Local Government Finance

Wednesday 11th February 2026 Commons Chamber

[Relevant documents: Second Report of the Housing, Communities and Local Government Committee, The Funding and Sustainability of Local Government Finance, HC 514, and the Government response, HC 1355.]

15:02

[The Secretary of State for Housing, Communities and Local Government (Steve Reed)]

I beg to move,

That the Local Government Finance Report (England) 2026-27 (HC 1604), which was laid before this House on 9 February, be approved.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

With this it will be convenient to discuss the following:

That the Referendums Relating to Council Tax Increases (Principles) (England) Report 2026-27 (HC 1605), which was laid before this House on 9 February, be approved.

[Steve Reed]

Before I begin, I notify the House that the local government finance report has been updated with small corrections on pages 7 and 13. These corrections have been passed on to the House in the proper way ahead of today’s debate. Like you, Madam Deputy Speaker, I am grateful to the Joint Committee on Statutory Instruments for its careful consideration of these reports.

I believe in local government, because I have lived it. As a councillor and as a council leader, I saw the difference that councils make to people’s lives. Local government is the part of our democracy that is closest to people and the things that they care about the most—their family, their community and their home town.

Labour took office after 14 years of ideological cuts imposed on local government. The Tories devolved the blame for their failure in national government by imposing £16 billion of cuts on councils and local communities. Even worse, they targeted the worst of those cuts deliberately on our poorest communities. The former Prime Minister, the right hon. Member for Richmond and Northallerton (Rishi Sunak), was filmed standing in a leafy garden in Tunbridge Wells boasting about how the Conservatives had stripped away funding from struggling towns so that they could play politics with public money.

[Lincoln Jopp (Spelthorne) (Con)]

Has the Secretary of State made an analysis of the division of Pride in Place funding between Labour and Reform seats versus Liberal Democrat and Conservative seats?

[Steve Reed]

I thought the hon. Gentleman was going to stand up and apologise to the House for what his Government did in diverting money away from the poorest communities. I am very disappointed that he did not take that opportunity, and I suspect that I am not the only one—perhaps he will take the opportunity later on. I remind him and his colleagues that under the Tories, only three in 10 councils received funding that aligned with deprivation; with this Government, the number is more than nine in every 10.

Local people were forced to pay a staggeringly high price for Tory venality. High streets were hollowed out and boarded up. The number of people sleeping rough on our streets doubled. The number of families stuck in temporary accommodation doubled. There were more potholes on our roads than craters on the moon.

[Mark Garnier (Wyre Forest) (Con)]

rose—

[Steve Reed]

I will give way to the hon. Gentleman so that he can apologise for that.

[Mark Garnier]

I was going to say thank you for the Pride in Place money, actually; I am very grateful that the Government have given £20 million to my constituency.

On the subject of funding for councils, the Government are requiring district councils to pay for food waste recycling. That is not an unreasonable proposition, but there was a principle under the previous Government of new burdens funding, whereby when a new burden was presented to a council, the Government would sort it out. Why have the Secretary of State’s Government decided not to support councils with new burdens funding?

[Steve Reed]

I am grateful for the hon. Gentleman’s words about Pride in Place. I am glad that he has answered the question of the hon. Member for Spelthorne (Lincoln Jopp), because that money is being distributed to constituencies represented by Members right across the House. On the point that the hon. Member for Wyre Forest (Mark Garnier) makes about food waste recycling, funding for that has been built into the settlement, so it is present. The new burden is being funded in that way.

[Mark Garnier]

The Secretary of State is being incredibly kind. He talks about the settlement, but the settlement does not work. Wyre Forest district council has had a 0% increase in core funding. Dare I say that across the whole of Worcestershire, where there is a district council with a Conservative Member of Parliament, there has been a 0% increase, but where there is a district council with a Labour Member of Parliament, there has been an increase of up to 5%. Can he explain why that has happened?

[Steve Reed]

The settlement follows a funding formula and takes account of the costs of delivering food waste recycling in the way that the hon. Gentleman described earlier.

[Graham Stuart (Beverley and Holderness) (Con)]

Will the Secretary of State give way?

[Steve Reed]

Let me return to my theme for a moment before I take any more interventions.

The right hon. Member for Beverley and Holderness (Graham Stuart) and colleagues across the House will remember that the Tories used to belittle local councillors as part-time volunteers and took away their pension rights to deter people from risking a career on the frontline of local government. Today, it falls to this Government to fix the foundations that the Tories smashed apart.

We are rebuilding local government so that councils can rebuild their communities. We are making good on our promise to introduce multi-year funding settlements so that councils can plan for the future with certainty. We are reconnecting funding with need so that we can take off the Tory shackles that have held back so many of our towns and communities for so long. We are ending wasteful bidding wars for funding, freeing councils to focus on filling in potholes, not forms. We are putting fairness back into a system that the Tories bragged about breaking. We reject the decline that ripped the heart out of towns and communities up and down this country. We choose change.

[Helen Morgan (North Shropshire) (LD)]

Shropshire council is about to see a 10% cut in its core funding from central Government, having been terribly badly run by the Conservatives for the previous 16 years before the Lib Dem administration took over in May. The Government have given the council permission to put up its council tax by 9% without a referendum, but that does not even touch the sides of the cut in funding from central Government. How is Shropshire, which needs to receive exceptional financial support in this year, ever going to fill the ever-growing black hole unless the funding from Government reflects the costs of delivering services in rural areas?

[Steve Reed]

I believe the hon. Lady has had several meetings with my colleague the Minister for Local Government. It is right and very important that we should align funding with need; that is the only way to ensure that funding is fair across the whole country. That is what we promised to do in our manifesto, and that is what we are doing with this settlement.

[Several hon. Members rose—]

[Steve Reed]

I have taken an awful lot of interventions so far, and I do not want to leave no time, but I will take one last intervention.

[Matt Rodda (Reading Central) (Lab)]

The Secretary of State is being very generous with his time. Like him, as a councillor I saw appalling pressures put on our local council in Reading while funding went up in neighbouring Wokingham, which is a much better-off area and was then controlled by the Conservatives. I appreciate his work on readjusting the settlement to reflect need. That should be a fundamental point in any allocation of resources to local government. Would he like to say a little more about his work on this, and how it is going to benefit residents on the lowest incomes in the most disadvantaged communities?

[Steve Reed]

At core, what we are hearing from all parts of the House at the moment is people’s views on the fact that under the previous Government, the alignment between funding and deprivation was broken, and this Government are bringing it back. Because the previous Government did nothing about it for 14 years, funding became extremely detached from deprivation. We are putting that back in and making sure that funding goes where the need is greatest, so that stealing money from the poorest communities to pork barrel Tory areas—which the former Prime Minister bragged about—can no longer go on.

[Mr Clive Betts (Sheffield South East) (Lab)]

My right hon. Friend is being a little unfair to the Tories. The biggest cuts under austerity from 2010 to 2024 came from 2010 to 2015 when the Lib Dems were in coalition, so perhaps they should share some of the blame.

[Steve Reed]

I certainly agree that the Lib Dems should share the blame for austerity. I was a council leader while the Lib Dems and Tories were in coalition together. I think they cut our council by a third just over the first one or two years that they were in power. Now they have the chutzpah to stand up and complain that this Government are putting some of it back. I really think they should reflect on that.

[Several hon. Members rose—]

[Steve Reed]

I have taken an awful lot of interventions, more from the opposite side of the House than from my own side, so with your kindness, Madam Deputy Speaker, I will make a little progress.

I thank all who contributed to the provisional settlement consultation. We listened carefully to views expressed by councils and MPs, and today I am pleased to announce an additional £740 million in new grant funding over and above the provisional settlement. This means that by the end of the multi-year settlement, councils will benefit from a 15.5% increase in core spending power, worth over £11.4 billion, compared with 2025-26.

