(4 days, 23 hours ago)
Westminster HallRead Hansard Text Read Debate Ministerial Extracts
Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Helen Hayes (Dulwich and West Norwood) (Lab)
I beg to move,
That this House has considered funding for local authorities in inner London.
It is a pleasure to serve under your chairmanship today, Dr Murrison. My constituency includes part of the London borough of Lambeth and part of the London borough of Southwark. Before I was elected to this House, I spent five years as a local ward councillor in Southwark. I just managed not to overlap with the Minister, who was also a councillor on Southwark council and stepped down in 2010 as I was being elected.
Being a councillor is deeply rewarding, with a responsibility for delivering services in a way that makes a direct difference to people’s daily lives. From recycling to street cleaning, adult services, children’s social care, roads, parks, playgrounds and council housing, our councils are responsible for important aspects of the fabric of everyday life. They affect people’s quality of life and, in doing so, play a vital role in building trust and confidence in politics, the Government and public services.
I am proud that, as a councillor, I helped turn around a local primary school in a deprived area of my ward from being one of the worst in the borough to one of the best. I am proud that we delivered road safety improvements at a number of dangerous junctions in the ward. I am proud of the work that we did through tenants and residents associations and local community organisations to bring people together and build community. I am also proud that, despite more than a decade of Conservative and Lib Dem austerity, Southwark continued to keep the borough clean and open new libraries. It was one of the first councils to fund universal free school meals for primary-age children and it is a borough of sanctuary that supports the refugees and asylum seekers who are part of our diverse community.
I remember very clearly the Labour group meeting in 2010 in which we were briefed on the coalition Government’s local government funding settlement for Southwark. There was a stony silence in the room as the newly elected cabinet member for finance told us how big the cuts were and the services and investment that the council would no longer be able to deliver as a result.
We had no idea how much worse the cuts would get over the coming years such that, a decade on from the 2010 election, our councils were receiving 60% less in grant funding from central Government, and the capital grant for new council homes had been decimated. That marked a huge shift in local authority funding away from the certainty of grant funding and towards retained business rates, the new homes bonus and endless small, short-term pots of funding, often requiring resourcing for a bidding process.
At the same time, our councils saw rising need. Our ageing population has meant an increasing need for adult social care, and the erosion of support for families has resulted in more children being taken into care and the cost of expensive placements increasing. The rising numbers of children with special educational needs and disabilities has increased the costs of school placements and home-to-school transport.
That is all before we get to housing. Inner-London boroughs are at the epicentre of our national housing crisis. Spiralling rents and a lack of security in the private rented sector mean that more and more families have turned to their council for support with housing, while the lack of investment in new social housing and the loss of council homes under the right to buy has meant that they have had to be housed in temporary accommodation, which is very expensive and often the worst-quality accommodation. London councils are currently spending £5 million a day on temporary accommodation—that is £5 million a day into the pockets of some of the worst landlords, and at times paying for damp, mouldy, overcrowded homes, often far from a family’s home, neighbourhood, community and their children’s school.
Jim Shannon (Strangford) (DUP)
I always try to be helpful to the hon. Lady and all hon. Members. We have many brownfield sites in my constituency and there are many in London where the hon. Lady refers to there being a housing crisis. Does she feel that there should be a focus on trying to use those sites for social housing and improve the housing problems that London clearly has?
Helen Hayes
I am grateful to the hon. Member for his intervention. I will come on to talk about those sites in my constituency that have planning permission but currently are not funded to build the social homes that could be on those sites. I think that is an important part of how we solve these challenges.
The Conservatives’ interventions to reduce social housing rents have also been disastrous for the ability of our councils to fund the maintenance of social housing and to fund new social homes. Southwark council calculated that Conservative-imposed rent cuts and freezes will cost the council’s housing revenue account £1 billion over 30 years. What is a very small saving for tenants has had a really big impact on the ability of councils to keep up with the maintenance needs of their social housing stock.
The Conservatives were happy to cut our councils’ budgets to the core and did not worry about the erosion of services that inevitably followed. Reform imagined that our councils were full of waste and profligacy, only to find that they are lean organisations that have constantly innovated in the face of austerity but that, over time, have become stretched, sometimes to breaking point.
A budget settlement based on a definition of deprivation that did not include housing costs, as was originally proposed, would have had absolutely dire consequences for inner-London councils. The reality is this: if rent eats up so much of someone’s income every month that they cannot afford the bare essentials, or if the only property they can afford to rent is so bad that it causes them and their family to become ill, then they are deprived and they face exactly the same consequences of that deprivation as anyone else anywhere in the country who simply does not have enough money to get by.
Helen Hayes
I give way to my hon. Friend the Member for Vauxhall and Camberwell Green (Florence Eshalomi), the Chair of the Housing, Communities and Local Government Committee.
Florence Eshalomi
I thank my hon. Friend, my constituency neighbour, for making such an impassioned and powerful speech. I declare an interest in that my constituency also covers both Lambeth and Southwark. She is talking about housing costs, which we know are so expensive in London. We have seen housing costs rise over 15 years, pushing more people into homelessness and temporary accommodation. Does she agree that the Government should look at the subsidy paid for temporary accommodation, which has been frozen since 2011? In real terms, rents have continued to go up in our constituencies.
