and Local Government. The Government have a framework in place to support councils in the most difficult positions. We will not seek to replicate conditions that made borrowing more expensive. Where a council in need of exceptional financial support views additional council tax increases as critical to maintaining their financial sustainability, the Government will continue to consider requests for bespoke referendum principles. In considering requests, the Government will take account of councils’ specific circumstances, including the potential impact on local taxpayers.
The Government have committed to providing support to Departments and other public sector employers for additional employer national insurance contribution costs. This applies to those directly employed by local government. More information will be provided at the provisional settlement.
Supporting households
Many households are still feeling the impact of the prolonged cost of living crisis, and the Government are committed to protecting local taxpayers from excessive council tax increases. The previous Government, and the Office for Budget Responsibility in March 2024, both assumed core council tax and adult social care precept referendum principles of 3% and 2% respectively. The Government are now formally confirming that they will maintain the proposed core (3%) and adult social care precept (2%) referendum principles for next year. These strike the balance between protecting taxpayers and providing funding for local authorities.
We are ensuring that households receive the support that they need from programmes outside the settlement. The autumn Budget confirmed the extension of the household support fund for a further year, from 1 April 2025 until 31 March 2026. This will ensure that low-income households can continue to access support towards the cost of essentials, such as food, energy and water. Funding of £742 million will be provided to enable the HSF extension in England, plus additional funding for the devolved Governments through the Barnett formula, to be spent at their discretion, as usual.
Proposals in the policy statement for the 2025-26 settlement will be subject to the usual consultation process at the provisional local government finance settlement in December 2024.
This written ministerial statement covers England only. The policy statement will be deposited in the Libraries of both Houses, and has been published on gov.uk: https://www.gov.uk/government/publications/local-government-finance-policy-statement-2025-to-2026
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Devolution: Lancashire
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The Minister for Local Government and English Devolution (Jim McMahon)
As a fellow Lancastrian—I am from Oldham—I start by congratulating my hon. Friend the Member for Lancaster and Wyre (Cat Smith) on securing this debate on this special day, Lancashire Day. If you go into Lancashire county hall, you will see Oldham’s crest emblazoned on the wall, pointing to our historic ties to the county of which we are very proud. This is a special day, and I am pleased to see the flag flying in New Palace Yard in recognition of that.
I welcome this debate. This is an important moment, as the English devolution White Paper is due to be published before Christmas. I hope my hon. Friend will forgive me, but I will wait for the White Paper to be published before discussing a number of aspects of that framework. However, I am certainly happy to talk about Lancashire, the agreement that has been reached and the next steps forward; that may address some of her points more directly.
This Government were elected on a platform to widen and deepen devolution across England. As part of our central mission to drive economic growth and improve living standards, we want to move power out of Westminster and back into the hands of those who know their areas better, giving those with skin in the game the tools to get the job done. In September, the Government agreed to the Lancashire devolution deal, which marked a significant step in delivering on that mission for the region. The agreement will help to reshape communities and unlock the economic growth potential of the region to benefit all residents by returning power from Westminster to local communities. Specifically, the devolution agreement means that a county combined authority will be established with Lancashire county council, Blackpool council and Blackburn with Darwen borough council as its constituent members.
Local leaders through that body will take responsibility for services delivered at a strategic level, giving them more control and influence over the levers of local growth. For example, local leaders will take control of the adult skills fund, allowing Lancashire to better shape local skills providers. The Lancashire local enterprise partnership will be integrated into the new body, ensuring a more strategic and co-ordinated approach to business support. The new body will take on the status of the local transport authority, meaning better integration for local transport in the area to make it easier for local people to get from A to B. There will be new land assembly and compulsory purchase powers, enabling housing and economic development to flourish in the future.
Yesterday, a statutory instrument was laid before Parliament to enable the combined county authority for Lancashire, and I look forward to debating that in more detail. The SI gives local leaders the powers I mentioned over transport, housing and economic development; powers over adult skills will follow. A locally run consultation demonstrated widespread support, including from the business community, for the area’s taking on these new powers.
Investment matters. That is why the devolution agreement also sees the release of £20 million of capital funding to support local growth priorities identified in the area. That could include projects such as the National Cyber Force headquarters, the innovative low-carbon data centre at Blackpool airport, the civil service hub in Blackpool, the Blackburn innovation quarter and the cosy homes project to deliver better quality, more efficient homes in the area.
I recognise that there have been live discussions on the role of district councils in the combined county authority, and it is my firm belief that district councils will continue to play a key role in the success of devolution in the area. We expect effective levels of collaboration to be demonstrated between upper-tier, unitary and district councils. In the end, it is the place and the people that matter, and we expect councils to work together in that endeavour.
The devolution agreement that we have reached with Lancashire, which is being implemented at the moment, to be the start, not the end of the devolution journey. Essentially, it is the first step. It is a down payment made in good faith to work toward a mayoral combined authority. The discussions that we have been having in that area are not only about realising the potential of Lancashire, which is important, but enabling the north of England to realise its full potential. The way to achieve that is by taking power, decision making and resources away from the centralised model that we have in this country and bringing it closer to people and the communities where they live. We believe that where mayors are in place—and they are working together now, as a unit through UK Mayors, and on the Great North project where they are organising—they are beginning to make a significant difference and showing collective leadership for the north of England in particular, and we want to see all of England benefit from that. We do not shy away from that ambition.
Cat Smith
Will the Minister pick up on the points raised by the hon. Member for Blackburn (Mr Hussain) and myself around Cumbria and Lancashire, which are very rural counties? Does he have any thoughts on the challenges of being a mayor in a disparate and spread-out area rather than a neat metropolitan area?
Jim McMahon
It is important to separate out the different roles and responsibilities. We do not see mayors as being super-councils. We see mayors as regional leaders that have a strategic responsibility. That is very different from councils that provide a public service delivery responsibility. We are seeing mayors begin to make a difference where they are in place. For instance, York and North Yorkshire is highly rural, with one of the biggest geographical combined authorities in the country. We have just agreed a mayoral combined authority for Greater Lincolnshire. There is a significant rural population there, too. Of course, Hull and East Riding will have a mayor next year as well.