When this Government took office, we introduced the recovery grant, targeted on those areas held back the most by Tory and Lib Dem austerity. This year we have maintained that grant, so every upper-tier council that received it will see a real-terms boost. I can announce a £440 million uplift to the recovery grant over the multi-year settlement targeted at councils the Tories hit with below average funding increases. By the end of this Parliament, we will have invested a total of £2.6 billion in the most deprived councils through the recovery grant, over and above what they receive through the settlement.

I have also listened carefully to feedback from the sector about business rates pooling. As a result, I am compensating any authorities that would have lost funding this year so that they have time to adapt to the new arrangements.

[David Baines (St Helens North) (Lab)]

I was council leader at St Helens for five years before coming here in July 2024. I just want to say thank you to the Secretary of State and the Minister for Local Government, and the Ministers in post before them, for the engagement, because the relationship now is different from what it was before. The conversation we have had since the provisional settlement has been constructive—it has been good; it has been done in good spirit—and I am very grateful for the result that we have for St Helens. In 2010, St Helens got £127 million a year from the last Labour Government, but when the Conservative party opposite left office it was £13 million a year. Does the Secretary of State share my absolute shock at the brass neck of Conservative Members?

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Brief interventions can be just as productive as lengthy ones.

[Steve Reed]

I thank my hon. Friend for his intervention. What he is seeing is the realignment of funding with deprivation, and that is as it should be.

[Graham Stuart]

rose—

[Steve Reed]

I will take one more intervention and then make progress.

[Graham Stuart]

The Secretary of State has been tremendously generous in giving way. He has also been making his usual barnstorming political knockabout speech, but perhaps he should start to act more like a Secretary of State, because low-income residents of the East Riding, of whom there are many in Beverley and Holderness, are going to have a £200 council tax bombshell. The smallest house is going to be paying £200 more in three years’ time and will have reduced overall funding to support public services after the increase in costs imposed by the Government. That is the reality. The Secretary of State said he wants to focus on need; why has rurality been removed from the category of need, when it is such a real issue?

[Steve Reed]

Well, the easy answer to that is that it has not been; it is still there.

Above all, this settlement is about fairness, because this Government reject the Tory belief that our poorest communities should be left to sink with less funding and worse public services than other parts of the country. That approach pulled our country apart; and, in doing so, was profoundly unpatriotic. Our settlement reflects a council’s ability to raise income locally, and it reflects the fact that it costs more to deliver services in different parts of the country, retaining rurality funding for social care, because we recognise that workers in those areas have to travel longer distances. We have used the most up-to-date data on deprivation to make sure funding accurately follows need.

We are introducing changes gradually over the period of the settlement so councils have time to adapt, and we are protecting councils’ income, including from business rates growth. Today’s settlement is a milestone in returning councils to a sustainable financial footing, and in restoring fairness to local government funding.

[Lincoln Jopp]

rose—

[Steve Reed]

I will give way one last time.

[Lincoln Jopp]

I am incredibly grateful to the Secretary of State for giving way. He calls it a milestone; I call it a millstone. He talks about fairness. Stanwell in my Spelthorne constituency hits the markers for the double deprivation criteria that would qualify for the Pride in Place funding, but that is diluted by the more affluent areas in my constituency. How is it fair to the people of Stanwell that they do not qualify for Pride in Place funding just because they are surrounded by more affluent areas? Rather than helping, is the Secretary of State not just going to engineer the continuation of pockets of deprivation?

[Steve Reed]

I am afraid the hon. Gentleman has misunderstood how it works. An area does not get diluted. The scheme looks at super-output areas on a very small level so we can ensure that the funding goes to those areas with the highest levels of deprivation. I would be happy to write to him about the process if it would help him to better understand how it works.

For the vast majority of councils, increases in council tax will be restricted to 3%, and 2% for the adult social care precept.

[Bradley Thomas (Bromsgrove) (Con)]

Will the Secretary of State give way?

[Steve Reed]

I am going to make some progress, I am afraid.

There are a few councils facing extremely challenging financial pressures that the previous Government turned into a crisis by ignoring their problems for over a decade. In response to requests from those councils, I am giving them flexibility to increase their council tax above referendum principles next year. Unlike the previous Government, we will not agree any increases that could lead to households in these areas paying above national average council tax, but we will not let councils go to the wall and see their residents punished with failing services. These flexibilities will apply to Warrington, Trafford, Worcestershire, Shropshire, North Somerset, Windsor and Maidenhead, and Bournemouth, Christchurch and Poole. One fire authority will also be granted additional flexibility. These are caps, not targets, and no area with additional flexibility will see bills rise above the national average.

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

I thank the Secretary of State for making that point about council tax and flexibility for local councils. Does he agree with the Local Government Association, which is worried, stating that

“council tax is not the solution to the financial challenges facing local government. It places a significant burden on some households”,

including the poorest. Does he agree that we should now be looking at council tax reform?

[Steve Reed]

I agree with the Chair of the Housing, Communities and Local Government Committee that council tax cannot be the only means to fix these problems. That is why we have increased the level of funding overall and reconnected it with the deprivation indices that tell us which areas have the greatest need, and should therefore get a fair share of the available funding.

The Home Secretary and I have also agreed an additional £3.50 council tax flexibility for six police and crime commissioners in 2026-27, where that was critical to financial sustainability in maintaining law and order. It is for councillors, mayors and police and crime commissioners to set their own council tax, and to take into account the impact on households when making those decisions.

Nationally, council tax will not increase by more than it did last year. Six local authorities set council tax bills between £450 and £1,000 lower than the national average because of the high value of homes in their areas. The previous Government made no adjustment in the funding formula for this, creating unfairness. It is not fair that people living in our poorest communities should subsidise rock-bottom bills in some of our wealthiest areas, so I am giving those councils additional flexibility to manage their budgets as we align funding with need, as we should.

For councils that need some support to balance their budgets this year, we will no longer just sign off borrowing or the sale of assets without a credible approach to reforming services to get back to financial stability. Later this month, I will confirm arrangements for supporting councils in the most difficult positions, but they will be expected to bring forward plans for more effective and sustainable services, built on sustainable budgeting into the future.

[Several hon. Members rose—]

[Steve Reed]

I want to make some progress, because I have taken quite a lot of interventions, but I will give way before I conclude.

Local government is still under pressure, and we will not bury our heads in the sand or dodge the difficult decisions. The adult social care system is in crisis, and we are facing up to that by transforming it. This settlement makes available around £4.6 billion of additional funding for adult social care in 2028-29, compared with 2025-26, including £500 million for the sector’s first ever fair pay agreement. That means more carers getting better pay and having the time to provide the high-quality, compassionate care they want to give. It will get us moving towards a national care service that gives people better-quality care, joined-up services, and more choice and independence.

[Mr Calvin Bailey (Leyton and Wanstead) (Lab)]

We are very grateful for the settlement and the announcements that the Secretary of State has made today. Both Redbridge and Waltham Forest in my constituency are receiving significant uplifts from this Parliament, and Ministers have been excellent in listening to the arguments of both those London boroughs. Although this measure will not be enough to fill the immediate financial gaps left by the Tories, it is a step forward. However, given that temporary accommodation costs have risen so much in London—by about 75% over the last five years—will the Secretary of State set out how the Government are acting to expand the supply of socially rented homes?

[Steve Reed]

I thank my hon. Friend for recognising that funding is now following deprivation. He will find the answer to his question in the homelessness strategy, which I will come to. [Interruption.] Madam Deputy Speaker, you are indicating with your wrist that I need to speed up, so I will make some progress.

On children’s social care, the system was again left on its knees. That is why this Government are driving forward the biggest transformation of children’s social care in a generation by rolling out the Families First Partnership programme. We have backed the programme with nearly £3 billion over four years, including an investment of over £2.4 billion in this multi-year settlement. It gives local authorities, police and health partners the tools to provide families with the right support at the right time, shifting the system from expensive statutory provision towards early intervention and preventive support. It will help families stay together, divert thousands of children from care and transform the outcomes and wellbeing of children across the country.