Helen Hayes
My hon. Friend is absolutely right. The maths on temporary accommodation costs simply does not add up at the moment. I have more to say on that a bit later in my speech.
Dawn Butler
I thank my hon. Friend for her important speech today. Brent council, which covers my constituency, spends £100,000 a day on temporary housing. We have around 40,000 people on the housing waiting list. It is impossible to match that need, but it is also important to understand that councils, as my hon. Friend has said, are trying to innovate. Housing costs in inner London need to be taken into consideration with any calculations.
Helen Hayes
My hon. Friend makes the point very well. It is the reality of people’s lives. People come to all of us who represent constituencies at the heart of the housing crisis in the most desperate of circumstances—in circumstances that everybody would agree are completely unacceptable—and there is no relief for them, because the options that are on the table are simply unaffordable, and what is affordable is unacceptable.
I am grateful to the Government for listening and for changing the deprivation criteria to include housing costs. I also completely recognise the very deep poverty and deprivation that affect other parts of the country. I grew up in the north-west and before I was elected to Parliament, I worked with communities all over the country. This should be about not pitting different areas of our country against each other, but resourcing and empowering local authorities right across our country to meet the needs of their communities. Some of those needs are universal, and some are specific.
While I welcome the changes made to the formulae in recent weeks, inner-London councils will still remain in a very difficult financial situation as a consequence of the settlement that was finalised yesterday.
Luke Taylor (Sutton and Cheam) (LD)
I welcome the tone of the hon. Member’s comment at the end there. I will use the examples of Lambeth and Southwark. When we pull out the contributions from council tax and look only at the money that is coming from central Government, over the next three years, Lambeth residents will have £75 per capita removed from their support from central Government, and Southwark residents will have £75 per resident removed. Does she agree that that is not good enough from a Labour Government?
Helen Hayes
There are different ways of looking at the analysis and I am sure that the Minister will speak in detail on the way that the Government have apportioned funding based on the formula. The reality of the settlement as finalised yesterday is undoubtedly that our councils are in a very stretching situation indeed, and that could lead to difficult situations ahead. One of the areas where the Government could really help our councils is by looking at the costs that they have to bear as well as the resources that they have to meet those costs. I will come on to make some of those points in a moment.
Bell Ribeiro-Addy (Clapham and Brixton Hill) (Lab)
My hon. Friend and constituency neighbour in Lambeth is making an excellent speech. The arbitrary cap, which I believe was initially created in the fair funding review, created the unintended consequence of leaving Lambeth missing out on the funding that it would have otherwise received. That means that Lambeth has lost out on £47.5 million over three years. As she knows, that money is urgently needed to protect our local services. Although, like me, I am sure that she welcomes the uplift to the recovery grant that was announced yesterday, does she agree that it is not enough to meet the needs of our constituents and our local authority with its ever-growing costs?
Helen Hayes
My hon. Friend makes the point about the recovery grant very well. I will come on to some practical suggestions for what the Government could do to alleviate that situation in the short term.
Council tax equalisation, such that the grant is now based on each area’s share of the national tax base and not actual local tax levels, penalises low tax base, high-needs areas like Lambeth and Southwark. The business rates reset will wipe out historical strong growth in some inner-London boroughs, and falling numbers of children will also have an impact through the children’s formula, even though need is growing and increasingly complex.
The risk is that our councils are left in an increasingly precarious situation and are forced to make impossibly hard choices about local services in the face of increasing need. Having agreed the final funding settlement—it is welcome that it is for three years, which gives our councils more certainty—there is more for the Government to do to help councils bring down their costs and reduce need, so that service delivery is manageable within the resources that are available.
On behalf of my councils of Lambeth and Southwark, I have a number of asks of the Minister. Our councils desperately need help with the costs of temporary accommodation. The average cost of temporary accommodation in London has risen by 75% over the last five years, and the number of people seeking help with their housing has also increased dramatically, yet the amount that the Government pay councils to subsidise temporary accommodation has been frozen since 2011. Will the Government work towards increasing the subsidy so that it is closer to the actual housing costs that our councils face?
Temporary accommodation is the least stable form of housing and it has terrible consequences for residents. I have known many constituents to get up at 5 am to travel long distances by bus to keep their children in the same school and give them some stability. Those costs could be saved if more residents could afford to rent privately, yet the freezing of the local housing allowance has made that increasingly impossible. Will the Minister work with her counterparts in the Department for Work and Pensions and the Treasury to increase the rate of local housing allowance to stop private renters from needing temporary accommodation? Some of the £5 million that is spent every day by London local authorities on temporary accommodation would be much better deployed keeping residents in stable homes through the local housing allowance than propping up the most awful situations in temporary accommodation.
With the application of the £35 million cap, councils in receipt of the recovery grant currently face a cliff edge. For Lambeth council that will mean, as my hon. Friend the Member for Clapham and Brixton Hill (Bell Ribeiro-Addy) said, a loss of £47.5 million over the next three years. If the cap was removed for just next year, it would give the council an additional £11 million to reduce the savings that it is currently having to plan for. Will the Minister consider that?
