Local Government Finance

Matt Rodda Excerpts

Wednesday 5th February 2025 Commons Chamber

[Jim McMahon]

I will make some progress, but to answer the right hon. Lady’s question on employer national insurance contributions directly, the funding is based on service expenditure costs. The reason is that that allows councils to make a decision about whether the money will cover in-house provision, or whether they will have contractual pressures further along in the system that show up in their service expenditure budgets. That is the approach that we have taken, and the Institute for Fiscal Studies has come out and said that it is a fair way of doing things. As I say, there is no perfect way to deal with this issue in the time that we have, but we have arrived at a good way to do it that gets the money out of the door to the places that need it.

[Matt Rodda (Reading Central) (Lab)]

Will the Minister give way on that point?

[Jim McMahon]

I will give way for a final time before making some progress.

[Matt Rodda]

I commend the Minister’s approach, because it is excellent that we have certainty. The Government are supporting local councils to make wise budgeting decisions and to invest in all the crucial things that we all want to see in our communities, including more help for vulnerable people, the important work on children, and infrastructure improvements such as new cycle lanes and better parks. Those are all valuable contributions to our communities, so I thank him for that.

[Jim McMahon]

That is the point. When it comes to fairness in the council tax system, we have to be honest and say that there has increasingly been an imbalance, whereby people are paying more and more but often receiving fewer and fewer universal neighbourhood services. There is a real danger to the democratic process if there is not a link between the tax that people are paying and the quality of public services that they are getting in return. In the end, councils are wrestling with adult social care, children’s services and temporary accommodation, and what else can they do but meet the demand? It is not a good position for the taxpayer or for local authorities, and we acknowledge that.

Our new £600 million recovery grant targets areas with both the greatest need and the greatest demand for services. The recovery grant is the first meaningful step towards long-overdue funding reform, but it is only the first step. A longer-term and more fundamental overhaul of the way that councils are funded is needed to ensure that all councils can deliver for local residents. The Tories committed to improving and updating the way that councils are funded through the fair funding review, but in the end they failed to take the tough decisions needed to deliver it, just like they failed to give councils certainty and security so that they could plan ahead, with a decade marked by year-by-year, hand-to-mouth settlements. That is why the 2026-27 settlement, which will be the first multi-year settlement in a decade, will introduce an up-to-date assessment of councils’ needs and resources.

We are acting where the previous Government failed. We will get on with the job of allocating funding fairly, based on the evidence of need, because councils know that every pound counts, and they also know that the current system—