The investment in the Families First Partnership programme marks a milestone in transforming the children’s social care system, but we recognise that the children’s social care residential market is fundamentally broken. Local authorities are being pushed to the brink, while some private providers are making excessive profits. This cannot—and it will not—continue. Instead, we are working to reduce reliance on residential care and move towards a system rooted in family environments through fostering. Last week, the Government set out a plan to expand fostering for 10,000 more children by the end of this Parliament. The evidence is clear that taking this approach will be better for children and better for the local authorities that provide the services. Using the new powers in the Children’s Wellbeing and Schools Bill, we will explore the implementation of a profit cap in the children’s social care placement market to ensure that public money delivers value and care, not profiteering.

It is obvious that the current special educational needs and disabilities system is not working for children and families. We know that it is not working for councils either, as they are seeing funding for neighbourhood services diverted into a broken system. The Government are bringing forward ambitious reforms that will create a better and financially sustainable SEND system, built on early, high-quality support for kids with SEND to improve their time at school and maximise their potential throughout life. My right hon. Friend the Secretary of State for Education will set out the details of those reforms in the upcoming schools White Paper.

Crucially, we are taking action now to support local authorities as we move towards that reformed system. We will deliver this in phases, the first of which will address historic deficits accrued up to the end of 2025-26. All local authorities with SEND deficits will receive a grant covering 90% of their high-need deficit up to the end of 2025-26. This is subject to local authorities securing the Department for Education’s approval of a local SEND reform plan.

On homelessness, as my hon. Friend the Member for Leyton and Wanstead (Mr Bailey) has said, we know that temporary accommodation is a growing financial pressure on councils, with near record levels of rough sleeping and declining social housing stock. The final settlement also provides a £272 million uplift to the homelessness, rough sleeping and domestic abuse grant, taking total investment delivered through the settlement to £2.7 billion. On the ground, that will mean families off the streets; kids out of temporary accommodation and instead living in safe, secure homes; and people’s lives put back on course. We are matching that landmark investment with our national plan to end homelessness, led by the Minister for Local Government and Homelessness, to put the full might of the state behind preventing homelessness before it happens.

Today’s settlement is about keeping a promise—a promise to repair the broken foundations of local government, and a promise to put the heart back into our communities. When the last Conservative Government slashed councils to the bone, the consequences were severe: the services people use every day were undermined, streets became filthy and people’s lives got tougher. The hard work of councillors, mayors and frontline staff kept vital services running during those hard Tory years, and we thank them for the work they did in those circumstances. Our aim is a future where councillors, working with their communities, have the freedom to innovate—rebuilding public services and investing in high streets, youth clubs and libraries. We are fixing the foundations so that councils and their communities can build the public services, renew the high streets and shape the future they want to see.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Before I call the shadow Minister, I will announce the result of today’s deferred Division on the draft Greenhouse Gas Emissions Trading Scheme (Amendment) (Extension to Maritime Activities) Order 2026. The Ayes were 362 and the Noes were 107, so the Ayes have it.

[The Division list is published at the end of today’s debates.]

15:30

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

The Secretary of State and I will have had long experience of working with Morgan McSweeney during the many days he spent as head of the Labour group at the Local Government Association. I think that influence is reflected in the very political speech we have just heard from the Secretary of State. Despite its political excellence, I am struggling to reconcile his speech with what is actually in the finance statement he has laid before the House to agree this afternoon. We have a high level of agreement that local government touches all our lives in our communities. We recognise its huge potential to develop our economy, improve public health and give children a great start in life, and we know that the average local authority in this country delivers over 800 different services. They are there for us literally from cradle to grave, and are led by democratically elected councillors who run budgets that are bigger than those of many Government Departments, in organisations that are more complex than many a FTSE 100 business.

However, having served—like the Secretary of State—as a councillor under the last Labour Government, we see a swift reversion to type. Announcements of funding for social housing may arrive towards the end of the decade; funding for schools from VAT on fees for private education amounts to a real-terms cut in state school funding; and at the heart of what the Secretary of State has set out is a massive diversion of funding away from the legally enforceable statutory duties placed on councils by this Parliament and towards generalised poverty as a driver of those allocations.

[Sir Ashley Fox (Bridgwater) (Con)]

Does my hon. Friend acknowledge that the Labour Government have abolished the rural services delivery grant, a decision that has cost Somerset council £4.1 million and has cost other rural counties many millions of pounds—rural counties in which it is more expensive to provide services? Does he agree that this is Labour diverting money from rural areas that are desperately in need to Labour strongholds in the north?

[David Simmonds]

My hon. Friend is absolutely spot on. The analysis produced by the County Councils Network makes a comparison between the funding pressure on statutory services facing the urban councils that are the beneficiaries of the Government’s largesse, which totals £180 million a year, and the budget gap facing rural areas as a result of this Government’s decision, which is a £2.7 billion black hole.

[Sir Desmond Swayne (New Forest West) (Con)]

That is nothing new. In every one of the last 29 years, people who are lucky enough to have a modest property in the New Forest and a mansion in the city have come to me to complain about how much more their modest property in the forest costs them in council tax. I have told them that the one is subsidising the other, but people who are not in that fortunate position—young families in my parliamentary constituency with only one property—are subsidising the north and the cities, and they cannot afford it.

[David Simmonds]

I hesitate to disagree with my right hon. Friend, but it was not ever thus. The rural services grant referred to by my hon. Friend the Member for Bridgwater (Sir Ashley Fox) was a measure to address those additional cost burdens, including direct costs arising from statutory duties. It was a funding stream that is being removed by this Labour Government.

[Gareth Thomas (Harrow West) (Lab/Co-op)]

rose—

[Natasha Irons (Croydon East) (Lab)]

rose—

[David Simmonds]

I will give way to my constituency neighbour.

[Gareth Thomas]

The shadow Minister will remember that when the Conservative party took control of Harrow council four years ago, it did so on a promise of freezing council tax, which he presumably campaigned on. Instead, council tax has risen by 20% over the past four years. Will the shadow Minister take the opportunity to apologise to the people of Pinner—indeed, of Harrow more generally—for his party saying one thing when it was campaigning and then doing exactly the reverse, increasing the cost of living for his constituents and mine?

[David Simmonds]

Without wishing to be parochial, I am sure the hon. Member would also like to join in the apologies for the appalling level of corruption that had taken place under Labour in the London borough of Harrow. As has been covered extensively in the local and national media, it left an astonishing legacy of cost overruns in the local authority’s highways department, which has taken a good deal to recover from. I am sure we would not want the House to be inadvertently misled about the impact of those cost overruns.

[Graham Stuart]

It is far from my typical habit to get involved in political knockabout, but following that astonishing intervention that showed a total lack of self-awareness, does my hon. Friend remember the now Prime Minister saying that council tax would go up by “not a penny”? This settlement assumes an increase of 5% a year on low-income people in rural East Yorkshire at the same time that core funding is cut. That is a £200 hit for the smallest house in our area, while—as my right hon. Friend the Member for New Forest West (Sir Desmond Swayne) said—very valuable homes in central London seem to pay a fraction of the amount.

[David Simmonds]

My right hon. Friend is absolutely correct. When Ministers talk about additional resources being provided to local government, we need to reflect on the fact that two thirds of the funding in this settlement comes from the maximum possible council tax rise across the country, and a large chunk of the rest comes from a huge rise in business rates.

[Mr Betts]

It is interesting to hear the hon. Member completely remove from his memory what happened in the 14 years of his Government. I ask him to remember back to when this began in 2010, when council tax generated about 20% of council funding, and how it has grown over the years under the Conservative and coalition Governments to deliver more than half of local government funding. How can he say that this is a problem when his Government originated that process?