Councils have expressed concern to me about the Government’s assumptions about the level of council tax receipts. Will the Minister work with councils to ensure that the assumed level of council tax receipts closely matches actual council tax collections? The social housing crisis requires that new social homes are delivered at pace. In my constituency, we have council and housing association-owned sites with planning permission that are not currently being delivered because the soaring inflation caused by the Liz Truss mini-budget priced them out of viability.
The Government’s commitment to invest £39 billion in social housing is very welcome, but will the Minister ensure some of that funding is urgently made available to London boroughs that have sites that are ready to build? We urgently need that.
The overnight accommodation levy is very good news for London but it must be apportioned to where it is most needed. Will the Government mandate that at least 50% of the funds raised by the levy are retained locally by London boroughs to cover the costs incurred by services affected by tourism and to support local growth?
Joe Powell (Kensington and Bayswater) (Lab)
The Government are looking at how the overnight stay levy might be used, and there is some really welcome potential, for example where major events in London happen in one local authority but impact many. I completely agree with my hon. Friend on the 50:50 split. Does she agree that that could help to smooth out some of the longer-term funding issues coming out of the settlement, by providing additional capital that councils could use, for example, on public realm and public safety works?
Helen Hayes
I agree completely. The levy is a really important source of additional revenue into London, and it is so important that it is spent where it is needed. That does mean allowing councils to retain some of the receipts—I would say 50%, as London Councils is calling for—in order for them to do exactly that.
Exceptional financial support was designed to be a temporary intervention to support councils with acute financial pressures, but the consequence has been a growing number of councils running structural deficits. Will the Minister set out in greater detail how the Government intend to support councils to exit EFS so they are not held back by growing deficits?
Finally, the announcement yesterday on SEND deficits is very welcome. It is a clear recognition that the current costs of SEND provision are totally unsustainable. Writing off 90% of SEND deficits will only help if the forthcoming SEND reforms are properly funded and designed such that they are financially sustainable. What is the Minister doing with the Department for Education and the Treasury to make sure that councils’ statutory SEND responsibilities are properly funded when the schools White Paper is published?
Our councils and councillors are a crucial part of the bond of trust between local residents and the politicians and governments that serve them. We cannot leave our councils in the position in which the Conservatives were happy to leave them, with no answer to the needs of their local populations because they do not have the resources to deliver. Our local residents need and deserve clean streets, well-kept parks and open spaces, good-quality road services, good adult social care and effective children’s services, good-quality homes in the social rented sector, and proper support for children with SEND. They deserve nothing less, so that they can trust that government is there to deliver for them. We owe it to our dedicated, hard-working colleagues in local government to support them.
Peter Fortune (Bromley and Biggin Hill) (Con)
It is a pleasure to serve under your chairmanship, Dr Murrison. I congratulate the hon. Member for Dulwich and West Norwood (Helen Hayes) on securing this important debate.
Let me start by expressing my agreement with colleagues from outer London. Local authorities are in a perilous position, and have been for some time, due to Governments of all stripes. As a former council deputy leader and cabinet member for children’s services, I really do understand. I also believe that Members from inner London will benefit from an enhanced appreciation of the specific struggles those of us in outer London face.
I want especially to raise the devastating impact of unfair funding on my borough of Bromley. Bromley has the third lowest settlement funding per head among London boroughs. As a result of the Government’s provisional settlement, Bromley will see funding reductions of £6.5 million in 2026-27, rising to £22.2 million per annum by 2028-29. That equates to over £30 million per year in real-terms funding reductions by 2028-29. If the Government’s funding were fair, Bromley would instead be receiving a funding increase. Indeed, if Bromley received the average London core grant funding in 2026-27, it would gain about £112 million extra—an enormous figure.
Any cuts to our funding are felt more keenly than by other councils, too. Bromley maintains the lowest net expenditure per head in London while delivering efficient services for its residents, limiting our ability to realise significant savings compared with other, high-cost authorities. Effectively, the Government are punishing Bromley for being an efficient, well-run council, while Government after Government bail out failing councils. Bromley deserves better.
Bromley is no stranger to being targeted. The mayor’s precept currently stands at just over £490 for a band D property—a more than 77% increase since Sadiq Khan became Mayor of London. Before anybody highlights inflation, a rise in line with inflation would have brought the precept to just over £380, an increase of 39% rather than the 77% that has been inflicted on us.
What do people in the inner-London boroughs get? A regular and extensive bus service and a tube network to their doorstep. What do the people of Bromley get? Poor transport infrastructure and a mayor who keeps coming back to siphon more and more money from our borough, close our 24-hour police desk and fleece motorists with increased congestion charges and an expanded ultra low emission zone charge. Outer London is subsidising inner London’s transport network, while Bromley is served by only two direct bus routes into central London, both of which only run after midnight.
If we are going to have to continue to pay into the mayor’s coffers, will he or she at least ensure that the Superloop is extended a mere 2 miles to run from Bromley North via Plaistow Green, and can we please keep our 24-hour police desk? The situation in which Bromley and the rest of outer London is simply ignored by the Government and this mayor cannot continue. We deserve fairer funding. Bromley council wants to work with the Government, but the Government need to listen so that we see a truly fair and sustainable settlement that does not punish boroughs like Bromley.