These devolution deals are being rolled out across the country in both urban and rural areas. In the end, it is about political leadership, accountability and getting powers from here. If people feel as though somebody down the road is distant, people feel much more that this place is distant. We have got to break the centralised model of command and control that we see here. In many of the questions that have been raised are the issues that we wrestle with—how do we balance a functioning economic area with a public service foot- print with people’s locally and strongly held identity and sense of belonging in a way that balances all those out to get to a settlement that can be supported and accepted?
Those are all issues that we face in the English devolution White Paper and will continue to form part of the agreements that we have reached. On all of those tests, Lancashire is the ideal model. It is a modern county outside of our historic roots. It has units of local government that speak to that footprint. It has units of public service delivery that speak to that footprint. It has a police and crime commissioner that speaks to that footprint, and is a functioning economic area that speaks to that footprint, too. On that basis, I think that Lancashire is a very good candidate; and I think the people of Lancashire have a lot to gain from the mayoral model of devolution.
This is worth facing head-on. In the discussions that we had in Lancashire—to refer to the intervention by the hon. Member for Blackburn (Mr Hussain)—we recognise that we want to see district councils represented, but local government reorganisation is clearly part of the conversations that are taking place. We get representations fairly regularly from council leaders and Members of Parliament, and we recognise that those are live discussions. They are separate discussions that might come together at a point in time, and we need to allow both processes to run and to be worked through in more detail.
Finally, I again thank my hon. Friend the Member for Lancaster and Wyre for securing the debate. Although we have an overarching national ambition to see devolution across the country, it is fundamentally a local issue about how best to shift powers to communities and deliver real change on the ground. We look forward to that ambition being realised in Lancashire.
Question put and agreed to.
Local Government Best Value
Jim McMahon Excerpts(1 year, 11 months ago)
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The Minister for Local Government and English Devolution (Jim McMahon)
All hon. Members will recognise the importance of having well-functioning local councils that provide essential statutory services local residents rely upon. Government will continue to work directly with a small number of councils in difficulty, and this should be done in a way that is not punitive and is based on genuine partnership to secure improvements. Today, I would like to update the House on the statutory interventions in Slough and Woking.
Slough Borough Council
On 22 October 2024, I announced to the House that the Secretary of State for Housing, Communities and Local Government, my right hon. Friend the Member for Ashton-under-Lyne (Angela Rayner), was minded to issue new directions to Slough borough council, and that I was seeking representations on a proposal. I also announced that if I implemented this proposal, I would reappoint the current three commissioners, and also appoint the interim chief executive, Will Tuckley, as managing director commissioner.
The proposal was to require the council to take actions that are consistent with the priorities that the commissioners have set for the council; provide for commissioners to continue to be able to exercise council functions relating to governance, finance and appointments; and to extend the timeframe of the statutory intervention until 30 November 2026. This followed the publication of the fifth report from commissioners, which, as I outlined on 22 October, provided evidence that there are still a substantial number of areas that require further improvement at the council, and there remains volatility in the council’s overall financial position. In my view, the report provides considerable evidence that the authority is not complying with its best value duty, as outlined in the Local Government Act 1999 and best value guidance published in May 2024.
Following consideration of the two representations that were received, and noting the support from the council for the proposal and the concerns raised about the pace and impact of the intervention to date, the Secretary of State and I have decided to implement the proposals announced on 22 October and issue new directions to the council, which come into effect immediately and will remain in force up to and including on 30 November 2026. The directions issued on 1 December 2021—updated on 1 September 2022 and 22 May 2023—are revoked with immediate effect.
I am therefore today confirming the reappointment of the current three commissioners, Gavin Jones, Denise Murray and Ged Curran. They will continue to work in partnership with the council to support its recovery. Alongside this, I have appointed Will Tuckley, the interim chief executive, as managing director commissioner. This will strengthen the relationship between the commissioner team and council and support the council to lead its recovery. The three reappointed commissioners have been nominated for the duration of the intervention and the managing director commissioner has been nominated for 18 months.
As with other interventions led by my Ministry, the council will be required to cover the costs associated with the commissioners. The fees for each individual are detailed in their appointment letters, published on www.gov.uk'>www.gov.uk. I am assured this provides value for money given the expertise that is being brought, and the scale of the challenge in councils requiring statutory intervention.
Woking Borough Council
As the House will be aware, in May 2023, the former Secretary of State (the right hon. Michael Gove) announced a statutory intervention in Woking borough council, following evidence of extensive best value failure compiled in an external assurance review. The review detailed the exceptional level of financial and commercial risk to which the council had exposed itself, and concerns regarding the quality of its strategic financial decision making and its commercial dealings.
Historic commercial mismanagement and major governance failures led to Woking borough council accumulating an extraordinary level of debt, far exceeding usual levels of borrowing for a council of its size. This is an extreme position for a council to be in, and will require unprecedented support from Government to resolve. Woking clearly requires a significant programme of change to ensure it is operating to the required standard. I am grateful to the commissioners for working with the council to improve its strategic financial management and governance, and in charting a path to reduce Woking’s debt as far as possible.
On 29 May 2024, the commissioners at Woking submitted their third report. I will be publishing this report, and my response, later today. It is clear from their report that Woking still faces significant challenges in its recovery, particularly regarding its financial position, but I am pleased that the council remains committed to working with commissioners to deliver fundamental change through its improvement and recovery plan. There are lots of obstacles ahead, but I am confident that the commissioners and council have a good understanding of the challenge and are beginning to deliver a robust plan of improvement.
I also join the council in thanking their auditor Grant Thornton for their recent public interest report on Woking’s historic investment practices, which the council will consider later today before issuing their formal response. The council has the full support of the commissioners in addressing the recommendations. I will also be reflecting on the public interest report and what lessons it can provide on the drivers of council failure.