[David Simmonds]

Madam Deputy Speaker, I am sure that you will be pleased to know that that prompts me to move on to the next part of what we need to say. Let us recall for those who cry austerity at Conservative Members that the last Labour Government spent on average 10% more in every year of its final decade in office than they raised in taxes, which left a colossal legacy of debt that we have scarcely begun to repay. Millions were squandered on projects such as building schools for the future that were cancelled at the tail end of the last Labour Government by Alistair Darling, as they ran out of money. When we look at the reports of what this means at constituency level, councils such as Surrey, which embraced this Labour Government’s devolution agenda, have now lost the opportunity for the mayor that they were promised. They report that they have been left £60 million a year short. Members will be ill-served by the consequences of the Budget.

[Mr Jonathan Brash (Hartlepool) (Lab)]

I am sure the hon. Member did not mean to inadvertently mislead the House, but as I was a councillor in Hartlepool in 2010, I can tell him with absolute surety that it was the Conservatives who cancelled the building schools for the future programme. I think he should take the opportunity to correct the record. You cancelled it; we initiated it.

[Madam Deputy Speaker (Caroline Nokes)]

Order.

[Mr Brash]

Sorry, they cancelled it; we initiated it.

[David Simmonds]

One of my tasks in the world of local government was to engage with that last Labour Government and the disastrous consequences of their overspending. They were completely clear with authorities such as mine that stopped work on BSF that they did not have the money to see through the promises that they were making to the public. We were told that by the Department for Education. I am very confident that my constituents understand the consequences that a Labour Government have on their politics.

[Danny Beales (Uxbridge and South Ruislip) (Lab)]

rose—

[David Simmonds]

I will give way to my constituency neighbour.

[Danny Beales]

The hon. Member is very generous with his time. I always have a lot of time for him. He is talking about our constituents in Hillingdon. Is it not the case that the financial settlement of the previous Tory Government, which also included council tax, had a 7% cut to core spending power for our constituents in Hillingdon? This spending settlement has almost a 40% increase in core spending power for our constituents. [Interruption.] hon. Member seems rather depressed about this announcement. Surely that is fantastic news for our constituents. Does he not agree with me that thank God we have a Labour Government for Hillingdon?

[David Simmonds]

I appreciate that he knows rather more about Camden council than he does about Hillingdon council, but let us reflect a little further on the history. Our constituents last had a Labour council in 1998. I went to that budget meeting at which our constituents were faced with an 18.7% council tax rise—£60 million of unfunded efficiency savings by a Labour council. I think they understand where their political priorities lie and who has their interests at heart.

[Several hon. Members rose—]

[David Simmonds]

I will make a little progress, because I know that Madam Deputy Speaker will want others to have time.

History is repeating itself. Let us not forget that this is a statement that leaves two thirds of councils in England worse off, from the analysis that has been done by the Local Government Association. That piles additional costs on top of things such as last year’s national insurance contributions rise, which left councils £1.5 billion net worse off. This settlement tightens ringfencing, removing the ability of local leaders to deploy homelessness funding flexibly to meet local needs, for example. It also comes at a time when this botched reorganisation of local government has created chaos across the sector, with a hokey-cokey of elections promised and then cancelled, sometimes within 24 hours, from that Dispatch Box.

[Rebecca Smith (South West Devon) (Con)]

Does my hon. Friend agree that one of the problems with the current process for local government reorganisation is that there has been no direction on how the funding will work out? We have some proposals on the table that would leave enormously vast rural communities in constituencies such as mine neighbouring towns and urban centres that will see this as an opportunity to get what they want. This settlement does not give those rural councils any confidence that they will get the money they need once local government reorganisation has taken place.

[David Simmonds]

My hon. Friend draws attention to another significant issue facing local authorities: the level of uncertainty. Money has been promised, then withdrawn. Budgets have been allocated, then reduced. In that context, I am sure that her constituents will be as concerned as I am that so much of this money is simply built into massive tax rises across the country.

I will turn briefly to business rates. We know, including from the question that the hon. Member for Stourbridge (Cat Eccles) asked at Prime Minister’s questions, the pressure being felt acutely on our high streets, especially in hospitality and retail. A business owner in my constituency told me yesterday that across his food franchise, the business rates rise alone is an additional £100,000 a year. That is a lot of entry level jobs at risk. It means price rises for consumers, fuelling inflation. The rise is a barrier to investments in our high streets, and that situation is replicated across the country.

Let us not forget that under the previous Government—this is one of the things of which we are most proud—an average of 800 new jobs were created every single day we were in office. Let us never cease to remind those on the Government Benches that unemployment has risen in every single month of this Labour Government. They are a Government who clearly do not respect our local colleagues. They refer to leaders as mere community convenors. They seek to reduce our councillors’ level of discretion. They create uncertainty through a lack of clarity on reorganisation, on special educational needs and disabilities deficits and on whether mayoral elections are going ahead. That comes at a time when thousands of voters are being denied a say by this Government through the cancelling of elections. That situation is caused solely by the Secretary of State’s abject failure to deliver the Government’s devolution plans to the proposed timetable. It is one thing to cancel elections in a council that is about to be abolished, so that voters can instead choose its replacement. It is very much another thing to defer elections indefinitely while we wait for the Secretary of State to get his act together. Our councils and our communities deserve a better settlement than this.

I will conclude with some points that I hope the Minister will address in the summing up. One of the most striking things about this settlement is that the Secretary of State has come to the Chamber and said that the key priority for this Government is addressing poverty and deprivation. Poverty and deprivation do not feature in this local government funding settlement. They are not part of this formula that the Secretary of State is asking us to agree. What is striking is the things that he says are important. He talked about vulnerable children in education, but it is cash flat, same as last year. Virtual schools are cash flat. The revenue support grant for local authorities is cash flat. Personal advisers to care leavers are cash flat. Money for supporting local authorities with social care, which was specifically described as a priority, is cash flat. Buy one, get one free campaigns intended to reduce obesity in the public health environment have a 50% reduction. Even Awaab’s law, which was championed at the Dispatch Box just a short time ago by the Minister for Housing and Planning sees a cut of £26,000 from its paltry beginnings.

Perhaps the Secretary of State will reflect that what he is announcing is essentially a massive shift of funding away from the statutory duties and obligations that this Parliament has placed on our local authorities to those favoured political areas that the Government see as their priorities for the future.

15:45

[Gareth Thomas (Harrow West) (Lab/Co-op)]

Harrow council was on the verge of bankruptcy until Ministers announced substantial extra funding in the local government settlement. Council officers told councillors that they were facing a budget deficit of more than £32 million, and they were planning to use virtually all the council’s reserves to fill the gap if the settlement for Harrow was not as generous as in fact it was. They were even contemplating having to ask for exceptional financial support status, so I particularly welcome the 31% increase in funding for Harrow over this Parliament that the Government announced in December. The last multi-year funding settlement for the council, under Theresa May and Boris Johnson, delivered just a 5% increase, so a 31% uplift over this Parliament is a significant step forward.

Harrow certainly needs that uplift, because over the last four years residents have become increasingly concerned about how the council has been managed. Council tax has increased by more than inflation every year. Rents and service charges imposed by the council have rocketed. Crucial parts of the council’s responsibilities have been rated as inadequate and needing improvement. Basic critical services such as street cleaning have been cut to the bone, and new housing to ease the housing and homelessness crisis has been stalled, delayed or just axed. Council officers have told senior councillors that without that increase, Harrow would have faced having to approach the Secretary of State; it would have been at risk of bankruptcy, and of needing exceptional financial support.