Luke Taylor (Sutton and Cheam) (LD)
It is, as always, a pleasure to serve under your chairship, Dr Murrison. I thank the hon. Member for Dulwich and West Norwood (Helen Hayes) for securing this important debate at an opportune time.
“The streets of London are paved with gold”—or so the saying from the tale of Dick Whittington goes. But of course the point of that saying was to remind us that he did not, in fact, encounter riches and utopia when he got to London. That has been inner London’s story for centuries: portrayed as pampered by the rest of the nation while its people grapple with some of the biggest challenges imaginable.
I am a proud Londoner, I am an MP and a still councillor in London, I am my party’s spokesperson for London, and I know vividly how drastic the challenge is across London. I have knocked on doors across the city and heard directly from residents about their challenges, their fury at the last Conservative Government and now their disappointment with the Labour Government. London is a city where 2.3 million people—that is twice the population of Birmingham, and one in four people in the city—live in poverty. According to data from the Trust for London, that figure rises to 38% for non-white households and 53% for single-parent households. It is a city where SEND deficits and adult social care deficits have thrown council finances into uncertainty for more than a decade. It is a city where, perhaps most shockingly of all, a teacher in every school can walk into their classroom in the morning knowing that, on average, at least one of their pupils at any given time is likely to be living in temporary accommodation.
Year after year councils in London have been asked to do more with less. Reform of the system is long overdue, with the current formula not having been properly updated in more than a decade—not to mention the fundamental unfairness of the council tax system to raise money for local services. We were told by the Government that there would not be a return to austerity on their watch. It was a claim that most of us could believe, not just because they are a Labour Government with a social democratic tradition, but because they are a Government full of former councillors and council leaders who have seen at first hand that the reality of austerity is often most severe in local government. It is therefore outrageous that they have presented a funding review that simply doubles down on the disastrous cuts.
Over the next three years, per capita funding, when council tax contributions are removed, will reduce by £109 in Camden, by £79 in Lambeth, by £75 in Southwark, by £37 in Lewisham, by £180 in Wandsworth, by £54 in Greenwich, by £220 in Hammersmith and Fulham, by £86 in Islington, and by £247 in Westminster and in Kensington and Chelsea. What is that if not Labour austerity?
The current formula makes use of the index of multiple deprivation as the central measure of poverty but, as has been said many times, the IMD as currently designed does not properly reflect housing costs, housing poverty and what it means to be poor in a city where rent alone can swallow well over a half of a working person’s income. If we build a funding formula that ignores housing costs, we build one that blatantly ignores inner London.
I am an engineer and know bad maths when I see it, and the proof that the Government’s latest announcements, published just this week, are smoke and mirrors is right there in the forecasted effects. Two thirds of the purported increase in total funding in London comes from the assumed council tax increases. When we account for that fact, we see that over the three-year settlement period, only two of the 12 inner-London boroughs—Hackney and Tower Hamlets—receive a real-terms funding increase per capita from the Government. Government Members like to talk about the austerity during the coalition period, but perhaps they would like to reflect on those figures for per-capita funding when council tax contributions are removed, which are a result of this Labour Government, and the effect on their inner-London residents.
I have lots of data, which I am sure the Government know to be true, but a person does not have to be expert to know that the Government’s numbers do not add up—they just have to walk a few miles away from this place. I thought Labour Members were supposed to be in tune with and sensitive to inequality, yet here we are in a palace that is increasingly a boundary to their views while just a few minutes away, in Lambeth, Southwark, north Kensington and Chelsea Riverside, people are suffering because their councils are choked of the funds that they need to protect them. The support that this Government promised to deliver never materialised. Those working people have already been hit by inflation, the cost of living and rising transport fares. They now face not just lesser services but the prospect of huge council tax hikes because of this mess, which Labour might not have made but is doubling down on.
Londoners are sick of being utterly let down while being told that they have never had it so good, or that they have a Government and a mayor who are on their side. I do not doubt that Labour Members’ intentions are good, that they got into politics for the right reasons, or that they have had incredible achievements as councillors—I am proud to have done that myself—but I sincerely ask them to please get their house in order and provide what London needs. With the devil in the detail of their unfair funding review, they are proposing the exact opposite. They have just a couple of months to get their act together before the local elections, but I suspect that for most Londoners the die is already cast against Labour because of its lack of care.
This is not a sustainable foundation for any public service system. It is not fair funding; it is the accelerated starvation of a vital part of the public realm, masked by cosmetic changes. The Minister has heard it from around the Chamber; it is not just me ploughing a single furrow. If the Government are casting about trying to understand why people are not warming to their efforts—perhaps more so this week than ever before—they should remember that although they can mask an unfair funding formula under snappy headlines and public relations gloss, they cannot make it function as a good policy just by wishing it so. That is government by magical thinking.
I am racking my brain trying to imagine why Members on the Government Benches cannot see the wood for the trees on this topic. I can only guess that they simply do not grasp the true value of well-funded, well-functioning and truly independent local government. I know that that is not true for some of the Members in this Chamber, who have come from local councils in inner and outer London. However, they are unwilling to challenge the dangerous idea that local government is a derivative of central Government, and the fact that the mayor’s powers are being used as a convenient shield by a Labour Government who are quietly keeping London in their back pocket for whenever they need someone else to carry the pain—because that is what the fairer funding review amounts to. It is hard to see it as anything other than a plan for managed decline of our cities, with inner-London boroughs first in the firing line.
