Local Government Reorganisation: South-east

Peter Lamb Excerpts

Tuesday 10th March 2026 Westminster Hall

[Dr Pinkerton]

I am grateful for my hon. Friend’s intervention. Labour may not have broken the local government system in Surrey but there is now an obligation to ensure that people who live in Surrey are not faced with the bankruptcy of their new unitary authorities on day one of those authorities’ existence, especially given the vital services that they will be delivering.

In neighbouring Woking—where there was another Conservative-run council in those fateful years—the gravitational denialism was even wilder. During the same period, Woking borough council accumulated debts that now stand at approximately £2.1 billion. It is said that that debt is so large that it directly impacts the Government’s borrowing capacity in international markets. Versions of that story are repeated across much of west Surrey: it is a pattern of behaviour that has, frankly, never been properly investigated. Its impact has been compounded by systemic failures in the auditing of local government accounts.

[Peter Lamb (Crawley) (Lab)]

Is the hon. Gentleman astounded, as I am, that the majority of that debt is with the public works loan board, which sits underneath the Treasury. Where was the Treasury when that debt was being allowed to accumulate?

[Dr Pinkerton]

I could not agree more with the hon. Gentleman. I will come on to talk about a systemic failure, as I see it, in the power that section 151 officers of borough councils have in effectively signing off the ability of a council to repay debts when accumulated. That is a power that I think may be far in excess of the skills that they have. After all, there is no separate mechanism to determine—from the Treasury or from the PWLB, for example—the ability of a council to fulfil its obligations.

It is therefore entirely reasonable that residents ask a simple question: why should communities that played no role in accumulating that debt now be expected to inherit its consequences through a newly-created local authority? If reorganisation is intended to create a stable future for local government, it would be deeply concerning for any new authority to begin life already burdened with billions of pounds in inherited liabilities. I ask the Minister what assurances the Government can provide that any future West Surrey authority will begin life next year on a financially sustainable footing? It cannot be right that my residents face the realistic prospect of their new unitary authority being bankrupt or effectively bankrupt on day one of its existence, given the critical services that councils are expected to provide.

The scale of borrowing in Surrey also raises wider questions about financial oversight in local government—this is where I will answer the hon. Member for Crawley (Peter Lamb). Local authorities rely on statutory finance officers—section 151 officers—to ensure financial prudence, yet the scale of borrowing undertaken by some councils suggests that existing safeguards have not always been sufficient to prevent high-risk commercial strategies. This debate is often framed in terms of protecting section 151 officers from excessive political pressure, and that may well be necessary, but it is also true that section 151 officers hold significant authority within council structures and must themselves be subject to proper scrutiny and accountability—something that is often lacking.

Councillors very often perceive that they are not allowed to overly scrutinise 151 officers because of members’ codes of conduct. Will the Government therefore consider whether additional safeguards or oversight mechanisms are needed to prevent similar situations arising again in the future, particularly as councils become larger, their finances become more complex and the risks become even greater.

There are also important questions about the size and structure of the authorities now being proposed. Under current proposals, the new West Surrey council would serve approximately 657,000 residents. By comparison, the average non-metropolitan unitary authority in England serves around 265,000 residents, with most serving fewer than 300,000. Authorities of the scale we are talking about today risk weakening democratic accountability, diluting local knowledge and making decision-making feel more distant from the communities they are meant to serve.

Ministers have suggested that having larger authorities will deliver financial efficiencies. In support of that argument, the Government have relied on modelling produced by the County Councils Network, which happens to be chaired by the very same leader of Surrey county council who locked Surrey into this fast-track pathway in the first place. Despite several Parliamentary questions seeking clarification, it remains unclear what independent modelling the Government have undertaken to substantiate those claimed savings. I ask the Minister again: have the Government undertaken their own economic modelling of the projected financial benefits of local government reorganisation in Surrey? If so, will that modelling now be published publicly?