Although a combination of recent mismanagement of council finances and a decade of austerity has done considerable damage to our public services, Harrow remains one of the lowest-funded councils, both in London and nationally, so I say gently to the Secretary of State that I hope he will understand when I tell him that I will continue to press for further funds to improve our local services. It is worth underlining that between 2013-14 and 2022-23, the council saw cuts in its funding from the Tory, and Tory-Liberal Democrat, Governments of more than £50 million, and a reduction of a shocking 97% in the revenue support grants. One of the consequences of that level of austerity was vastly weakened public services.

[Sir Desmond Swayne]

May I tell the hon. Gentleman about austerity?

[Gareth Thomas]

I am happy to give the right hon. Gentleman a way into the debate, but he might prefer to sit down and make a longer contribution later.

[Sir Desmond Swayne]

No, no. The one thing that the Secretary of State got right when he was wagging his finger to my left was his implication about the Liberal Democrats. I was at the heart of that Administration. Danny Alexander was Chief Secretary to the Treasury and had to be restrained by George Osborne, so gung-ho was he about making greater cuts. Personally, I would have given him his head, but don’t let them escape!

[Gareth Thomas]

I am happy to join the right hon. Gentleman in again condemning the role that the Liberal Democrats played, but if he was the sane voice in the Government at the time, I hope he will forgive me for being—slightly—even more concerned about what was going on.

One of the understated problems resulting from the austerity that Harrow has suffered has been the decline in the quality of vital local services. Children’s services were rated inadequate by Ofsted just last year, and immediate improvement was required in eight areas. They included leadership stability, particularly relating to management and oversight of staff and social workers; the

“quality of support, advice and guidance for care leavers”;

the “quality of help” for children who were homeless; the

“quality and consistency in the response”

when care leavers went missing; and the consistency of staffing to support children. Some of the most vulnerable children in my community and across Harrow more generally have been let down by Harrow council. Two years earlier, the Conservative councillors who led Harrow council had driven through major cuts to children’s services of over £2.5 million. Astonishingly, the current Conservative leadership locally is proposing another round of major cuts to children’s services.

One particular case in my constituency stands out. At a nursery, parents reported significant bruising on their child, in what looked like the shape of a child’s footprint. The matter was referred to social services. The parents were arrested and went to court, and the child was taken into emergency foster care. Eventually, the case against the parents was rightly dropped when the court accepted that the original bruising was caused by a child’s foot. In the meantime, during supervised contact that was arranged by Harrow social services, the parents found extensive injuries on the child and reported them to the social worker. Given the scale of the injuries, there should have been a serious investigation at the time, but there was not. In the nearly three years since, the council has struggled to get answers to its questions, and the parents inevitably remain profoundly affected by what has happened to their child, and by what they have been put through as a family. I wish I could say that was an isolated case, but it is not. Although I welcome the additional funding that the council will get, which it will be able to put into social care for young people, there are other measures that I hope the Secretary of State will consider further down the line.

It is not just children’s services that have been affected; the Care Quality Commission has said that adult social care run by Harrow council requires improvement. That certainly did not come as a huge surprise to many carers, elderly people and other vulnerable adults in Harrow. Just last year, the council was ordered to pay compensation to an elderly resident with dementia and her family. The resident needed medical help after she was neglected and let down by the care home in which she had been placed by Harrow council.

Since 2022, Harrow has become the third most expensive council in London for council tax, behind Tory-run Croydon and Liberal Democrat-led Kingston upon Thames. Harrow’s Conservative councillors have put up council tax by the maximum possible every year they have been in power, and they plan to continue doing so—a 20% rise in council tax since 2022, despite their promises to freeze it.

Council tenants have been hit with the maximum rent increases allowable in each of the past four years, while leaseholders’ service charges have rocketed. Astonishingly, some leaseholders in properties owned by Harrow council are expecting to see their service charges rise by 70% this year. One family, currently paying £2,000 annually, have been sent a bill for £3,400 for next year. Those rates are simply unacceptable in the midst of a cost of living crisis, and I hope the council will review them urgently.

[Lincoln Jopp]

Does the hon. Member believe that people who promise not to raise council tax should not raise council tax?

[Gareth Thomas]

Conservative councillors in Harrow promised not to raise council tax but duly did so. I hope the hon. Gentleman will join me in urging the shadow Secretary of State to ask the leader of the council to explain to the people of Harrow why he reneged on his promise.

Regeneration should be an opportunity to build more affordable and social housing, and to help tackle the housing crisis that we face in communities like mine. It should surely involve local communities, create opportunities for them to come together, and provide for key local services. Instead, the completion of the redevelopment of the Grange Farm estate has been delayed multiple times—again, a product of the lack of funding and poor leadership locally.

[Matt Rodda]

My hon. Friend is making an excellent point, and I am very sorry to hear about the challenges that his residents have with their council. Some local authorities are doing the exact opposite of what he describes. In my area, Reading borough council recently opened 46 new council houses, built on its own land, as part of a programme to build nearly 800. There are local authorities that are able to grip this issue, and I am very sad to hear about the situation at his council. Perhaps it could learn something from Reading and other councils around the country.

[Gareth Thomas]

I would certainly welcome the news that the Conservative councillors in Harrow responsible for housing were looking at councils that are committed to building more council homes, like those in my hon. Friend’s constituency.

The failure to complete the redevelopment means that residents have had to put up with mice, damp and substandard accommodation for too long on the Grange Farm estate. On other regeneration schemes in Wealdstone, plans for affordable housing have been axed, no new council housing that had not already been planned by the previous council has been built, and a primary school that was due to be provided has been axed. Developers are not being held properly to account, and a major opportunity to lift the quality of life in the borough has been missed.

A consistent complaint that I have heard from constituents of mine is that they find it very difficult to get to see anyone at the council. They do not know where to go to meet council staff to sort out problems and discuss issues in their neighbourhood. Shortly after the local Conservative party took over running Harrow council, it closed Harrow’s civic centre. It was due to be replaced by a smaller set of council offices in Wealdstone, on what is currently the Peel Road car park. That would have given Harrow residents access to council staff, and helped increase the number of people using businesses on the local high street. It would have freed up council-owned land for much-needed affordable housing and for new workspaces, retail and commercial spaces, as well as a new primary school, a new library, a new park for residents to enjoy and a new town square. However, the civic centre remains closed—derelict and boarded up—and major decisions on regeneration have been delayed or cancelled. No new set of accessible council offices is planned, and no one knows when, or indeed if, new promised housing will go ahead. Instead, local Conservative councillors have spent thousands of pounds doing up their council offices, yet members of the public are not allowed in.

[Lincoln Jopp]

Will the hon. Gentleman give way?

[Gareth Thomas]

If the hon. Gentleman will forgive me, I have given way to him once, and I leave him to hope to catch your eye later, Madam Deputy Speaker.

The public will get their say on the situation in Harrow in May, but the failures at Harrow council raise other questions. Reversing the decade and more of austerity for local services is clearly a priority, and the settlement that was announced in December makes a good start on that objective. Harrow certainly needs a serious examination of its funding formula, but surely raising the quality of local services needs to be more than just the responsibility of local people. In 2015, the Opposition parties decided to abolish the Audit Commission, a body that usefully challenged councils much earlier on, and helped prevent many poor management practices of the sort we regularly see in Harrow from developing and getting out of control.

[Danny Beales]

My hon. Friend makes an excellent point. Rightly, this Government are putting more money back into local government for the first time in many years. That is long overdue, but that money has to be well spent. Unfortunately, what he describes in Harrow is quite similar to the experience of my residents in Hillingdon. The independent auditors are quite damning about the council’s budgeting approach. Millions of pounds have been misallocated, and there were no opening and closing balances, well into the financial year. It was recently reported by the press that the council, in a secret deal, had written off a former Tory councillor’s debt, all while applying for exceptional financial support from this Government, so I completely agree with him. Do we not need more independent oversight and audit of local government finance?

