Local Government: Funding

Lord Whitty Excerpts

Monday 27th January 2025 Lords Chamber

Asked by

[Lord Whitty]

To ask His Majesty’s Government whether, before or alongside changes in local government structure in England, they will undertake a thorough review of the sources of funding, basis, and equity of local government financial resources at all levels, having regard to both the responsibility of individual councils and the balance of responsibility between central and local government.

[The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Baroness Taylor of Stevenage) (Lab)]

My Lords, before I answer my noble friend’s Question, I note that, 80 years ago this month, soldiers of the Soviet 60th Army of the First Ukrainian Front opened the gates of Auschwitz-Birkenau. It has been so moving today—Holocaust Memorial Day—to hear in our media the first-hand accounts of those who may be visiting Auschwitz for the last time. That infamous camp has become the symbol of the Shoah. Today, we remember the Jewish lives, and all lives, lost to genocide, and we remind ourselves that it is more important than ever to keep our humanity and respect for human dignity at the heart of all we do.

In answer to my noble friend: alongside our proposals to widen devolution and streamline local government structures, this Government are making good on their promise to reform and improve the local government funding system. From 2026, funding will be directed to where it is most needed, through the first multiyear settlement in a decade. By fixing the foundations, we will give better value for taxpayers and empower local government to provide high-quality services and support the delivery of the Government’s missions.

[Lord Whitty (Lab)]

My Lords, first, I am sure that the whole House endorses my noble friend’s opening words. It is indeed a moving day.

On my Question, the biggest problem for local authorities is not structure or assessment. This Government and every other Government depend on local authorities’ ability to deliver many of their most important policies and strategies, and yet local government depends on an archaic system of local taxation—both council tax and business tax—and uncertain grants from central government. I hope the assessment that my noble friend refers to will begin to change that system, but does my noble friend not agree that a fundamental assessment of what local authorities need should be introduced so that we can start to improve the financial position of local authorities before the end of this Parliament?

[Baroness Taylor of Stevenage (Lab)]

I thank my noble friend. For 12 of the last 14 years, I was a local government leader, so his words definitely strike home to me. The Government are committed to local authority funding reform, with the updated approach that I spoke about from 2026 to 2027. We need to fix the foundations that he spoke about, so this will be developed in partnership with the sector and based on the principle of giving councils early certainty of their funding and a much fairer funding picture across the country. We are inviting views on our principles and objectives for funding reform through a consultation. We want to do this in consultation with the sector, and that consultation closes on 12 February. We will move towards an updated system and possible transitional arrangements to determine how local authorities reach their new funding allocations.