Finally, we should recognise that all of this is unfolding while councils continue to deliver vital services under considerable strain. In my constituency, the concerns most frequently raised with me relate to special educational needs and disabilities provision. Hundreds of families contact me about problems with education, health and care plans—incorrect names, incorrect details, long delays and support packages—that simply do not meet the needs of the children concerned.

For the past three years, Surrey has recorded the highest number of SEND tribunal appeals nationally. At the same time, residents regularly contact me about deteriorating road surfaces, potholes causing vehicle damage and wider infrastructural pressures. These are not abstract policy debates; they are real challenges affecting families who rely on local government services every single day.

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[Peter Lamb (Crawley) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Vickers.

Local government is an area of great interest to me. I did my master’s dissertation on models for English devolution; I have worked at the UK’s leading think-tank on devolution; for 17 years I worked as an adviser to local authorities, and I have served in local government in a county council and a district council, including almost a decade as a council leader. From 2015 onwards, I have also been involved in various devolution proposals for Sussex in one way or another.

I say all that because, despite that background, I still cannot get my head around what the Ministry of Housing, Communities and Local Government is trying to achieve with all this. That is despite talking to the director at No. 10, special advisers and Ministers on this policy area. In fact, the more I delve into it, the more opaque it becomes.

My understanding is that this reform all kicked off with Angela Rayner and Rachel Reeves—two people without any background in local government—making a deal: more money now, in return for local government reform. The only reason they thought it would deliver any results was that the County Councils Network had, for many years, been putting forward a document that seemed to set out a case that there would be financial savings if county councils were merged at the unitary level.

Those figures relied on population sizes of roughly half a million people—that figure is critical; I re-read all the statements made by local government Ministers on this before this debate, and it is a figure that has been repeatedly stated and was consistently pushed for the better part of a year. The reason was that, when we look at the County Councils Network figures, the £2 billion savings it talked about delivering, which it presented as if it were an annual statement—it is not, it is over five years—are achievable only when dealing with population sizes of 500,000 or greater.

The problem, when we come down to it, is this: for the Labour party, that is completely unelectable. We have pockets of support within the south east, but we do not have larger footprints. With the politics unravelling around this question, we have started to talk about smaller sizes for unitary authorities, but here we run into a problem: unitary authorities do not save money. Merging existing councils saves money. We could merge districts together—that would save money. We could merge counties together—what an idea!—and that would save money. We could merge existing unitaries together—that would save money. However, when we start creating unitaries, we are merging two different tiers together; if that is a smaller footprint than existing upper-tier authorities, it will always end up costing more money than the alternative.

We now have a proposal that will not deliver politically or financially. I will return to the finances in due course, because the situation is much worse than people think it is. This proposal is somehow still on the table long beyond the original document that set this all out. If there are other figures on this then, like the hon. Member for Surrey Heath (Dr Pinkerton), I would be delighted to see them. I have asked for them repeatedly. However, when Governments do not release data, we come to the conclusion that they do not have data that backs up their case. The evidence base here is very hard to find.

The other argument that comes up very frequently is that two-tier areas are too complicated and people do not know who runs what. I have lived in two-tier areas essentially my entire life, apart from when I was at university, and that is not something I have come across, despite being in roles where I might expect to come across it very regularly. If we say tiers are a problem, adding mayors across the country and encouraging people to set up third-tier authorities increases the total number of tiers at the local government level. It adds to the complexity rather than decreasing it.

We hear bizarre arguments about issues such as waste collection and waste disposal authorities, as if the idea that someone collects the bins and someone gets rid of them is complicated. What particularly grates my gears about that argument is that there are many unitary authorities that are not waste disposal authorities. Take the Thames valley waste authority as an example—take Greater London—take Greater Manchester: in all those areas, waste is collected that is then disposed of on a larger footprint. There are many such areas where the powers do not perfectly align, and people manage to get through them without any great deal of controversy.