[Gareth Thomas]

We certainly need more independent oversight of the way in which Conservative councils in outer London are managing their finances. I am completely with my hon. Friend on that score, and the story of what has happened in Hillingdon is almost as bad as the situation we have faced in Harrow over the last four years. The one bright spot has been the increase in finance that the Secretary of State has delivered for Harrow. We need a review of the funding formula for Harrow, but I welcome the settlement we have had, and I look forward to continuing to persuade him of the case for more funding in Harrow.

[Madam Deputy Speaker (Caroline Nokes)]

I call the Liberal Democrat spokesperson.

15:58

[Gideon Amos (Taunton and Wellington) (LD)]

In our manifesto, the Liberal Democrats called for multi-year settlements for local government; for councils to be freed to generate more revenue, including by charging more council tax on second homes and from increased planning fees; and for an extra £2 billion on education, including for special educational needs and disabilities. It is right that funding for local government is rebuilt after the consequences of the 2008 crash and the famous letter left by the outgoing Labour Government that they had spent all the money and there was none left. The moves forward in the areas I have mentioned through this settlement are positive and we welcome them.

The announcement that 90% of SEND service debts that councils have unavoidably built up will be met by central Government also begins to address the crisis in SEND, but I am afraid it does not finish the job. The promised SEND reforms have again been delayed. Whatever the outcome of those SEND reforms, they must not be a precursor to weakening the protection disabled children rely on and their parents expect.

Our five tests for SEND reform would guarantee that children’s rights to SEND assessments and support are maintained, and that the voices of children and young people with SEND, and those of their families and carers, remain at the centre of the reform process. Secondly, capacity in state special school provision must be increased, alongside improvements to inclusive mainstream settings. Thirdly, national Government must top up funding for each child whose needs exceed local authority provision within a given cap. The Government must get on and introduce a cap on the profits made by private sector SEND companies. Fourthly, early intervention must be improved and waiting must be times cut. Lastly, schools must be incentivised to both accept SEND pupils and train their staff.

The additional funds for housing and homelessness, while small, are welcome, including those for Somerset council in my constituency. The extra funding through the recovery grant is also welcome, but places such as Kingston upon Hull tell us that it does not go far enough and will not fill the gaping hole in financial stability that persists. It is disappointing that social housing does not get a mention in the settlement. We need a new generation of council and social rented homes. Our plans are for 150,000 per year and Shelter’s are for 90,000 per year. Both would be a good proposition. The Government’s proposal for 18,000 per year just will not meet the level of need out there.

The additional funding, along with provision for SEND deficits, will help councils like mine in Somerset to keep the council tax rise to the 4.99% norm across the country. In a cost of living crisis, people cannot afford more than the minimum increase. That is something Somerset MPs and the council pushed hard for, and I am grateful to the Local Government Minister for meeting us and engaging with us on that. It is notable that 70 out of the 74 Liberal Democrat-led councils have kept the council tax rise to the norm minimum of 4.99%. The four that are, exceptionally, going above that all inherited from their previous Conservative administrations a social care funding time bomb.

Voters will take note that Reform-led Worcestershire county council is increasing council tax to the highest level allowed in the country. Typically, Reform Members are not here to take part in the debate on local government finance. The message is clear: vote Reform and pay more tax than anyone else in the country.

[Layla Moran (Oxford West and Abingdon) (LD)]

My hon. Friend is giving a powerful speech outlining how Liberal Democrat councils up and down the country are doing their best in this cost of living crisis. Oxfordshire county council finds itself in a £24 million deficit as a result of the settlement. Meanwhile, residents on the doorstep are saying to us, “What about my potholes?” He is right to point out that social care is part of that demographic deficit. [Interruption.] Does he agree that we need to tackle the core issues and that one of those is social care, because sorting that out helps everything to do with local government finance?

[Gideon Amos]

My hon. Friend is absolutely right. Conservative Members ask, from a sedentary position, who runs the council, but I use the phrase “inherited time bomb” advisedly. The well-respected Conservative former leader of Somerset county council, Dave Fothergill, was one of the first in the country to identify this issue. He told “Panorama” back in 2019 that adult social care was a time bomb that was ticking. That time bomb has now gone off around the country, and council tax payers are having to bail out the broken social care system.

[Steve Darling (Torbay) (LD)]

For Torbay council, on which I still serve, incredible assumptions are being made about the levels of council tax being collected. That results in a deficit of £13 million in years 2 and 3 for a small unitary authority. Does my hon. Friend agree that the Labour party has been learning from the Conservatives, and is planning to balance the books of councils on the backs of local tax payers?

[Gideon Amos]

I certainly agree with my hon. Friend, who champions Torbay on a regular basis in the Chamber. Councils are suffering reductions in their funding settlements across the country, which is one of the reasons we cannot support the amount of support they are getting from central Government.

[Mr Betts]

There is again memory loss on the Lib Dem Benches. It was the coalition Government who made the biggest cuts to local government funding and started passing funding responsibilities over to the council tax system—that all began with the Lib Dems in the coalition Government. Why does the hon. Gentleman not apologise to the Chamber and to people up and down the country for what the Lib Dems did to them when they were in government?

[Gideon Amos]

The hon. Gentleman is right that massive savings were made after the financial crash in 2008—some would say around £40 billion over the coalition years. He would be horrified to learn that the only people suggesting cuts greater than £41 billion were those in the Labour party in their 2010 manifesto, which proposed £56 billion in cuts. [Interruption.] If the hon. Gentleman does not believe me, he can look at the headlines of the time: “Alistair Darling: we will cut deeper than Margaret Thatcher”. That was Alistair Darling in his 2010 Budget. Who began austerity? Who began the cuts? It was the Labour Government, who were planning to go further, faster and deeper, according to Alistair Darling, than the Liberal Democrats or the coalition did.

[David Simmonds]

I just want to ask the hon. Gentleman whether he agrees with the Labour leader of Sheffield council, who says:

“Cost pressures continue to outstrip increases in funding, both specific inflationary pressures in major service areas, particularly for care, accommodation and construction, and the increasing volume of demand in housing and care.”

Is the Labour leader in Sheffield correct?

[Gideon Amos]

I hesitate to get too involved in the politics of Sheffield.

I am concerned that we are seeing reductions in Government funding for councils across the country, particularly in the case of rural authorities, which are especially hard hit by this settlement. Rural authorities find delivering social care and other services far more costly than in tightly drawn urban areas; Somerset’s 4,000-mile road network, for instance, is a massively more onerous proposition than a network in a tightly drawn urban area.

It is inexplicable that despite a consultation that considered maintaining the remoteness funding uplift across the country and across all funding heads of local government, it has been taken away from all funding heads apart from adult social care. Why would it be less costly to provide children’s services than adult’s services in a remote, rural area? Why would it be less costly to provide flood relief and flood protection than adult services in a rural area? A whole range of really remote authorities are affected, including Westmorland and Furness, Somerset, Devon and Cornwall, all of which are particularly badly hit.

Remote authorities have much greater areas to protect from flooding. I have spent recent days with families in Stathe and Burrowbridge on the Somerset levels in my constituency, where I have seen how heartrending it is for families to watch the water coming closer and closer to their homes. Some people are going to bed with the water 200 metres away, but by the time they wake up the next morning and look out of their window, it is only 20 metres away. In some of the places I visited, the water is lapping up against the houses themselves.

When Conservative Prime Minister David Cameron came down in 2013-14—the last time we had severe flooding—he promised Somerset that money would be no object. It turned out that he meant that Somerset residents’ money would be no object, because Somerset’s new rivers authority became the only one in the country not to be funded by central Government and to have to rely on local taxpayers.

When the Flooding Minister, the hon. Member for Kingston upon Hull West and Haltemprice (Emma Hardy), came down to Somerset yesterday, she said that Somerset will not be forgotten. I ask the Local Government Minister what extra support the Government are providing to Somerset council to deal with this flooding major incident, which could easily become a national emergency if effective measures are not taken now—and I mean in the next few days. Water levels are still rising, Minister.

