Local Government Finances: London

Luke Taylor Excerpts

Wednesday 26th March 2025 Westminster Hall

[Luke Taylor (Sutton and Cheam) (LD)]

It is a pleasure to serve under your benevolent gaze, Ms Lewell. I thank the hon. Member for Leyton and Wanstead (Mr Bailey) for securing this important debate, and I point to my entry in the Register of Members’ Financial Interests, which shows that I still proudly serve as a councillor in my constituency in Sutton borough.

London faces a crisis in council funding unparalleled in living memory. We have a funding system that has been starved for years under previous Conservative Governments. As a result, our councils are now struggling to meet the growing demands of the communities they serve. This is not an exaggeration—this is an emergency. Since the onset of austerity in 2010, per capita Government funding has been reduced by more than a fifth, with boroughs now receiving 28% less funding per resident. Meanwhile, London’s population has skyrocketed, increasing by over 900,000 in the past 15 years. The city’s councils are crying out for a long-term funding solution.

Local government provides critical frontline services to our society. It is where people turn for help to meet their daily needs, and it is how communities are supported. Let us be clear: many councils that put in considerable effort to balance the books are not at fault here; they are simply not given enough financial support in the first place as statutory demands rise. It makes a mockery of our conversations about policy here in Westminster when people’s bins go uncollected and children are left waiting for their EHCPs. Our attention should be focused on helping local government, which is at the frontline of the state, to deliver the basics.

Outer London boroughs like Sutton, Kingston and Richmond are getting a raw deal on Government funding—in fact, some of the worst in the country. We see that in police abstractions and we see it in financial council funding.

[Andrew Rosindell]

The hon. Member mentions that the people of Sutton are getting a raw deal, and I am quite sure that they are. Does he think that the people of Sutton are getting good value for money from the precept we are paying to the Mayor and the Greater London Authority, or would he like some of that money put back into the local communities that he serves?

[Luke Taylor]

I thank the hon. Member for his intervention. Sutton has one of the lowest spends per resident by Transport for London of any of the London boroughs. We have no tubes, no overground, and half a tram stop in the very northernmost part of the borough, which shows how poorly we are served by TfL infrastructure, so I agree with the hon. Member’s point.

Outer London is being left behind, with some of the lowest support per capita. Our broken system means that inner London continues to be prioritised, despite the shifting needs across the city. There is a growing mismatch between funding allocations and local need, worsened by a funding formula that has not been updated since 2013. The data on which those allocations are based—population demographics and deprivation levels—are outdated and no longer reflect the reality on the ground. Research from the IFS in 2022 found a 17% gap between funding need and actual funding across London, the largest gap of any region in England. There is a temptation among many—we have all heard it—to paint London as a city where the streets are paved with gold and the challenges of poverty are less intense, which is nonsense. London has the second highest poverty rate in the country, second only to the west midlands. It has infrastructure problems, growing homelessness and millions of people suffering with the ever-rising cost of living, which is particularly pronounced in the context of London’s overheated property market.

The problem is diffuse, not concentrated in inner London. Indeed, poverty is shifting across London in ways we have not seen before, as working patterns change and jobs and industries ebb and flow. The outdated funding model forces outer London boroughs to tackle what are often characterised as inner London problems with far less support. The Minister must reassess the funding formula to ensure a fairer deal for boroughs like Sutton.

It is time to recognise the significant demographic and social changes that have taken place in London over the last 12 years. The homelessness crisis is an example of how poverty is shifting across London in unprecedented ways. Homelessness in my home borough of Sutton increased by 51% between 2018 and 2023. London is at the epicentre of the UK’s homelessness disaster, with the highest levels in the country. London Councils estimates that one in 50 Londoners are currently homeless and living in temporary accommodation. In Sutton every night 1,200 families are housed at the cost of the council. Nearly 90,000 children in the capital are homeless. That is one in every 21 children in London—at least one homeless child in every classroom.

As the Liberal Democrat MP for Sutton and Cheam, I am proud to live in a borough that is committed to housing the homeless where we can, but for the sake of such boroughs that hold that commitment it is essential that we address the gaps in support and provide long-term solutions to end homelessness for good. The financial strain currently put on councils to fight the crisis is utterly unsustainable. Boroughs are spending £4 million every single day on temporary accommodation, and those costs have shot up by 68% in just one year. If such trends continue, homelessness will bankrupt our boroughs and plunge our city back into the dark days of Victorian poverty and inequality. Municipal government will wither away and the fingertips of the state will succumb to financial frostbite, meaning we will no longer be able to reach out and rescue families from homelessness and communities from disintegration. Our city will be a plaything of the rich and famous—no longer a home, but a cold shell. Let us be under no illusion: that is what is at stake.

We are already seeing councils needing exceptional financial support just to survive. The housing revenue account is under unprecedented pressure, and with cuts to resources, capped social rents, rising inflation and ageing housing stock, London boroughs are being forced to cut £260 million over the next four years, making it harder to build new homes or to maintain the ones we already have. So we on the Liberal Democrat Benches urge the Government to urgently publish a cross-Whitehall plan to end all forms of homelessness and exempt groups of homeless people and those at risk of homelessness from the shared accommodation rate; ring-fence emergency funding for local councils for permanent accommodation of rough sleepers; increase the local housing allowance rates in line with inflation; and ensure sufficient financial resources for local authorities to deliver the Homelessness Reduction Act 2017. If we do not, I fear the consequences for the future liveability of our city will be existential.