This can only be justified by misunderstanding the aphorism that I began with and not grasping that London’s streets are considered to be paved with gold only when it suits those who wish to ignore its many challenges. I invite the Minister to explain more clearly how a reduction in per-capita funding over the next three years for residents in 10 of the 12 inner-London boroughs that are the subject of this debate will result in better services for those residents.
David Simmonds (Ruislip, Northwood and Pinner) (Con)
It is a pleasure to serve under your chairmanship, Dr Murrison. I draw hon. Members’ attention to my entry in the Register of Members’ Financial Interests. I am a parliamentary vice-president of London Councils and a vice-president of the Local Government Association. I would like to thank those organisations for the excellent research that they have supplied to Members to help us prepare for today’s debate.
While I congratulate the hon. Member for Dulwich and West Norwood (Helen Hayes) on securing the debate, listening to her story of being a councillor—one that is reflected, I think, by a good number of Members who were present this afternoon—made me think about where it sits in the context of what is happening with the local government funding formula overall and the particular impact that it is having on our inner-London boroughs.
We know that London’s funding formula has always, to an extent, created a city of two halves. There are the inner-London boroughs, with a relatively generous settlement from that funding formula and, historically, generally lower council taxes. Then there is a doughnut of outer-London boroughs, in which my constituency and that of my hon. Friend the Member for Bromley and Biggin Hill (Peter Fortune) are found, with a funding level broadly in line with the surrounding county and district authorities.
For a long time, it has been a source of concern among London authorities that there needs to be some levelling out to ensure consistency across council tax and funding. To address the longer-term funding issues, however, the Government clearly need to address the nature, scope and purpose of many of the statutory duties that exist across all those authorities, in order to enable us all to live within our means and to set levels of taxation that are reasonable for our constituents to pay.
Sadly, we are not seeing that happening. Instead, as the hon. Member for Sutton and Cheam (Luke Taylor) described, we have a Government who came to office saying that they were the cavalry coming over the hill, and that they could be trusted to inject additional resources into inner London, outer London and other parts of the country that were concerned about funding. In their first Budget, however, local government was left £1.5 billion net worse off through the jobs tax—the national insurance rise—alone.
The consistent feedback from councillors across London is that they feel a sense of shock and surprise at just how fast things have got so much worse. There are also particular significant dynamics in inner London. As several hon. Members have said, in the local government finance settlement, more than two thirds of the additional resources announced by the Government would come from the maximum possible council tax rise being imposed across the board. That is not additional Government funding, it is simply councils being required, as a minimum, to use their maximum possible tax-raising powers on the household budgets of all their local residents.
We also see the impacts of exceptional financial support, a policy that has existed under Governments of all stripes under different names for a long time. It is essentially a measure to allow a council to borrow to get it through temporary financial difficulties. It is a way of avoiding the issuance of a section 114 notice, which is the equivalent of a bankruptcy notice, by the statutory finance officers in that local authority. On an almost weekly basis, this Government make written ministerial statements on local government best value interventions, and on agreeing exceptional financial support to the extent that it is no longer exceptional. It is clearly simply a method of sustaining local authorities to avoid bad headlines, rather than addressing the nature, scope and purpose of statutory duties, which need to be addressed to get budgets back into balance.
Acute pressure has been created by an explosion in rough sleeping and homelessness in inner London since this Government took office. We need to be clear: London has always had a challenge around rough sleeping. Although my constituency does not cover Heathrow, it is a significant factor in my local authority’s activities. The number of people who find their way to an airport that is open 24/7, with showers, toilets and security, means that there are a disproportionately large number of rough sleepers in my local authority’s area.
As we heard, there has been a 27% increase in street homelessness since this Government took office. That contributes to the sharply rising pressure on temporary accommodation that London Councils, on behalf of the capital’s local authorities, has highlighted as the biggest single factor driving inner-London councils to seek exceptional financial support and to look at significant reductions across the capital in the services that our constituents expect local authorities to provide, such as libraries, parks and clean streets. At the same time, according to a recent report by Savills, two thirds of London boroughs report reaching net zero: not net zero in the traditional sense of an environmental target, but net zero new housing starts. In two thirds of our capital’s boroughs, no new homes are being added to the housing stock at a time when the Government have an increasingly unattainable target of 1.5 million new homes. To hear hon. Members from throughout the Chamber talk about the acute pressure from housing need, at a time when housing delivery in the capital has absolutely collapsed, demonstrates that things are not going in the right direction.
We are due to consider the local government finance settlement in the main Chamber tomorrow. More two thirds of local authorities have reported, having crunched the numbers on that funding formula, that they will be left worse off under it. Two thirds of councils in the country are worse off under the funding settlement being introduced by this Labour Government.
There is another significant factor. This week we heard that the SEND White Paper is to be delayed further. It will address the significant long-term structural and demographic concern driven by the increasing numbers of children with more acute needs for whom local authorities have a statutory duty—another duty over which they have no discretion. Although the statutory accounting override—to which Ministers have referred in the past—goes some way to avoiding that becoming an acute problem, we see acute pressure building up across the country, not just in inner London.