I urge all councils to consider whether they could be doing more to ensure they are delivering the sound decision making that residents deserve, including considering the characteristics of a well-functioning authority as set out in best value guidance.
Conclusion
The Government are committed to working in genuine partnership with councils under intervention to support their reset, reform and recovery, making sure residents have what they need from their local council, including confidence in its governance, financial management and service delivery. I will continue to monitor progress over the coming months and ensure these councils get the support they need to secure sustainable continuous improvement.
I will deposit in the House Library copies of the documents I have referred to, which are also being published on www.gov.uk today.
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Local Government Best Value: London Borough of Tower Hamlets
Jim McMahon Excerpts(1 year, 11 months ago)
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The Minister for Local Government and English Devolution (Jim McMahon)
I have previously updated this House that this Government are committed to resetting the relationship between local and regional government, and to establish partnerships built on mutual respect, genuine collaboration and meaningful engagement. Never is this more important than when individual councils face governance challenges. We are keen to work with local authorities to support focus on recovery and reform. It is imperative that all councils are fit, legal and decent. There must be a clear and deliverable plan in place to address problems where these have been identified to protect the interests of local taxpayers. In that context, I would like to update the House on the London Borough of Tower Hamlets.
It is a matter of public record that the London Borough of Tower Hamlets was subject to statutory intervention under section 15 of the Local Government Act 1999 between December 2014 and September 2018. This followed an inspection by PwC which identified best value failure, particularly in relation to grant making, property disposal and publicity spending. Commissioners were withdrawn and functions returned to the council in March 2017 on the condition that it continued to achieve against its best value plans and report regularly to the Secretary of State on its ongoing compliance with the best value duty. In response to a corporate peer review by the Local Government Association in June 2018, which concluded the council was now “on a positive trajectory”, Ministers took the decision to end the intervention in September 2018.
Following evidence that suggested recent changes to the council’s governance arrangements may have the potential to undermine past improvements that had allowed the intervention to end, on 22 February 2024 the then Secretary of State (the right hon. Michael Gove), commissioned an inspection of the council’s compliance with its best value duty. He appointed Kim Bromley-Derry CBE DL as lead inspector, along with Suki Binjal, Sir John Jenkins and Philip Simpkins as assistant inspectors, and asked them to report their findings to him by 31 May 2024. On 24 May, following the announcement of the general election, this deadline was extended to 31 July. The inspectors completed their inspection and submitted their report to the Secretary of State and, as statute requires, provided a copy to the council.
The report identifies several positive features at the council, such as the finance service and the enthusiasm shown by officers and members for serving the borough. It also notes that the council has already taken steps to make improvements, including in response to the Local Government Association’s corporate peer challenge report of September 2023. However, the report documents serious concerns across a number of areas which I considered against its best value duty under part 1 of the 1999 Act:
On Leadership: The report concludes that a lack of respect and co-operation between political parties prevents councillors from engaging in a culture of genuine improvement. A lack of trust has contributed to officer churn at the top few levels of the organisation. Inspectors also found insufficient challenge of the executive and a perception among many staff that “many good managers had left the organisation as a result of ‘speaking truth to power’”.
On Governance: The report paints a picture of an organisation with a clear drive and mandate to deliver the mayor’s priorities, but for whom due process is often treated as an obstacle to priorities rather than as a necessary check and balance. The inspectors consider the council’s scrutiny culture to be “weak and confused”, and the level of challenge “inadequate”.
On Culture: The report concludes that the entire organisation is impacted by a lack of trust, with the administration “suspicious and defensive in its behaviour”. The culture appears to be one where decisions are taken based on advice from a small number of people who are trusted by the mayor and has been described by many staff and partners as “toxic”. A culture of patronage, even if not at play in every appointment, is perceived as pervasive enough to undermine trust between members, staff and leadership, as well as with external stakeholders.
On Partnerships and Community Engagement: While the report notes the strong community focus of the mayor, councillors and wider council, it concludes how the “significant time and energy” spent in local communities “seems to distract from their critical and statutory strategic relationships”. Inspectors found a lack of co-production and joint planning undertaken by the council and saw insufficient evidence that the council undertook meaningful and comprehensive consultation with key partners, staff, and service users before decisions were taken in some key areas.
On Continuous Improvement: While the council has made targeted and concerted improvements over the last two years, this has lacked a strategic focus or a cultural prioritisation of continuous improvement. The culture set and exemplified by the leadership is to reactively respond and counter criticism rather than honestly appraise and self-improve. On some issues, the inspectors are sceptical of the council’s capability to self-improve.
I have carefully considered the report and other relevant material and am satisfied that the council is failing to comply with the requirements of part 1 of the 1999 Act, namely that it is failing to comply with its best value duty in relation to continuous improvement, governance, leadership, culture and partnerships. I am therefore minded to exercise powers of direction under section 15(5) of the 1999 Act in relation to the London Borough of Tower Hamlets to secure its compliance with the best value duty. I believe, given the evidence of serious concerns in the report, a broad and supportive intervention package, with robust external assurance, is necessary and expedient for the council to secure compliance with this duty. To that end, and in line with procedures laid down in the 1999 Act, I have today, 12 November 2024, written to the council asking them to make representations —if they wish—both on the inspection report and on the statutory support package that I am now proposing.
This proposed statutory support package, to be in place for an initial period of three years, is designed to strengthen and expand the improvement work that the council has already begun. It acknowledges the political mandate the mayor holds, while recognising the need to tackle deeply rooted and persistent issues. It recognises the constructive engagement I have had with the council and acknowledges that they stand ready to work in partnership with Government to deliver the change needed for local people. It also recognises that the council has some corporate capacity to address the challenges identified in the report and has already put in place some of the building blocks for continuous improvement and will help to ensure that the council remains in a stable financial position.
