Local Government Finance

Natasha Irons Excerpts

Wednesday 5th February 2025 Commons Chamber

[Jim McMahon]

Very real pressures have built up, and I will not criticise any council from the Dispatch Box—the days of doing that have long gone. That is not to say that I agree with every decision made by individual councils, or that I would not have chosen a different course. In some cases, the decisions were plainly not in the interests of local taxpayers.

However, we are where we are, and we need to stabilise the sector this year and reform the funding system over the multi-year settlement, so that we begin to build back the foundation of sustainability and long-term security. We need to invest in prevention and reform, so that we get ahead of the problem instead of paying at the back end for worse outcomes. In the end, we need a funding system that really holds.

By doing that, we will ensure that most councils in most parts of the country find themselves in a much better position than they were before the work was undertaken. Because of the types of decisions that have been taken, there will always be outliers. Whatever system we design, we can accommodate most councils in most circumstances, but because of the decisions that have sometimes been taken, we cannot accommodate all councils in all circumstances. The Government have committed to working alongside councils to work through this. Of course, local government reorganisation will accelerate the need to do that in some areas, because we will have to reconcile the creation of unitaries with the inherited debt liabilities. We are fully sighted on that.

[Natasha Irons (Croydon East) (Lab)]

I thank the Minister for meeting me and other Croydon MPs to talk about our council’s legacy of debt.

The Minister talks about early help and prevention. Will the funding formula take account of things such as youth services, where early help and prevention can have a massive impact on what councils have to spend over a longer period?

[Jim McMahon]

Absolutely. Deprivation is a key part of the funding settlement. This is the first settlement in a long time, and probably the first since the area-based grant in 2010-11, in which deprivation is a measure by which the Government allocate money to the sector.

If we see this as only a local government problem, we will miss the prevention and reform agenda that we need. My hon. Friend and I often talk about this, but the Home Office is working on diversionary activities for young people. In many communities, gang activity, child criminal exploitation and knife crime are very real issues that draw too many young people into crime. We need those diversionary activities in the places where people live.

We need to address that, and it should be a whole of Government agenda. That is why we are marshalling our work around the Government’s missions, and our approach is anchored to the plan for change.

--- Later in debate ---

[Kevin Hollinrake]

Of course there are some needs around deprivation, but that is not the entirety. The major cost drivers for local authorities are the things that I outlined earlier: adult social care, special educational needs and temporary accommodation. There may be some crossover, but the reality is that simply basing that on deprivation will not work for all authorities; some will be worse off as a result of moving from need to deprivation.

[Natasha Irons]

I had hoped that we could move away from this pitting area against area. I can assure the shadow Secretary of State that I am from an urban area with high deprivation, but with very high transport costs for children to get to special educational needs placements, and also massive temporary accommodation costs. Perhaps we need to move towards a better model that takes in all the issues we face in all of our areas. In that way, we are not fighting each other, but working together to get better local councils across the country.

[Kevin Hollinrake]

I do not want to be party political, but it is not us who are changing the formula. The reality is that this Labour Government are robbing Peter to pay Paul. This is a zero-sum game. If they move the formula around, some councils will be worse off and some will be better off. I want everybody to be treated fairly, but this is a very difficult situation against the current spending round.

The Labour Government’s approach is particularly worrying given their intention to move to a new fairer funding formula. “Fairer to whom?” we might ask, given the point we have just made. Labour’s broken promises on this are clear and follow similar promises broken on the fully costed and fully funded manifesto: the family farm tax, the family business tax, the winter fuel allowance, the rise in employer national insurance contributions and, of course, that statement about “not one penny more on your council tax,”