All that amounts to a situation where residents in inner London face extraordinarily significant increases in their taxes. The royal borough of Kensington and Chelsea has reported potential increases of council tax of up to £500 a year. Earlier, I met with one of the Conservative councillors from the London borough of Barnet, traditionally one of the less affected outer London boroughs, who reported that a £200 million funding gap is opening up as a result of the changes that this Government are making. Even for those of us in outer London boroughs, where council tax rates are broadly similar to those in the surrounding county and district areas, the combination of the rises in the mayoral precept, referred to by my hon. Friend the Member for Bromley and Biggin Hill, and those acute pressures, mean that in many cases council tax will already be at or well in excess of the £2,000 benchmark that Ministers have set out for council tax across the country.
In conclusion, we see a consistent message from across the sector. The leaders of inner-London boroughs—Labour and Conservative—talk of acute pressures getting much worse much faster than they had expected, and shortfalls in this funding settlement so excessive that no level of cuts could lead to boroughs achieving them and meeting their statutory duties. When she speaks on the local government finance settlement tomorrow, will the Minister announce a more fundamental rethink? Local authorities have a huge range of statutory duties, with more than 800 different services delivered by a typical local authority. The rise in national insurance alone has significantly driven up the cost of those activities.
We do not simply need more sticking plasters. Our residents, hearing a message from the Labour Government that there is more money in the system, find that money is coming straight out of their pockets and wallets, through massive increases in council tax. We need a fundamental rethink about how we deliver local government in the capital, so that it is affordable, deliverable and sustainable for the future.
The Minister for Local Government and Homelessness (Alison McGovern)
It is a pleasure to serve under your chairship, Dr Murrison. I thank my hon. Friend the Member for Dulwich and West Norwood (Helen Hayes) for securing the debate, in which hon. Members have raised some important issues. She posed some questions that I will come to in my response. She mentioned that I served on the London borough of Southwark just before she was first elected to the best borough in London. She is right that a bit of my heart will be forever in Camberwell.
I learned a lot during those years, but local government has changed in the 20 years since I was first elected. Poverty in London has also changed, along with the services that boroughs try to provide. In a moment of shock and surprise, I find myself in agreement with the shadow Minister, the hon. Member for Ruislip, Northwood and Pinner (David Simmonds). He rightly characterises a situation faced by councils where costs are spiking, often because of policy failure not of their making, whether those are the costs of homelessness, mentioned by my hon. Friend the Member for Dulwich and West Norwood, or the costs associated with SEND mentioned by many hon. Members, to which I would add adult and children’s care.
We have fundamental issues to tackle and many of the policy levers lie in this place, not in town halls. We all need to own our responsibilities on that front. We continually need to rethink how we approach this issue. It is a shame in many ways that I could not introduce some of my colleagues in other parts of the country to this discussion. Hon. Members will have seen in the press that I have been variously accused of robbing the north to send money to the south, and now robbing London to send money somewhere else—the north or the midlands, I do not know.
In fact, the consistent theme in the funding settlement is the Government’s attempt to reconnect council funding with deprivation. I will come to the detail of that, because we are committed to making long-overdue changes to council funding. This is the first multi-year local government finance settlement in a decade, which, as Members have mentioned, will make a huge difference.
Alison McGovern
I will make some progress. Yesterday’s announcement keeps our promise of a multi-year settlement, because local communities in London and elsewhere deserved better than the out-of-date funding allocations not aligned with need, which meant poorer public services and slower growth, particularly for those dealing with the consequences of poverty.
We are making changes to how councils are funded. Many of these are changes that the public, local government partners and Parliament have long called for. We consulted four times on these changes, and we are grateful for the engagement from all corners, including from hon. Members in this debate. The engagement has informed our approach at every stage. The settlement confirms multi-year funding, our pledge to realign funding with need, and our commitment to end wasteful competitive bidding and to simplify funding.
The Government have an important role as an equaliser for local government income, and we are directing funding towards the places that are less able to meet their needs through locally raised income, which will enable all local authorities to provide similar levels of services to their residents. However, that is true notwithstanding the major differences in spiking demands around the country.
Following the provisional settlement consultation, the Government have announced an additional £740 million in grant funding as part of the final settlement, including a £440 million uplift to the recovery grant, bringing total investment over the multi-year settlement to £2.6 billion. Of that £2.6 billion, £400 million is supporting places in London that suffered the most from historical funding cuts, and there is an additional £272 million to bring the total investment in homelessness and rough sleeping services over the next three years to £3.5 billion—including over £800 million in London as part of our national plan to end homelessness.
That is a significant investment in the capital’s homelessness services, which is much needed, as has been mentioned by Members from across the House. It takes the total new grant funding delivered through the annual settlements for 2026-27 to 2028-29 to over £4 billion. Since coming to power, we have pledged a 24.2% increase in core spending power by 2028-29 when compared with 2024-25, worth over £16.6 billion. It is a significant uplift in the spending power of councils.