Finally, we need an end to the massive expense of all this top-down reorganisation of local government where people do not want it. Forcing change on the structures of the natural communities that people know and love can only distract from the important work of reducing flooding, delivering care and all the other priorities that councils put first. No one I have met in Taunton and Wellington, in Somerset or on the levels has told me that what they really want to see is a metro-style mayor for their area coming down the road. Is spending almost half a billion on mayors really going to help any of our constituencies in the way that known, understood and strengthened local councils would?

While we welcome the limited extra funding, the settlement leaves too many questions unanswered on how SEND costs will be met. It is still going to lead to big cuts in services for rural and remote authorities, and on social care it leaves council tax payers bailing out a broken system. For all these reasons, we cannot at this stage support the settlement.

[Madam Deputy Speaker (Caroline Nokes)]

I call the Chair of the Housing, Communities and Local Government Committee.

16:10

[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.]

[Mark Garnier]

On exactly this point about the democratic process, my constituents were promised by the Reform candidates that they would cut council tax, but Worcestershire county council’s council tax is going up by 9%. It is a shame that not a single Reform Member of Parliament has turned up to defend what they have done. The worrying point is that we are being denied a referendum even though this goes above the 5% threshold. That bit of the democratic process has been removed from Worcestershire.

[Florence Eshalomi]

I agree. I think many residents are feeling the pinch. Yes, we have seen fantastic initiatives and new legislation from this Government, but that is not trickling down quickly enough. Many residents will be seeing their council tax bills in the next few months, and for a number of them, those bills will be going up. It is important that we look at that democratic link.

[Graham Stuart]

A £200,000 house in the East Riding of Yorkshire will be paying between £3,000 and £4,000 in council tax, depending on its 1991 valuation. A £2 million flat in Westminster will be paying £2,000. There is an opportunity to put that right. I know that the hon. Lady is from London and the Secretary of State is from London—it feels to a lot of us out in the provinces that everybody in charge is from London—but this system is so egregious and wrong. Does the Chairman of the Committee not agree that something needs to be done about this? We did not do it in our years in office, but this Government said they would have a fairer system, but it is not fair yet.

[Florence Eshalomi]

I think it is fair to say that successive Governments have put the issue of council tax in the “too difficult” box. I hope that it will fall on this Government to finally address that and bring an end to this regressive form of taxation.

[Antonia Bance (Tipton and Wednesbury) (Lab)]

Does my hon. Friend agree that the work being done on the draft local government settlement to get us to this final local government settlement has actively put the principles of fairer funding into place? My local authority in Sandwell—the fifth most deprived local authority in the country—is getting an extra £28 million as a result of the continuation and increase of the recovery grant. That money will go on crucial services that we were deprived of in my area during 14 years of Conservative austerity. I know my hon. Friend will want to join me in welcoming the work being done by the Local Government Minister and our friends in the Treasury to make sure that the principles of fairer funding are put into place.

[Florence Eshalomi]

My hon. Friend is a doughty champion for her constituency and for her council’s needs. I think it is fair to say that the outdated and opaque previous funding settlement caused a number of issues for councils up and down the country. It is good to finally see this Government responding to that and ensuring that we have a fairer and more simplified settlement, so that our councils can get on with the day job of providing vital services for residents.

We have to be honest and ask: if councils have to impose a council tax hike just to fulfil mandatory services—going back to the question raised by the hon. Member for Wyre Forest (Mark Garnier)—where is that democratic choice for residents? If council tax is collected locally, how can it be right that what it is largely spent on is dictated by central Government? We know from the settlement today that the Secretary of State and the Minister have shown a boldness by ensuring that they continue to engage with local leaders, the Local Government Association, and cross-party colleagues and councils, to get to grips with the day-to-day issues facing local government, but I urge the Minister to continue on that road of being bold. The Government need to continue working, especially with Treasury colleagues, to properly address the growing demand on the mandatory costs that councils face, from SEND to adult social care and temporary accommodation. That demand for those core services will continue to grow no matter how much money the Government put into them.

There is a real need for a fundamental review of council tax and wider council funding. I urge the Government to go further and bring about a cross-party consensus, and to truly reform council tax and bring an end to this regressive form of taxation once and for all.

16:18

[James Wild (North West Norfolk) (Con)]

This settlement is supposed to deliver fair funding; that is what the formula says on the tin, but it fails the Ronseal test. Norfolk’s core spending power in the first year of the settlement is lower than the national average, and the largest increases in core spending power are going to urban authorities. This simply fails to recognise the needs of large rural counties such as Norfolk. The County Councils Network’s assessment is that rural counties and unitaries face the highest pressures, collectively amounting to £7 billion of costs by 2028-29.

[Natasha Irons]

I appreciate the hon. Member’s concerns. My constituency is an outer-London borough that has long been deemed as having inner-London support through finance, and it has inner-London problems—it is not particularly leafy, and deprivation is tough and takes a massive toll on our councils. Does he understand that addressing deprivation, the cost of housing and things like temporary accommodation are crucial for places like mine?

[James Wild]

Indeed. I am sure that if the hon. Lady catches your eye, Madam Deputy Speaker, she will elaborate on that.

Here is my point. Perhaps the kernel of the unfairness is the lack of recognition of remoteness and its impact beyond the adjustment for adult social care. It has been removed from most of the formulae—

[Antonia Bance]

Will the hon. Member give way?

[James Wild]

I will not give way; lots of people want to speak.

This is a serious cost pressure on rural authorities that the Government have chosen to ignore. Of course, this has been compounded by the removal of the rural services delivery grant in 2025—the loss of funding that had been put in place specifically to acknowledge the high cost of rural service delivery. That was a political choice made by a very political Secretary of State.

People in Norfolk can see in plain sight how this Government view rural areas, in the light of the farm tax, the lowering of the bus funding that the previous Government had put in place, and the scrapping of road and rail schemes in our area. I ask the Minister, who is not currently in her place—I hope the Whip on the Front Bench will make a note of my question—why Ministers rejected the evidence that Norfolk and other rural authorities submitted about the additional costs that they face and the importance of remoteness.

After remoteness, there is the recovery grant, which is supposed to be a one-off formula intended to give local authorities the funding they need. The formula was meant to be replaced, but the Government have decided to continue it for the next three years. However, there is no funding for Norfolk county council, despite the allocation, and the additional element of the final settlement, supposedly being targeted at upper-tier authorities—only Labour upper-tier authorities, it seems. It is little wonder that the Institute for Fiscal Studies said:

“Maintaining…allocations of the recovery grant does not look like a principled decision”.

I think that says it all. The policy is designed to shove all funding to Labour councils. Let us be clear: this is about shifting resources away from rural areas and into unitaries.

[Blake Stephenson (Mid Bedfordshire) (Con)]

I declare an interest: I am a Central Bedfordshire councillor. Central Bedfordshire will have to find £17 million off the back of this so-called fairer funding formula. Does my hon. Friend agree that that is nothing short of pork barrel politics?

[James Wild]

I agree. The figures simply bear that out. As a result of the settlement, council taxpayers in Norfolk—it is probably the same for my hon. Friend’s constituents—will bear the brunt through much higher council tax. Maximum council tax increases are assumed for the full three years of the settlement.

Let me touch on internal drainage boards, which are responsible for managing water levels and reducing flood risk. They play a vital national role in protecting key areas, including the prime agricultural land that is so important for our food security; yet the cost of IDBs falls on council taxpayers. In the borough council of King’s Lynn and West Norfolk, 40% of council tax goes towards IDB levies—costs that other local authorities do not face. Funding should reflect the nationally important role of IDBs. Additional support was introduced by the previous Conservative Government. It has been continued by this Government, but they are not uprating it with inflation to take account of the high energy costs that IDBs pay. We do not know if that support will continue in future years. If it does not, will the Minister commit to working with the local and district authority groups that have been set up precisely to find an equitable solution?