The argument for much of this change, particularly with the mayoralties, was that we were would get wider public sector reform, which would deliver astounding savings. The problem with that argument is that the footprints that the change was supposed to create would align the mayoralties, the police authorities and the integrated care boards, so that we would get all the services in one area and they could deliver efficiencies. However, we are now talking about creating police authorities on a larger footprint than the existing mayoral footprint, so the two would no longer correspond. There will be a much more complicated structure now, with deputy mayors sitting on different boards in relation to it. Similarly, the ICBs have had to expand, so they no longer go along with the devolution footprint.

The only form of public sector reform that we can now carry out around this process is reform of local government on its own, and that will not deliver the projected savings. Most of the areas that a district council deals with and most of the areas that a county council deals with do not interface in any meaningful way when it comes to savings. If they did, the County Councils Network report, which it paid PwC to produce in order to create the strongest possible case for reform, would have put that forward. Instead, the report solely states that savings can be made by reducing senior officer numbers. As anyone who has been involved in the sector knows, many of those posts no longer exist in the numbers that they did at the time that the PwC report was formed. At this point, such figures simply do not exist.

The only people I can find who have any difficulty with the idea of two-tier areas are civil servants and politicians from unitary authority areas. One might imagine what other people might feel if we went to their areas and tried to impose our culture upon them. There has also been the claim that these reformed authorities will be engines for economic growth and housing delivery, but let us think about it in this way: I was the leader of a local authority that delivered over four times our Government-assessed numbers for housing, whereas—unfortunately—Mid Sussex district council, which was previously under Conservative control, often did not even have a core strategy for that entire period, never mind delivering any actual housing numbers.

We are about to create unitaries where the areas that deliver large volumes of housing, and that need such housing at an affordable rate, will be swamped by rural communities. What do we think will be the dominant factor in these new authorities, where the politics is controlled by rural communities? Will it be a focus on economic development? Will it be a focus on housing delivery? Or will it be stamping down on those two things, as we have seen time and time again? This plan does not deliver on the Government’s missions; it kills them off, as many Members have tried to point out in recent times. The reality is that demography is destiny, and rural communities will have control over those authorities.

Returning to the issue of finance, in my area the actual cost of the merger is estimated as three times greater than the estimate put forward so far. In fact, even on the most optimistic assumptions, on these footprints no savings would be delivered until the end of the next Parliament—but it is more likely that there would not be any saving at all. In fact, the situation gets even worse than that. Who knows when most of the country’s leisure centres were built? I will give Members a clue—it was in the early ’70s. What happened in the early ’70s? We merged all the district councils, and they looked at their accounts and said, “I am not handling this over to the next council”, and they got busy spending.

We can see that in the country currently. The reality is that, until the protections come in with the new authority, people will be getting money out the door. Debt is going up, budgetary decisions are being postponed and savings are being put off in order to invest in local communities while there is one last chance to do that. Over the next 12 months, section 114 notices are far more likely than in any preceding period.

I will move on to the issue of democracy. Resident satisfaction surveys of local authorities have consistently shown a positive correlation between the perception of a local authority and the size of that authority. It is not the other way around, as though suddenly authorities delivered much more effectively when they got to a much greater footprint—why would that be the case? More remote Government is not necessarily going to make people any happier.

Currently, the average size of authorities in the UK is seven times larger than not the European average, but the authorities in the European country with the next largest—and this programme will make our authorities 14 times larger than those. Why are we such an outlier? Why are councils in Europe, which have far greater powers and far greater money than we do, apparently perfectly capable of running their local areas, while in our areas we have to bring things up to a central Government level? Again, I think that the civil service has far more to do with this programme than any actual rational thought does.

The changes will also prevent people from having any meaningful relationship with councillors. In the UK, we are far less likely than in any other part of Europe to have independent councillors. The reason is that with footprints of this size we cannot build a meaningful relationship with a councillor. The distance cuts people off from their democracy and any sense of control, and increases their scepticism. Conversations about area committees are frankly meaningless; anyone who has actually worked with those structures knows they do not replace meaningful representation.