This approach balances the evidenced need for Government support, with the desire to work constructively so that we see sustained improvement. A core element of the proposed support package will be the reconfiguration and strengthening of the council’s transformation advisory board to provide external expertise, challenge and advice to the council. I am proposing directing the council to work with ministerial envoys to reconfigure its existing board into a transformation and assurance board, and to draw on existing and additional members to appoint independent and external leads for leadership, governance and culture and partnerships—all areas where the council is currently failing. I am also proposing directing the council to appoint at least two opposition councillors to the board and for the mayor to continue his role as chair. The council will be required to report to this board on the delivery of its continuous improvement plan every three months or at such intervals as the board may require. The council will also be required to have regard to and respond promptly in public to any recommendations from the board with respect to the council’s improvement work.
In order to assist the council to achieve the necessary improvements, I am minded to appoint a ministerial envoy and assistant envoy to act as adviser, mentor and monitor to the council, and to oversee its improvement work. The ministerial envoys will work comprehensively within the council to oversee the proposed changes to the board, including agreeing its scheme of work and meeting agendas, preparation of the council’s continuous improvement plan and an open recruitment exercise to appoint a permanent lead for the council’s improvement work. They will attend meetings, provide ad hoc advice and challenge, and be available to senior leadership for support. They will also work closely with the board leads for governance, leadership and culture and partnerships to ensure the realisation of comprehensive programmes of cultural change and political mentoring. I am proposing directing the council to co-operate with the ministerial envoys, and to allow them all reasonable access to their premises, documents, employees or members in support of their work.
I would like the ministerial envoys to report on the council’s progress against its improvement agenda after the first four months, and then regularly as we agree is appropriate. Their assessment will provide the assurance local residents, strategic partners and I need to ensure the council’s compliance with its best value duty.
I will carefully consider any representations the council and other interested parties make and decide how to proceed. If I decide to intervene in the manner described here, I will then make the necessary statutory directions under the 1999 Act and appoint the ministerial envoys. Any directions that I make will be without prejudice to making further directions, should this prove necessary.
This action is not undertaken lightly, and I am committed to working in partnership with the London Borough of Tower Hamlets to provide whatever support is needed to ensure its compliance with the best value duty and the high standards of governance local residents and service users expect. I hope with focus and oversight that improvement will come at pace, but I will not hesitate to consider further action and escalation if necessary, in the interests of Tower Hamlets residents. I will deposit in the Library of the House copies of the report and letter I have referred to, which are also being published on gov.uk today. I will update the House in due course.
[HCWS204]
Draft Barnsley and Sheffield (Boundary Change) Order 2024
Jim McMahon Excerpts(1 year, 11 months ago)
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The Minister for Local Government and English Devolution (Jim McMahon)
I beg to move,
That the Committee has considered the draft Barnsley and Sheffield (Boundary Change) Order 2024.
It is a pleasure to serve under your chairmanship, Mrs Harris. The draft order is straightforward. It provides for the boundary between Barnsley and Sheffield to be revised so that the whole area of the Oughtibridge Mill housing development will be in the city of Sheffield, as well as providing for consequential changes to corresponding ward and parish boundaries. The councils concerned both support the boundary change, as do the affected parish councils.
Before I go into the detail of the draft order, and with apologies, I must draw the Committee’s attention to the correction slip that has been issued to correct minor drafting and formatting errors. First, it removes the phrase “Ministry for” where the order refers to the Secretary of State for Housing, Communities and Local Government in the preamble; in article 2; in the signature box at the end of the order; and in the second and sixth paragraphs of the explanatory note. Secondly, it provides a clearer map of the boundary change for the explanatory note. A formatting issue meant that the map lacked clarity when it was inputted into the draft order. With the help of the statutory instrument registrars, the correction slip now enables the same map to be sufficiently clear and to cover a full page. Those minor errors in the original draft order have now been corrected. The substance of the order is unchanged, and I hope that the reformatted map provides greater clarity for those who read the order.
Few reviews of the external administrative boundaries of local authority areas in England have been carried out since 1992, so from time to time new developments and population changes have caused small-scale boundary anomalies between local authorities. In practice, local government will put in place informal arrangements to deal with such situations, but the very fact that they need to do so is not conducive to effective and convenient local government. Such anomalies can also impact perceptions of community identity: where residents do not feel, for whatever reason, part of a particular area, they may be less likely to take an interest in their council.
On 14 April 2022, the Local Government Boundary Commission for England received a formal request, made jointly by Barnsley council and Sheffield city council, for a review of the boundary in the area. Because the existing boundary runs along the River Don, the Oughtibridge Mill development has been split between the two councils. Both councils told the boundary commission that, because of the geography of the local communities and the existing road layout, the impact on service demand would mostly be felt by Sheffield city council, and that services would be better delivered by that council.
The boundary commission undertook a review of the boundary and consulted those affected, and a majority of the 19 responses supported the boundary change. Following the consultation, the commission’s final recommendation was to transfer to Sheffield the area of the Oughtibridge Mill housing development that is in Barnsley. Doing so would move a section of the councils’ shared boundary at the River Don so as to encapsulate the Oughtibridge Mill development of 12 existing and 284 future dwellings. There was also a recommendation to realign ward and parish boundaries. After receiving the final recommendations, the Secretary of State allowed four weeks for interested parties to make representations. The Department received none in that period.
The draft order provides for the boundary between Barnsley and Sheffield to be revised, so that the whole area of the Oughtibridge Mill housing development will be in the city of Sheffield.
Jim McMahon
Thank you for that, Mrs Harris. I thank my hon. Friend the Member for Brent West for his contribution. Given his diligence in preparing for his speech, I am happy to recommend to the Whip that he joins us for future Delegated Legislation Committees. I thank members of the Committee for—
Barry Gardiner
On a point of order, Mrs Harris. A point of order was made and I believe a motion was made, but I did not hear any vote taken on the motion. I would have thought that that was the function of the Chair.