According to analysis by the Department, as a result of our reforms, nine in 10 councils will receive funding that broadly matches their assessed need by the end of the multi-year settlement, up from around one third before our reforms. In 2028-29, the most deprived places will receive 45% more funding per head than the least deprived.
Alison McGovern
I will give way to my hon. Friend the Member for Kensington and Bayswater (Joe Powell) first.
Joe Powell
As the Minister knows, where we have pockets of high deprivation in London, one concern is protecting those communities. When the settlement was announced, it was very clear that the Government’s expectation was that things like council tax support should not be the first thing that councils looked to. Does the Minister agree that the royal borough of Kensington and Chelsea cutting £441,000 of council tax support to our lowest income families as its first decision is not the right way to go about building a sustainable budget for the future?
Alison McGovern
I agree, and my hon. Friend makes that case very well. I imagine that his local authority could have made other choices than that one.
Peter Fortune
I thank the Minister for the objective way that she is tackling this debate, but the reality for the London borough of Bromley is a £22 million cut over the next three-year period. Thinking about the deprivation and the challenges that we have, including the second-highest number of education, health and care plans in London, the cut will have a significant impact on our residents, despite pushing council tax as high as we can.
Alison McGovern
I take the hon. Gentleman’s point. Our challenge is to understand how we can best use our resources to support all our children. We could try to increase funding again and again, without any changes to the system, but we would not necessarily get better outcomes, and costs would keep going up, not least because councils have issues with how they are able to provide some of the support that children need. We need to get to a more stable financial position and take responsibility in this place to change the policy failures that caused the cost spikes that the hon. Gentleman mentioned.
Compared with 2024-25, by 2028-29 London will see an increase in core spending power of more than £3 billion. The vast majority of councils in London will see a real-terms increase between 2024-25 and 2028-29 and a fairer system that addresses issues that matter in London—and across England—including recognising the additional strain that commuters and tourists can place on service provision, taking into account need in specific high-demand service areas such as temporary accommodation and crucially, using the most up-to-date data, including the 2025 indices of multiple deprivation. That has been the subject of some feedback to the Department. It is a statement of the obvious that we would use the most up-to-date data, and it so happens that that data can better account for the impact of housing costs on poverty. That was always the intention, and we would always have done that, whatever noise I have picked up on this topic.
Dr Andrew Murrison (in the Chair)
I will allow Munira Wilson to intervene—at a stretch, because she arrived late to the debate.
Munira Wilson
I apologise, Dr Murrison. The debate moved more quickly than I had anticipated. I thank the Minister for giving way despite my late arrival. I have a lot of sympathy with the Government’s aims; we all want to tackle deprivation and poverty. In my borough, the London borough of Richmond, we are going to see £29 million of cuts over the next three years, which will stretch to £46 million by year 4. That means a huge cliff edge, and at the moment the Government are refusing to provide any transitional protection. I recognise that Richmond is largely a wealthy borough, but we have significant pockets of deprivation and very needy residents, particularly young and older vulnerable residents. Despite a maximum council tax hike and efficiency savings, we will see cuts to the most vulnerable.
Will the Minister finally agree to meet with me, my hon. Friend the Member for Richmond Park (Sarah Olney) and the leader of our council to talk about how we can put transitional provisions in place? She has refused to do that so far. [Interruption.] She seems perplexed, but her latest letter refused a meeting with us, so I am asking her again, in the spirit of cross-party working, if she will meet us to discuss this.
Alison McGovern
The reason for my perplexed state is that during the period of consultation with Members of this House, I met 140 Members of Parliament on the settlement. I am sorry if the hon. Member has had the message that I will not meet her, because my office door has literally been open to Members over the recent period. We can discuss this at any point. The fact is that the London borough of Richmond is in the least deprived decile. While she rightly stands up for her borough, when I look at some parts of the country that have been forgotten for far too long, I feel that it is right that we have taken the decision through the settlement to reconnect funding with deprivation. But I can discuss that with her in detail in the future.
I want to make some points about cost. Local governments are still under pressure, and despite the increase of nearly 25% that I mentioned, that pressure will remain because of the costs that they are facing. That is why we are taking action now to support local authorities as we move towards a reformed special educational needs and disabilities system. The first phase of support will address historic deficits accrued, as was mentioned by the shadow Minister. All local authorities will receive a grant covering 90% of their high needs dedicated schools grant deficit, subject to the approval of a local change plan.
We are also fixing social care services, on which many people, including in London, rely. We are changing children’s social care in a generation by rolling out the Families First Partnership programme, backed by more than £2.4 billion of investment across this multi-year settlement. We are providing about £4.6 billion of additional funding, available for adult social care, by 2028-29, compared with ’25-26. When it comes to children’s care, the issue is not only that the costs are unsustainable, but that we are failing in our duty to so many children, and that is why we must change.
It is important to recognise that some places, including some inner-London boroughs, benefited disproportionately from the old system. However, we are supporting those places to plan for changes with transitional arrangements, including by protecting their income and providing additional flexibilities. For London, we are providing more than £550 million for income protection over the multi-year settlement.
Luke Taylor
The Minister mentions additional flexibility. Within that does she include allowing what I think are five inner-London boroughs, including Wandsworth, to increase their council tax by up to 10% without a referendum? Is that the additional flexibility that she mentions?