The fundamental problem we will run into is geography. When we strive to get population sizes in rural areas, we come up with enormous geographies; for my patch, we are most likely talking about an area in excess of 50 miles wide. Greater London is just over 30 miles wide. What common interests can exist in that footprint? What common services? What common identity? We will end up with competition between the different communities in those areas, and policy will be driven by those communities whose voices are heard loudest in whatever administration is in control. That will, again, mean that the rural beats out the urban. Urban communities such as mine, which includes some of the most deprived parts of the country—certainly in the south-east, at least—will lose out as a direct result of the restructure.

There are 71 Labour constituencies that trusted us at the last election, but that will see their quality of life decline as a direct result of the policy as well. When we look at the numbers, it might well be that if the Labour party, sacrificed those 71 constituencies, it would never be in office again. I am sure that Opposition Members would be delighted; it is why I thought they would be pushing the policy, not the Members on the Labour Benches. Talk to any Labour party organiser and they will say that the policy undermines our organising model. They are up in arms.

Most Labour Governments in the last century would not have happened had there been a reform such as this. We are arguing for a policy that no longer reflects the principles on which it was first brought together. It no longer reflects the same goals: it will not save us money, it will be more remote and it will undermine the deprived communities that this Government are allegedly in place to serve. It is clear that the advice given to Ministers in MHCLG is poor; we have seen that in just one month, with fair funding miscalculations that took place, and we have seen that with the elections, with the conclusions that we now all have to deal with.

Having been through the detail of the policy over and over again, I cannot see any way that it is not another example of that poor advice.

[Alison Bennett]

I am very much appreciating and enjoying the hon. Member’s contribution to the debate. Can I suggest that, when it comes to getting local government in England on a sound financial footing, the real elephant in the room is putting social care on a financial basis so that councils can deliver decent social care to our communities?

[Peter Lamb]

There are three areas, and social care is one of them. The finances of upper-tier authorities have been totally compromised, initially by the costs of social care, where we have still not taken decisions all these years after the Dilnot review. We all know that social care is slowly bankrupting councils. Go to any single council presentation on local government finance—whether a unitary or upper-tier authority—and that is the thing that will be mentioned.

Then there is SEND, which again has absolutely crippled local authorities’ funding to the extent that we allowed them to keep it off their books because the cost would have bankrupted them. That has now been taken away from them to be covered centrally, so that is one less problem to deal with.

Lastly, there are the costs of temporary housing, which housing authorities, like the districts, are mandated to provide. They have no control over it, and are often dealing with the consequences of central Government decisions that move more people into the area and create that level of housing need. However, those costs ultimately stem from a failure of housing policy in this country.

Those are the three areas bankrupting local government. Despite the fact that local government started out as the most efficient part of the public sector and has become still more efficient since, taking sensible decisions to maintain its survival, it cannot deal with pressures that are not being dealt with centrally. If we deal with those three problems, local government finance problems will go away—but they are central Government’s problems to resolve, and we have not yet quite resolved them.

I accept that all that is in motion, but when I talk to people in local government, very few of them want this policy. The reality is the boundaries are most likely going to end up lasting for another half a century—just look at the pain we are going through now; we are not going to want to go through it all again. We should not be embarking on something that will last 50 years when we cannot publish the evidence base because it is so weak. A pause is now needed to reflect on these proposals. I will continue to argue more and more loudly for that, adding more and more things to the debate about the best outcome here. I say to Ministers, “You’ve inherited a mess from other people; it wasn’t of your making and I really wouldn’t jeopardise your careers seeing this through.”

[Martin Vickers (in the Chair)]

May I remind the hon. Gentleman that we do not refer to other Members by name, but by their constituency?

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[David Simmonds (Ruislip, Northwood and Pinner) (Con)]

It is a pleasure to serve under your chairmanship, Mr Vickers. I draw the House’s attention to my entry in the Register of Members’ Financial Interests on my roles as an unpaid parliamentary vice-president of both the Local Government Association and London Councils.