Jim McMahon
I do not have a great deal to say in rounding up, other than to reflect on the fact that the consultation included the residents who live in the Oughtibridge site at present, the majority of whom were in support of the move. On the 284 properties that will be brought into the wider development, I would say that most normal people—we are not among them, because we are talking about local government boundaries, which we care a lot about—live in places with identities that they feel connected to. I draw Members’ attention to the sales brochure for the site, which describes it as one of the most attractive developments in Sheffield, and to the fact that the development has a Sheffield address and a Sheffield postcode. I think most people moving into the new development will believe they are moving into Sheffield, and the draft order will allow them to enjoy the services of Sheffield city council.
Question put and agreed to.
Oral Answers to Questions
Jim McMahon Excerpts(1 year, 11 months ago)
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Alison Bennett (Mid Sussex) (LD)
The Minister for Local Government and English Devolution (Jim McMahon)
Councils across the country, of all political stripes, work hard to deliver vital public services in our country. We know that 14 years of mounting pressure is biting hard. We are committed to moving towards a multi-year funding settlement, ending wasteful bidding competitions that essentially set one council against another. Last week, I met political group leaders at the Local Government Association conference to understand what specific demand pressures they are facing, and we are committed to working together on those big issues. Members will know that we cannot pre-empt the Budget statement due later in the week, but we are of course fully engaged in that process. We stand ready to speak to any council experiencing financial difficulties, as I confirmed in my letter to MPs just over a week ago.
Mr Forster
As the Minister knows—I have met him to discuss this subject—my local authority, Woking borough council, effectively went bankrupt last year. It has had to cut services that many consider essential, and it will have to consider cutting others. Does the Minister agree that it is time for Government and Parliament to review which services are classed as statutory and non-statutory?
Jim McMahon
I thank the hon. Member for meeting me at one of our regular drop-in sessions. His concern is reflected across the country. Local communities recognise that their council is being forced to choose vital neighbourhood services against targets for adult social care, children’s services and homelessness services. In the end, we need to rebuild the foundation from scratch, and that is exactly what we are committed to doing.
James MacCleary
My constituency is largely rural and, as in many rural constituencies, parish councils play an important role in local government service delivery. Does the Minister agree about the importance of parish councils to rural communities, and what role does he see for parish councils as part of the Government’s devolution agenda?
Jim McMahon
We will of course publish a White Paper on the English devolution Bill. It will set out an ambitious programme for a power shift from this place and Whitehall to combined authorities, to local government and, of course, to communities. We are absolutely committed to that top-to-bottom power shift. We recognise that parish and town councils have a role to play.
Bell Ribeiro-Addy
Rising demand, rising costs and 14 years of Conservative public sector cuts mean that many local authorities and services are at breaking point. My own borough of Lambeth, a deprived inner-London area with higher demand for social housing and temporary accommodation, and for social, public and youth services, has been particularly affected, which has been quite challenging. Will the Minister commit to an emergency increase in funding to combat the immediate crisis for local authorities, and, in the long term, to a much-needed update of the funding formula to better reflect local need?
Jim McMahon
Like every Member of the House, my hon. Friend will know that those 14 years have taken their toll, and that it will take more than three months to repair that, but we are absolutely committed to repairing the foundations, and our multi-year financial settlements will give security. Of course, we recognise that the demand-led pressures in many places are the back-end of a bigger problem. Temporary accommodation relates to the housing crisis that needs fixing. The same applies to children’s services and adult social care.
Alison Bennett
The financial future of West Sussex county council is bleak: it faces a cumulative budget gap of over £200 million for 2029-30. At present, 64% of the council’s budget is being spent on adult and children’s social services, and that is set to rise. How will the Minister ensure that West Sussex county council and others do not have to close libraries, cut bus routes or reduce road repairs in order to meet the growing demand for the most vulnerable members of our community?
Jim McMahon
We always say that local government is paid for one way or the other: either we pay at the front-end through fair funding being fairly distributed across the country, or we pay at the back-end because eventually the system falls over and we must repair the damage. If we take ourselves back to the coalition years, when austerity first came in, the cruelty was that we did not reform public services, repairing them from the ground up, to get ahead of those system changes. That was a wasted opportunity.
Mr Jonathan Brash (Hartlepool) (Lab)
This year, Hartlepool borough council is set to overspend on children’s social care by some £5 million, due in no small part to the outrageous charges levied by private sector children’s homes. What can the Minister do to cap those providers’ charges to ensure that local government can continue to deliver its statutory obligations?
Jim McMahon
I recognise that, in large part, children’s services are the funding pressures that are driving council budgets. We cannot forget, though, that behind every one of those numbers is a child who often is not getting the outcomes they need. Far too often what we are seeing in the system is that high costs are not just sending councils to the point of bankruptcy, but delivering worse outcomes for young people. We want to see far more resilience built back into the system, and there are examples today of councils that are building that public sector provision back into the marketplace.
Sam Rushworth (Bishop Auckland) (Lab)
The previous Government cut County Durham’s budget by 60%, and we have all seen the Royal Tunbridge Wells video in which the Leader of the Opposition boasted about that act. That is having a real impact on my constituents and the ability of Durham county council to deliver vital services, so will the Minister consider a discussion with Cabinet colleagues about revising those funding formulas to take account of social care costs and deprivation?
Jim McMahon
We did see the former Prime Minister taking great credit for essentially shifting money from primarily urban and deprived communities into rural shires in an overtly political way. I want to ensure that in the funding review we are carrying out, whether that is the initial rescue operation that will take place this year or the recovery operation through the multi-year settlement, we do not pit one council against another, but take an approach that genuinely understands the needs, cost demands and cost pressures faced by local authorities. In the end, though, we have to accept that there is no fair funding at all if funding does not reflect the deprivation in an area.
Mrs Kemi Badenoch (North West Essex) (Con)
At the last oral questions, the Secretary of State assured me that she had no plans to increase council tax for anyone. However, when pressed by my right hon. Friend the Member for Beverley and Holderness (Graham Stuart), she would not give the same guarantee that the single occupant discount would be retained. Will Ministers take the opportunity to do so now?
