National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Fuller Excerpts

Report stage
Tuesday 25th February 2025 Lords Chamber

Moved by

[Lord Fuller]

43: After Clause 3, insert the following new Clause—
“Impact of this Act on local authoritiesThe Secretary of State must, within six months of the day on which this Act is passed, lay before Parliament an impact assessment of the cost of the provisions of this Act on local authorities.”Member's explanatory statement
This probing amendment seeks to respond to concerns about increased costs for local authorities.

[Lord Fuller (Con)]

My Lords, I rise briefly to speak to Amendment 43 standing in my name on the Marshalled List. I know that it is late, but my purpose here is to probe whether the Government really understand and appreciate the impact, damage and hurt that these national insurance proposals will visit upon councils, those who work with them to deliver essential services and the users of those services—in many cases, the most vulnerable in society.

Since the Great Reform Act 1832, local authorities have been an integral part of our nation. Joseph Chamberlain unleashed the powers of municipal entrepreneurialism in the 1800s to bring gas and clean water to the growing metropolis of Birmingham. Councils sweep the streets. They collect the bins and run parks. They issue planning permissions and curate the conditions to build the national economy one local economy at a time.

I am a councillor and, for the last 14 years, I have led local government finance for Conservative councillors at the Local Government Association. I have seen it all. My noble friend Lord Pickles once said that there are only two people who really understand local government finance. I am not saying that I am one of those experts, but I am one of the small number of people who does more than most to celebrate the 140 things that councils do to make a civil society for every family, every street, every neighbourhood and every day.

That is why I know that councils’ finances in England are under pressure like never before. Reductions in grant funding, increases in the scale and complexity of service demand, and the recent spike in inflation and wage costs have created the perfect storm for town halls. The fundamental challenge facing the sector is that cost and demand pressures are rising faster than funding. While inflation has fallen steadily since the peak, significant cost and demand pressures remain in the system. In essence, council revenues tend to grow linearly with the growth in the economy, but lately costs have grown geometrically. There comes a point where the lines of income and demand diverge so much that the gap becomes unbridgeable.

Some of the reasons for this geometric growth have been demographic: as society ages, demand increases disproportionately. Some of them have been countercyclical: as the economy stutters, demand in respect of homelessness, for example, increases. There have been some consequences of changes elsewhere in the state. Well-meaning changes by the DWP, for example, have driven up councils’ second order spend on home-to-school transport by 62.7% in the five years to 2024. Of course, the Covid hangover has made things worse. We have already reached the moment where the gap between income and expenditure has become unbridgeable, and that is before the impact of national insurance on councils and their tied contractors, which is the subject of my amendment.

This is not a case of a Tory crying wolf. Just last week, the MHCLG announced that in the financial year 2025-26—next year—the Government have agreed to provide 30 councils with support to manage financial pressures via the exceptional financial support process. For eight of those councils, this included agreement to support in prior years. These are just the canaries in the mine. In aggregate, three services are responsible for two-thirds of all the cost—adult social care, children’s social care and SEND—and these pressures have seen the greatest increases.

Let us get some numbers on the record. Increased costs and demand in adult social care have seen a rise of £3.7 billion, which is 18% since 2019-20. Spend on children’s social care increased by 25% in real terms in the five years from 2019 to this year, owing to the increasing complexity of need and rising placement costs. The Labour-run LGA tells me that, by 2026-27, these cumulative pressures will have added 12.5% to the cost of delivering services in the two years since last year, leaving councils facing an annual funding gap of £6.2 billion across the two years from 2025 to 2027, just to maintain services at 2024 levels.

These pressures come on top of councils having already absorbed a 22.2% real-terms reduction in core spending power from 2011. That is before Labour produced its reckless war on the countryside by cancelling the rural services grant. This cannot carry on. There is no more fat to trim, and I want to explain why this is so serious and consequential, because we get to the nub of the matter.

--- Later in debate ---

[Lord Fuller (Con)]

My Lords, I am conscious that it is late, and I do not sense any appetite to divide the House on this matter. I regret that the Government do not really appreciate the magnitude of what they are visiting on local authorities and, in particular, on those people, some of the most vulnerable in society, who rely on the council to fight for them and act in their corner. We are in a really sticky situation in local government, and I am not hearing any reassurance or even any acceptance that they are making a £6 billion hole over the next two years that is going to be visited on every town, street and community.

I am disappointed by the brevity and lack of detail in the Minister’s response. But I accept that it is late at night and am conscious of the time, so I will withdraw my amendment with regret and hope that at some stage the Government will at least take away the importance of this matter so that it is taken full account of in the comprehensive spending review. Councils cannot afford to carry this alone.

Amendment 43 withdrawn.