I congratulate to the hon. Member for Surrey Heath (Dr Pinkerton) on securing the debate. He, the hon. Member for Crawley (Peter Lamb) and my right hon. Friend the Member for East Hampshire (Damian Hinds) set the tone of a debate that has engaged, with a high degree of seriousness, not only with the issues that stem from the specifics of what is happening in Surrey but with what they say about the wider local government reorganisation debate.

It was interesting as a parliamentarian to be present, a short time ago, at a Delegated Legislation Committee in which Committee members agreed the abolition of the historic county of Surrey and its replacement with two unitary authorities. That was the conclusion of a long period of debate in which, as the hon. Member for Crawley outlined, the leaders of county councils in particular argued strongly that local government reorganisation on the footprint of the existing county structure would be a way to save money. Many district councils argued strongly against that idea, and it was called into question by many experienced unitary leaders.

We all recognise that there is a need to look again at our local government settlement. This country is already very under-represented in democratic terms at the local level, with the fewest elected politicians per capita of any developed democracy. It is also intensely centralised by comparison with most other countries, with decisions that would as a matter of routine be local decisions in most other democracies taken by Parliament or central Government.

I have a huge amount of sympathy for the Minister, because while she is from the Ministry of Housing, Communities and Local Government, council services touch on the work of the Department of Health and Social Care, the Department for Education, the Department for Transport, the Treasury, the Ministry of Defence and the Home Office. The observations that other Members have made about the impact of special educational needs and disabilities demonstrate that complexity, where an issue that sits outside the Ministry of Housing, Communities and Local Government is one of the single biggest factors in the viability of local authorities.

The last time we faced each other across the Dispatch Box, I asked the Minister, with particular respect to Surrey, whether there was an update on negotiations. Surrey had set out very clearly that its deficit on SEND spending sits at around £350 million, and the Government had been clear—in fairness, it was Department for Education Ministers—that they would pay off 90% of that deficit. The offer to Surrey was £100 million, which was significantly less than the 90% that we were promised at the Dispatch Box. This is not simply a matter of what happens in a single Government Ministry; it brings together services, activities and decisions across Government.

Reflecting on the long history of local government reorganisation, it probably predates the existence of our country as a unitary state. Certainly the role of some ancient Saxon kingdoms is quite akin to the behaviour of some local government leaders today. The particular challenges that come from the difficult relationship between central and local government are manifest here today.

With regard to recent developments, I spent 12 years in local government under the previous Labour Government and a further 12 years there under the Conservative Government who left office in 2024, and many of the decisions that were made then by central Government—statutory requirements placed on local authorities such as SEND arrangements, social care, the fair access criteria that were introduced, housing—were never fully funded. Since the early 2000s, there has been steady growth in the share of local government spending that is consumed by social care and housing. We have seen an erosion of the ability of our elected local leaders to deploy locally raised resources against local priorities, to the extent that social care now consumes around 70% to 80% of the budget of a typical social care authority. That is not sustainable.

Other Members have spoken passionately and with a degree of criticism about the impact that investment decisions at the council level have had. We all recognise that councils led by all of the parties represented here have made both good and bad decisions when it comes to investment, but we should be wary of criticising local leaders for having made decisions in good faith that did not end well. At a time when the public works loan board interest rate was 0.25%, the decision—even by a council—to take a loan and put it in the bank would have generated additional finance that could have supported local government services. Those decisions were not always innately wrong, but the impact of covid on local authorities’ investments in commercial property was absolutely devastating. Spelthorne, which has been mentioned today, is one example of that: what would have looked like an extremely sound commercial investment turned into a very bad one because of the impact of covid.

         We find ourselves today in a situation where Surrey is unusual. It is the only authority announced for the devolution priority programme that has got to the point of creating new successor unitary authorities. At the outset of this process, the Government were very clear that they were going to cancel the elections in all the devolution priority programme councils, which we voted against at the Delegated Legislation Committee that considered that matter. They did so on the basis that elections for the new unitaries and mayors would take place across the country. There were supposed to be elections this May for new mayors in Suffolk, Norfolk, Essex, Hampshire and many other places. Political parties and local leaders had been working on that basis, only to find after a 24-hour U-turn last December that the elections that were promised to go ahead were suddenly being cancelled.