Jim McMahon
I can see the shadow Secretary of State making that point repeatedly, because at this stage we are all waiting for the statement and the Budget that will contain that information, but I can say that the right decisions will be made in the interests of working people. We recognise the cost of living crisis that is being faced across the country. I am sure that she, like all Members of the House, is waiting with interest for Wednesday.
Mrs Badenoch
Local authorities employ 2 million people and commission services such as adult social care. The impact assessment for the Secretary of State’s Employment Rights Bill says that the Bill will increase costs. Those costs are likely to be passed on to councils, so has the Secretary of State assessed the impact of the Employment Rights Bill and an increase in employers’ national insurance specifically on local authorities? If costs do increase, will local councils be compensated?
Jim McMahon
Any decisions related to the Budget will be taken at the appropriate time, as will any decisions on the local government finance settlement. What I can say, though, is that this is a new partnership from this Government: we are not locking local government out, but standing shoulder to shoulder with it. Only last week at the Local Government Association conference in Harrogate, the Secretary of State launched the leaders’ council, a forum where central and local government will reset that relationship.
Vikki Slade (Mid Dorset and North Poole) (LD)
Rough sleeping is the most visible end of the homelessness crisis, but it is also brutal—the average age of death for rough sleepers in London is just 44. The rough sleeping initiative is literally saving lives—in Bournemouth, Christchurch and Poole, 102 people are kept alive every year through that programme—but it is due to end in March 2025. Removing it has been described by local teams as nothing short of catastrophic, so what assessment has taken place of the impact of that initiative, and what assurance can the Secretary of State give local authorities about the maintenance of the scheme so that they can plan for the long term?
Jim McMahon
Again, I ask hon. Members to wait for the spending review on Wednesday, and for the provisional settlement in December. We are under no illusion about the pressures faced by councils on homelessness. In the end, we need to repair the system, which is about providing safe, secure and affordable housing for people to live in. We will do that, but we also recognise that there is a problem today. Further detail on that will follow.
Neil O’Brien (Harborough, Oadby and Wigston) (Con)
Martin Vickers (Brigg and Immingham) (Con)
The Minister for Local Government and English Devolution (Jim McMahon)
This Government are acutely aware of the impact of the cost of living crisis on working people, and that is firmly in our sights as we approach the spending review this week, but we will have to repair a fair amount of the system, not just the finances. The early warning audit has been left shattered following 14 years of mismanagement, and single-year settlements have left councils not knowing from one year to the next how much money they have to spend, so we will have to introduce multi-year settlements. There is a great deal of work to do, and we cannot repair 14 years of damage in three months, but we are well on the way to it.
Mr Clive Betts (Sheffield South East) (Lab)
Let me first draw attention to my declared interest as a trustee of Fields in Trust.
In the last Parliament, the Housing, Communities and Local Government Committee received a large amount of evidence concerning the importance of well-designed open spaces for children and young people, but the national planning policy framework mentions them once and mentions bats twice. Is it not about time we got our priorities right, and did more to improve the design of—
Florence Eshalomi (Vauxhall and Camberwell Green) (Lab/Co-op)
The Secretary of State will know the financial difficulties facing so many of our local authorities. A recent Local Government Association report shows that one in four local authorities will apply for additional funding. It is fair to say that, for a number of them, March will be too late. What discussions have been had with the Chancellor to ensure that our local authorities get emergency support?
Jim McMahon
May I welcome the Chair of the Select Committee to her place? She will do an outstanding job for local government and housing.
The Government absolutely understand how difficult it is for local authorities to make ends meet. We understand that the pressures in adult social care, children’s social services and temporary accommodation are biting hard, and we are working through those issues with the sector.
Local Government Interventions: Birmingham and Slough
Jim McMahon Excerpts(2 years ago)
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The Minister for Local Government and English Devolution (Jim McMahon)
All hon. Members will recognise the importance of having well-functioning local councils which provide essential statutory services local residents rely upon. Local councils must be fit, legal and decent. Today, I would like to update the House on the statutory intervention in Birmingham, which was a year old as of 5 October, and my plans to reset the relationship between central and local government with a focus on reform and recovery. I will also update the House on the statutory intervention in Slough, which has been in place since December 2021.
Birmingham city council remains in a challenging place. Significant challenges continue to face the council, as outlined in the commissioners’ first progress report which I am publishing today. Steps towards financial stability have been taken, including setting the 2024-25 budget, and I am grateful for the significant oversight and direction from commissioners, who have been fundamental to this progress. The council is committed to leading its own recovery. I want to recognise the progress made by the council to date under the leadership of Councillor Cotton and his commitment to resolving the challenges facing the city. While there remains much more that needs to be done, I am keen that the intervention moves as quickly as possible to a model based around a more equal partnership with the council, working in the interests of the people of Birmingham.
Birmingham city council is committed to achieving financial stability, including finding a resolution to its significant equal pay liabilities once and for all, delivering the necessary savings to bridge the projected budget gap for 2024-25 and 2025-26 to move to a more stable financial footing and transforming local services, many of which still require significant improvement. I know that difficult decisions will need to be taken in the coming weeks and months. I am confident that Joanne Roney CBE, who has recently taken up her post as managing director at the council, will work with both officers and members to improve the culture and governance of the organisation and shift the focus to growth opportunities in the city.
I am exploring options to reset and reform the system to provide a more supportive approach to stewardship for local councils, establishing partnerships across local government built on mutual respect, genuine collaboration and meaningful engagement. In any system with adequate checks and balances there will always be a need for Government to work directly with a small number of councils in difficulty, but I am clear that this should be done in a different way that is not punitive and is based on genuine partnership to secure improvements.
Building a wider partnership to deliver for the city of Birmingham is essential. I encourage Birmingham city council to consider establishing and deepening partnerships with private and public partners in the region, including Mayor Parker of the West Midlands combined authority, so they can be more involved in shaping decisions around asset realisation and the growth strategy, linking in with local growth plans as necessary. Such partnerships will help unlock Birmingham’s huge potential for growth and drive forward skills, jobs and opportunities in the wider region.
