Local Government Finance

Will Forster Excerpts

Wednesday 11th February 2026 Commons Chamber

[Florence Eshalomi (Vauxhall and Camberwell Green) (Lab/Co-op)]

I thank the Secretary of State, who is not in his place, for opening this debate on the settlement. I know the work that he and the Local Government Minister have led on in bringing forward this statement, and they have been strong voices for our local government colleagues. I should declare that the Secretary of State and I served at Lambeth council, and the Minister served as a councillor in Southwark, one of my neighbouring boroughs. I also want to pay tribute to the former Minister, my hon. Friend the Member for Oldham West, Chadderton and Royton (Jim McMahon), for the work he did with many councils to get us to the place we are at.

I know that many local authorities across England will be delighted to see that the Government are going to be covering 90% of the debt that has built up through supporting children with special educational needs and disabilities. The issue of SEND appears in all our inboxes, and it has been a big ongoing issue for many councils, regardless of which party leads them. The issue is how we continue to support some of the most vulnerable children, so we must ensure that councils are adequately funded in this area.

If we are honest, SEND costs are not of councils’ making. As the shadow Minister, the hon. Member for Ruislip, Northwood and Pinner (David Simmonds), highlighted, the costs are a result of the broken system, which is finally being addressed by this Government. I hope that the Government will continue to address this issue in the upcoming schools White Paper.

One of the first things that everyone across local government asks for is certainty from the Government—certainty that authorities can make long-term investments in infrastructure; certainty that they have the funding to build the homes that we need; and certainty that they can start turning around the 14 years of under-investment in local government. I know that Opposition Members do not like to hear about it, but we saw 14 years of under-investment in SEND, temporary accommodation and adult social care. We should all welcome the first multi-year settlement in a decade, which ends the year-on-year waiting game that held back investment for too long.

This settlement has been called for not only by the current Housing, Communities and Local Government Committee but by its predecessor Committee, which was chaired by my wonderful colleague, my hon. Friend the Member for Sheffield South East (Mr Betts). It is good to see that the Government are finally listening on this issue.

We welcome the reduction in the number of grants. We have been asking our cash-strapped councils to continually bid for small pots of money. That means officer time being taken away from frontline services. Councils are bidding for those pots when, in some cases, they will not even be successful. That is not a good use of vital officers’ time, and in some cases the councils had to justify submitting the bids in the first place. We really do welcome this crucial change.

There are two other areas I want to focus on, one of which has been raised by right hon. and hon. Members this afternoon. The reality is that even with this welcome funding, a number of councils will still face budgetary issues. The Local Government Association anticipates that more councils may apply for exceptional financial support. When we see more councils having to apply for emergency funding, there is nothing exceptional about it. We cannot have a situation where councils have to rely on emergency funding to carry out day-to-day services and to avoid declaring bankruptcy. I hope that the Government will look at this area.

[Mr Will Forster (Woking) (LD)]

I agree with what the hon. Lady is saying. I am concerned that the Government’s support package for councils such as Woking borough council—which effectively went bankrupt several years ago following Conservative mismanagement—is allowing them to borrow more money to pay off their Government loans. Does she agree that the exceptional financial support process needs to change immediately?

[Florence Eshalomi]

I thank the hon. Member, an excellent colleague on our cross-party Select Committee, for his intervention. The Committee looked at this in our report on local government finance, and he will remember that our report stated:

“Exceptional Financial Support (EFS) by means of capitalisation direction is a stopgap measure that avoids section 114 notices and allows councils to produce short-term balanced budgets, but can weaken councils’ finances and capital investment in the long term.”

There is an issue, and we cannot keep sweeping it under the carpet and thinking that it is going to go away—it is not. In the long term, we are building more debts for those councils, which we have to look at addressing. I am pleased that the Government are going to ensure that councils applying for ESF have a wholesale root-and-branch review of how that money is to be allocated.

We know that this multi-year funding process will not solve the underlying issues facing all our councils. Another area at the heart of this issue, which I have mentioned on many occasions and on which there is growing cross-party support, is the reliance on the most regressive form of taxation to pay for mandatory demand-led services, where councils have little control over that demand. Council tax amounts to about half of the settlement total, with an assumption of the maximum increase across the board, despite the fact that the Government have little control over how much that figure will be. The Secretary of State has highlighted that in boroughs where the referendum principle will be lifted, the Government are assuming that increasing council tax will help, with some councils having to increase their council tax by over 30% just to reach their core spending powers and the figures in the settlement.

I think we all understand the challenges the Government face when it comes to balancing the books and the inheritance they were left with after 14 years. These are difficult decisions that we have to make, but let me take us back to when the former Local Government Minister, my hon. Friend the Member for Oldham West, Chadderton and Royton, told us:

“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.”—[Official Report, 5 February 2025; Vol. 761, c. 850.]