All this delay and dithering is imposing costs. I met yesterday with a finance company that told me that the procurement of new finance systems across the local authority sector has simply ground to a halt in the absence of any clarity from Government about what is happening. The commissioning of new services in social care to address homelessness has collapsed, which I know concerns the Minister, as has the delivery of housing—both the pipeline of new applications and the completions of new properties. Two thirds of London boroughs report no new net additional homes. That is an absolute indictment of the state in which many of our councils find themselves because of the delay imposed by this process.

As the hon. Member for Crawley outlined, both the Government and the wider argument for this reorganisation rely on a now rather old report that was prepared by PricewaterhouseCoopers at the instigation of the County Councils Network to support the case for county-based reorganisation. It is clear from the evidence he presented that the hon. Member, who left us in no doubt about what he thinks of this process, knows of what he speaks. The start of the process was simple. Half a million people was the minimum footprint in order to secure savings. That was the level that the Treasury expected to see delivered. However, that is significantly larger than the existing footprint of most unitary authorities. As my right hon. Friend the Member for East Hampshire described, it risked losing the sense of place and identity. Ministers quite wisely backed off. They looked at the bids from the local authority areas that were instructed to submit them and settled on a smaller footprint.

That fundamentally undermines the case that this will result in significant revenue savings to the Government in the medium to long term, for the reasons outlined by the hon. Member for Crawley. A concern that the Opposition have raised a number of times on the Floor of the House is that the Government have no independent modelling or independent financial analysis to back up their direction of travel on these reorganisation decisions.

As all Members who spoke passionately about their enthusiasm for getting local Government right recognised, when we compare ourselves, sometimes unfavourably, to other European countries and ask why they seem to be able to build railways and public transport infrastructure faster than the United Kingdom, the answer is largely that those decisions are made at local and regional level; they are not made by central Government. Delivery of rail networks or citywide transport, for example, which I know is of concern to a huge number of Members where lots of good projects are on the stocks, is much faster and cheaper in many other countries. We need to look at what we can learn from their experience.

We need to reflect on the role of the Treasury. I have heard former Chancellors say that when the demand for additional day-to-day spending becomes unbearable, the temptation is to simply slow down the exit of capital from the door on major projects. One of the benefits of localisation is that it removes that temptation from Chancellors and ensures that things that are committed to, become deliverable at a local level.

There are many urgent pressures. One of the key concerns I hear from councils all the time is that the Government do not have a huge amount of time to think, not just in the sense of the parliamentary timetable but when we look across our country. Unemployment has been relentlessly rising every single month since the Government took office, homelessness has surged up 27% in London alone since the Government took office, debt is rising rapidly, planning decisions are grinding to a halt and housing delivery is grinding to a halt. We need to give local communities hope that there is a prospect of solving some of those matters. I share a concern with the hon. Member for Crawley, which affects us very directly. The decisions that the Government have made in the Home Office, speeding up decision making on asylum seekers, pushing those people out the door and up the road to the town hall which then has responsibility for housing them, is putting acute pressure on my local authority, his local authority and many others across the country who are doing their best in difficult circumstances.

It is very clear that a whole range of issues are brought to our attention by what is happening in Surrey. I am grateful to all hon. Members who have set out their particular concerns. I hope that, as a result of the observations made in the debate, we may see the Government come back with a revised set of policies that reflect a clear sense of place and the opportunity for all our constituents to know that they will have elected representatives who can make the decisions that they want to see made at a local level.

[Peter Lamb]

On a point of order, Mr Vickers. Regarding my earlier breach, I just want to apologise to you and to the Chamber for referring to my right hon. Friends the Members for Ashton-under-Lyne (Angela Rayner) and for Leeds West and Pudsey (Rachel Reeves) by their names rather than by their constituencies, and without forewarning. I was unaware of the process. I will make sure it does not happen again.

[Martin Vickers (in the Chair)]

Your apology is noted.