I have asked that commissioners provide a further assessment of the council’s progress in January, including their assessment of how the council’s growth strategy can support the council’s recovery and contribute to this Government’s wider ambition for national renewal. I would like to place on record my gratitude to Lord Hutton, who is stepping down from his role as a political adviser to the intervention, for his knowledge and expertise which has been of immense value to both the council and the wider commissioner team.
I also want to acknowledge the diligent and hard-working members of staff at the council who do their utmost to provide essential frontline services for residents. I, in turn, will do my utmost to ensure that all interested parties/partners work collaboratively to guarantee Birmingham’s recovery remains on track so that residents have a well-functioning local authority with a set of statutory services they deserve.
I will keep the House and the public updated on any changes to the intervention, including publishing the second commissioners’ report in the new year.
Slough borough council has been in intervention since December 2021 and this House has received a series of updates on the recovery of the council. The last update was in February, when the view of commissioners was that the council would continue to need support beyond the scheduled end of the intervention on 30 November this year. Significant challenges continue to face the council, as outlined in the commissioner’s report from April and update letter from September, both of which I am publishing today.
While some improvements have been made since the start of the intervention, there are still a substantial number of areas which require further improvement. There remains volatility in the council’s financial position, and there is not yet a target operating model that aligns with the medium-term financial outlook. A robust and resourced transformation plan that aligns to the target operating model is needed to drive change, which must be underpinned by strong leadership and a comprehensive workforce strategy to foster and embed cultural change. Further improvements still need to be secured relating to risk management, governance, including the scrutiny function and audit committee, evidence-based decision making and resident engagement. Separately, the continued progress in children’s social care and SEND services under Department for Education intervention has been noted.
Having considered carefully the findings and evidence presented in the report and update letter, I have concluded that the council is not yet meeting its best value duty and that issuing new directions will provide Slough borough council with ongoing Government support via commissioners. They would continue to assist the council to design, implement and embed the necessary changes and improvements. Accordingly, I am now seeking representations by 4 November on the report and update letter and a proposal to issue new directions under section 15 of the Local Government Act 1999. These would set a new end date for the intervention of 30 November 2026, require the council to take actions that are consistent with both the existing directions and the priorities the commissioners have set for the council, and provide for commissioners to continue to be able to exercise council functions relating to governance, finance and appointments. I understand that the council would welcome the extension of the intervention, given the challenges ahead that they also recognise, and I am keen to explore further opportunities to work in partnership to support their reset, reform and recovery.
If, following my consideration of any representations, I decide to implement my proposal, I intend to reappoint the existing commissioner team of Gavin Jones, Denise Murray and Ged Curran, who I know are working with the council with mutual respect, genuine collaboration and meaningful engagement. To further support the council to lead its own recovery, I also intend to appoint the interim chief executive, Will Tuckley, as managing director commissioner.
I again want to acknowledge the diligent and hard-working members of staff at the council who do their utmost to provide essential frontline services for residents, and reinforce my commitment to support Slough’s recovery remaining on track so that residents have a well-functioning local authority with a set of statutory services they deserve.
I will keep the House and the public updated on my proposed change to the intervention.
I will deposit in the House Library copies of the documents I have referred to, which are also being published on www.gov.uk today.
[HCWS155]
Oral Answers to Questions
Jim McMahon Excerpts(2 years, 1 month ago)
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Natasha Irons (Croydon East) (Lab)
The Minister for Local Government and English Devolution (Jim McMahon)
I know at first hand how hard councils work to deliver essential public services, and we want to thank councillors, council officials and council workers for the hard work that they do all year round. The Government are under no illusions about the challenges facing local authorities. It is our priority to reset the relationship between local and central Government, and to end the politics that has seen Westminster hoard far too much power, holding back our towns, cities and villages from realising their full potential. We will provide more stability for councils through multi-year funding settlements, ending the competitive bidding process and reforming the broken audit system. Future local authority funding decisions are of course a matter for the spending review and the local government finance settlement, in which we are fully engaged.
Alison Bennett
Can the Minister explain how the English devolution Bill will reduce local authority budget shortfalls, ensuring that essential council services for the public are protected?
Jim McMahon
The English devolution Bill is a landmark piece of legislation that will finally address the imbalance of power between this place and communities up and down the country, but it is not in itself the answer. We know that the financial foundations on which it rests are local authorities, which are struggling. That is why we are committed to multi-year funding settlements and fair funding.
Clive Jones
I understand that there will be a major review of local government funding next year. I represent Wokingham, whose council is the lowest-funded unitary authority per head in the country. Will the review look at the actual needs and costs faced by local authorities, as opposed to the current methodology of allocating funding, which is based on historical data and is disproportionately skewed by simplistic measures of deprivation?
Jim McMahon
Any fair funding formula of course has to address the range of challenges that local authorities face, whether that is their local tax base, and how much they can realistically generate from their local communities and businesses, or the cost of service delivery and the demand within a local community. We will ensure that the fair funding formula, of which multi-year settlements are a part, is done with that rigour.
Natasha Irons
There can be no way of fixing the foundations of this country without fixing the foundations of local government, so I am pleased to hear that this council—sorry, this Government—are looking to reset the relationship with local councils; as a local councillor, I am stuck in the habit. Will the Minister please outline what specific support will be given to councils that have had to issue section 114 notices, to ensure that they can deliver on this Government’s aims throughout the country?
Jim McMahon
Local councils are central to delivering on this Government’s missions, and to changing this country for the better, but we know that many of them are on a cliff edge financially, and many of them will be fearful for their budget going forward. We will work in partnership with my hon. Friend. The Department’s door is always open to local authorities that need to have conversations.
Liam Byrne (Birmingham Hodge Hill and Solihull North) (Lab)
Council funding in Birmingham is inadequate because of a set of sadistic directions based on speculative estimates of equal pay liabilities. No one believes those estimates, not even the lead commissioner, so will the Minister revisit those directions quickly and meet with Birmingham MPs to help us to get them right?