Alison McGovern
We set out that flexibility when we made the provisional statement, and there will be more details of that in the Chamber tomorrow. I am at the slight disadvantage of speaking between the publication of the settlement and the full debate in the House of Commons tomorrow. There will be more detail tomorrow for the hon. Gentleman.
The council tax bill for a house worth £5 million in central London can be less than the bill for an ordinary family home in places such as Blackpool and Darlington. It is not fair that properties worth so much more pay less council tax and receive comparatively better services than elsewhere, because of Government subsidy. Removing referendum principles for the six councils, as we have said, will allocate more than £250 million more funding for places with higher need, instead of subsidising very low bills for 500,000 households under those councils.
I want to turn to the direct questions from my hon. Friend the Member for Dulwich and West Norwood, who led the debate. She raised the issue of the costs of temporary accommodation, and she was absolutely correct to do so. I refer her to the homelessness strategy, which I published just before Christmas. The problems in temporary accommodation are very geographically concentrated. I am anxious to work with London councils, including her councils, to get children and families out of poor-quality, expensive temporary accommodation and into better-quality temporary accommodation that will be more reasonably priced for local authorities—even if it is still temporary, because some of what we are paying for is very poor value.
My hon. Friend mentioned LHA rates and asked whether I will work with the DWP and Treasury. I can tell her that I am doing so. The Housing, Communities and Local Government Committee Chair, my hon. Friend the Member for Vauxhall and Camberwell Green (Florence Eshalomi), also raised that with me in another setting. I will happily update the House as we go. My hon. Friend the Member for Dulwich and West Norwood mentioned a stalled site in her borough, which sounds like a dreadful waste. I will alert the Housing Minister and the Secretary of State to that. They were anxious to bring forward their plan for London with the Mayor of London for this very reason, but I will refer them to this debate. She asked about a visitor levy, which other Members mentioned too. I will take those comments as input to the consultation on a visitor levy.
My hon. Friend and the shadow Minister mentioned EFS. Again, shockingly, I found myself agreeing with the shadow Minister: that system should have been used sparingly and for exceptional circumstances. It is becoming less exceptional, and we have to get to the heart of why councils are in this position. Some of that is about costs, as we have said, but there are also other things, like reintroducing local audit, that I believe will help to defend the system and make it more sustainable as we go. My hon. Friend also asked about SEND deficits, which I have mentioned.
We are making changes that we believe are necessary to change public services and get local government back on its feet. By realigning funding with need and reforming services that put pressure on local government, we will empower local leaders to deliver for communities in London and across the country. Unlike many people, I firmly believe that it does not matter whether someone lives in a northern town or city, in the midlands, the south-west, Scotland, Wales or London—poverty is poverty, and we should respond to it all.
Helen Hayes
I am grateful to all hon. Members who have contributed to the debate today, particularly the hon. Member for Bromley and Biggin Hill (Peter Fortune), who is a great champion for his constituents and his borough of Bromley, and to my hon. Friends the Members for Vauxhall and Camberwell Green (Florence Eshalomi), for Clapham and Brixton Hill (Bell Ribeiro-Addy), for Kensington and Bayswater (Joe Powell) and for Brent East (Dawn Butler) for their interventions and for speaking up for their boroughs. I am grateful to the Minister for her response.
I believe I am 10 years older than the hon. Member for Sutton and Cheam (Luke Taylor), so I would say very gently to him that perhaps my memory goes back a bit further. When I was elected to Southwark council, it coincided with the arrival of the coalition Government and the beginning, presided over by the Liberal Democrats in government, of some of the deepest cuts to local government funding that we have ever seen.
Helen Hayes
I am not going to give way during this very short summing-up. [Interruption.] I would say to him that listening to his impassioned pleas on behalf of inner-London boroughs does sound a little bit like the arsonist complaining that the fire brigade is not putting out the fire quickly enough. [Interruption.]
Helen Hayes
I urge the hon. Member to reflect with a bit of humility on what his party did to local government funding when it was in power.
Helen Hayes
I am not taking an intervention; I have been really clear about that.
I am grateful to the Minister for her response. I fully appreciate the challenging situation that she is in, the complexity of her brief and the pressures that she is facing from colleagues and from councils all across the country. I appreciate deeply her commitment to local government, and her deep understanding of its workings and the challenges that our council colleagues face. I am encouraged by her assurances on local housing allowance in particular, and on the costs of temporary accommodation. I look forward to seeing progress on those points and will certainly remain engaged on those issues. I would be hugely grateful for anything that the Minister can do to unlock the stalled sites. We have three in my constituency—two of them are council-owned and one is owned by a housing association. Between them, they have the capacity to deliver quite a good number of council and social homes. We would really like to see those come forward quickly.
I believe that the Minister has good intentions in the settlement that has been announced today. I support her in her aim of reconnecting local government funding with deprivation and ensuring that funding is fairly distributed, but the challenges that our councils face will remain. There is further work to do, and I hope to be able to engage with her further on behalf of my boroughs as we seek to repair the damage that has been done over a long period of time, and get things back on a better footing so that our councils can deliver for our communities.
Question put and agreed to.
Resolved,
That this House has considered funding for local authorities in inner London.