Jim McMahon
First, we need to reset the relationship between the Westminster Government and local authorities. I have seen far too many examples where the Secretary of State and Ministers have, at this Dispatch Box, hung individual councils out to dry. That is not a relationship of equals at all. I thank the leadership of Birmingham for taking the tough decisions and actions that are needed. This Government will work in partnership with them in a constructive way, as equals, going forward.
Blake Stephenson (Mid Bedfordshire) (Con)
Terry Jermy (South West Norfolk) (Lab)
The Minister for Local Government and English Devolution (Jim McMahon)
In the final 2024-25 local government finance settlement, a £3 million grant was announced to assist local authorities experiencing significant pressures on their internal drainage board levy. I am publishing today the allocations of funding for 15 local authorities, and I can confirm that King’s Lynn and West Norfolk will receive an allocation of £254,000 from the levy. We are also working closely with our colleagues in the Department for Environment, Food and Rural Affairs to explore options going forward for future allocations.
Helen Morgan (North Shropshire) (LD)
Residents in rural areas such as my constituency are seeing drastic cuts to local services despite their council tax having gone up this year. That is because councils are struggling to balance budgets. When the fair funding review takes place, will the Secretary of State commit to considering the cost of delivering services in vast rural areas, which is in excess of the same cost in urban areas?
Jim McMahon
We will absolutely ensure that the true cost of public service delivery is accounted for in different parts of the country and in different local authorities—that will be part of it. However, I say gently that although the Conservatives were the architects of austerity, the Liberal Democrats were definitely there sharpening the pencil.
Rachel Hopkins (Luton South and South Bedfordshire) (Lab)
The Government have my full support in making housing more affordable for my constituents and those across the UK, and creating more social rented housing will be important in that. Will the Minister update the House on the Government’s plans to protect existing council stock by reviewing the increased right to buy discounts introduced in 2012?
Jim McMahon
We are well under way in reviewing the consultations that are currently taking place and all the devolution agreements that were not tabled before the election. I am very happy to meet with my hon. Friend outside of this Chamber to discuss the matter further.
Melanie Onn (Great Grimsby and Cleethorpes) (Lab)
Could the Minister expand on his earlier answer relating to devolution, and perhaps provide a timeframe for some of the discussions that are taking place with local authorities about devolution plans that did not go ahead before the last general election? My constituents are very keen to move ahead with improvements to transport, education and inward investment.
Jim McMahon
I thank my hon. Friend for her question, and for her work on the agenda to further devolution in her region. We recognise that in some parts of the country, including Hull and East Yorkshire and Greater Lincolnshire, local authorities worked up proposals for the previous Government that were not tabled before the election. We are currently working through those proposals at pace to make sure areas have clarity about where they are up to, and we look forward to reporting on that as soon as possible and meeting with local MPs as part of that process.
Munira Wilson (Twickenham) (LD)
When the Secretary of State looks at the rules around local authority compulsory purchase orders, and at removing hope value for house building purposes, will she look at having the same rules for playing fields that local authorities want to keep as playing fields and not build on? That would allow sites such as Udney park playing field in my constituency, which has lain derelict for a decade under private ownership, to be brought into community use again.
Shaun Davies (Telford) (Lab)
I know from my time as chair of the Local Government Association that all council leaders, regardless of political persuasion, need more money for local government, but that there is also a commitment from the sector to reforming the sector. Will the Minister confirm his willingness to work with council leaders, regardless of political persuasion, to reform the system, and also to take a look at population under-counting, which is costing my council millions of pounds each year?
Jim McMahon
I pay tribute to my hon. Friend for the work he did in local government, and as chair of the LGA, to make sure that the sector spoke with one voice and worked in collaboration with Government to try to get a better outcome for local councils. This Government will continue in that spirit.
Paul Holmes (Hamble Valley) (Con)
The Minister for Local Government may be aware that Liberal Democrat-controlled Eastleigh borough council is subject to a best value notice, due to its unsustainable £700 million of debt. More audits have been undertaken that show that more borrowing is taking place, so will he meet me to discuss this risk to my constituents and their taxpayers’ money?
Jim McMahon
I am very happy to have a meeting, probably next week, on that issue.
Claire Hazelgrove (Filton and Bradley Stoke) (Lab)
As the housing crisis worsened under the last Government, houses in multiple occupation became more prevalent in a number of communities, including in Filton, Stoke Park and Stoke Gifford. Naturally, with more people living in more homes than were envisaged when the local infrastructure was planned, there is an impact on public services and the character of communities, and routes such as permitted development are regularly being used to start extensions and conversions. Will the Minister meet me, as the Government shape much-needed changes to the planning framework and regulations, to discuss how HMOs might be included in an appropriate way?
Max Wilkinson (Cheltenham) (LD)
Devolution is a positive thing, and we welcome it. Gloucestershire, which has my constituency of Cheltenham within it, has coterminous boundaries for the county council, a police force, a fire service, an economic development function and a health service, but there is fear that, in a devolution deal, it may be grouped with other areas to the north, or perhaps made part of an existing devolution deal to the south. Can the Secretary of State or another Minister confirm that that will not be the case?
Jim McMahon
Within the first couple of days of this Government, the Deputy Prime Minister wrote to local authority leaders, inviting them for discussions on devolution agreements. One of the founding principles is, of course, geography that makes sense—and having coterminous boundaries for public services and the rest does make sense. Without going into the specifics of individual conversations that are taking place, I advise the hon. Member to bring that point into the work on the English devolution Bill, which will make sure that all of England has a voice and a role in devolution.
Peter Dowd (Bootle) (Lab)
The Deputy Prime Minister has shown that her footwork at the Dispatch Box is as good as her footwork on the dance floor. At this year’s election, veterans who brought along their veterans’ ID card to prove their identity were turned away. Will the Minister guarantee that this will change?