Of course, Norfolk is losing out further still because of the Labour Government’s decision to cancel the Norfolk and Suffolk mayoral election and the county council election—two political choices with which I fundamentally disagree. Not only have our elections been scrapped, but my constituents—and those in Suffolk—were due to benefit from an annual investment fund of £37.4 million a year, which the Government have now cut for Norfolk. We will lose out on £48 million in the next two years. Why? Because of decisions taken by these Ministers. It is another sign that this Government neglect the people of Norfolk.

I welcome the announcements on SEND deficits, but it is clear overall that this is not a fair funding settlement. There is an over-reliance on council tax increases for my constituents, there is no recognition of the true costs that rural authorities pay, and ministerial decisions will lock in inequalities for years to come. The Government should think again.

16:28

[Ms Marie Rimmer (St Helens South and Whiston) (Lab)]

Life in my constituency is tough for many families. Too many live with the daily consequences of poverty, ill health and insecurity. Many people are vulnerable, and the impact can be soul-destroying. I pay tribute to my hon. Friend the Member for Knowsley (Anneliese Midgley) for her work at Christmas time. She was the one who really started our campaign, and I pay tribute to her.

Healthy life expectancy in Knowsley is 50, and in St Helens, which is most of my constituency, it is 57, for both men and women—it was a shock when I read those figures. The call for significant healthcare support is tremendous, and starts much earlier than in some other places, but in St Helens housing and social care is integrated, which has helped with that increasing demand.

Many children do not benefit from the excitement of dance classes, gymnastics, trips out or holidays. Sadly, many are lured into county lines and drug taking. Many of our children need special educational provision, and some wait for a special and unique service. The cost can be enormous, and provision is rare and very often not local. Those children lose out, and their families watch and worry while they wait for the solution to arrive.

Revenue support grants are always complex, mysterious and hard to nail down. Added to that, 14 years of austerity did not help. St Helens borough council lost £127 million. We were capped in the poll tax, and we had to put the rates up by 2%—I was the leader of the council at the time. We were one of 21 areas that were capped. We had to deliver over £10 million overnight or we would have been surcharged. We had three months to deliver a new plan. We were very poor in St Helens.

Our councils are struggling to meet statutory responsibility in social care and SEND provision, not because of inefficiency in the councils but because the funding bears no resemblance to the actual needs of the people on the ground and the lives that they have to put up with. There are ever-growing numbers of people with complex needs, higher costs and a lack of provision. Two thirds of council funding in St Helens is spent on adult social care and children. We lost £127 million from Government, so we have either £9 million or £11 million left—that is what we have.

I have always said that we need a settlement that addresses the real pressures on health and disability, and provides care, attention, safeguarding and protection for the vulnerable, the aged, the abused and children in need. The council gets very little income from the Government now, so money has to be raised from council tax. More and more efficiencies have had to be made, but we could not get more efficient councils than those in Knowsley and St Helens. I go to the council meetings—I have been a councillor at St Helens for 39 years and I praise what I see in Knowsley. Those councils are so efficient and so focused on the people of the area. They are good employers, but they are not focused on the people who work for the councils but on how they can serve and care for local people.

Due to the deprivation of our area and the lack of assets that can be sold, which other councils have, we can raise only a fraction of the amount that councils in the south-east, London and the cities can raise. There is very little we can raise, so everything depends on council tax and our ability to be more efficient in new and different ways—what the council manages to do is ingenious.

The settlement that we were first presented with, which we consulted on, seemed fair and good, but I have to say that when the provisional announcement was made just before Christmas, I was horrified. Housing had been included in the index of multiple deprivation, but we are not suffering from that deprivation in Knowsley and St Helens. I am not saying that it should not be there, but it should certainly not be there with the weighting that it has. That is where our money went; it went down from the first figure that we were consulted on just like that. St Helens would have been high and dry, but I will not go into the details.

I have got the figures on what the impact would be for Knowsley, which are the same figures as those of my hon. Friend the Member for Knowsley. I knew that St Helens would be bad, but I could not get the figures. My hon. Friend went off and started the work, and we did what we could to get this going.

Although this is called “fair funding”, it is not fair funding, because we are all different. I have listened to what Members said about people living in rural districts, and I have sympathy. We need to have a system that really looks at what costs are the highest and what is needed. No one can criticise the people who have this extra funding now, but it will not be there forever.

Following sustained lobbying, we have 90% off our high-needs deficit. That is the deficit that we have on SEND provision. Knowsley’s high-needs deficit is tremendous—far greater than that of St Helens—so that will and does help. What goes on is just wonderful.

We will get £14.7 million through the recovery grant over the three years, but that does not resolve the problem, because it is not part of the formula. We will have to commence straight away looking at what we are going to do, because we would have been much worse off than we were already. That is just one council; I know that there will be others like it, so we need to look at that issue.

I pay tribute to Ministers for the work that has gone on, as well as local authorities, chambers and finance departments. I also pay tribute to MPs and councillors for the work that they have done. It cannot have been pleasant for them to see what they saw. Having looked at this matter, I know that they have recognised things, but we will need to look again at fair funding in the future.

I sincerely thank all those who have been involved in coming to help for some of the worst affected boroughs in the country. I can assure hon. Members that this has not been party political. We do not think like that—I certainly do not, and I know that my hon. Friends the Members for Knowsley and for Bootle (Peter Dowd) do not either. Our Benches are full of former council leaders from our area who have done this for many years. I have been in local government and Parliament for 48 years, so I know what I am talking about—I see what I am talking about—and it is not made up.

I will support this measure tonight, but that does not mean an end to the lobbying; we will obviously start again. I am sure that Ministers will listen to what other people have said. Maybe there needs to be flexing here and there, but we need to recognise the needs of each area. We cannot leave them to deprivation and deny their needs.

16:36

[Manuela Perteghella (Stratford-on-Avon) (LD)]

I am incredibly proud to have been a councillor until last year, because local government is the foundation of so much that matters in people’s daily lives. It keeps our streets clean, supports vulnerable families, funds social care, maintains roads, protects our environment, ensures that our children can get to school safely, keeps our bins emptied and keeps our potholes filled, but not everywhere. When councils are stretched to breaking point, it is residents who feel the strain.

I welcome the move to a multi-year settlement, which we have long argued for. Councils need certainty and to plan beyond a single financial year. That stability matters, but let us be clear: a longer settlement does not in itself fix a broken system. The Public Accounts Committee has warned that deficits could reach nearly £4 billion a year by 2027-28, and that is not sustainable.

On top of that, we now have rising demand, inflationary pressures, increases in the national living wage and the hike in national insurance contributions, and councils are expected to absorb all of this. Further, making any material changes—for example in the assumptions about the level of business rates pooling and effectively reducing councils’ funding allocation between the provisional and final settlement—will cause serious challenges for many councils, including Stratford-on-Avon district council, which could see a big cut of 5% or more of its total spending power. If I heard correctly, the Secretary of State pledged to refund those councils affected by this material change, and I would like those on the Treasury Bench to confirm that. Our constituents are the ones who are going to be impacted, and the provision of valuable local services will be affected.

I am deeply concerned about the impact on rural areas like mine. The shift to a need-and-demand model risks overlooking the real costs of delivering services across large, sparsely populated areas. Rural councils often receive less grant funding yet face higher transport costs, greater recruitment challenges and weaker public transport networks. That reality must be properly recognised in any fair funding formula.

In my constituency, I see the pressures on local government every day. Stratford-on-Avon district council, led by the Liberal Democrats, has shown what responsible local leadership looks like even in tough times. It has delivered the third highest recycling rate in England. It has rolled out natural flood management. It has installed solar panels on leisure centres to cut running costs and reduce emissions. It has allocated £600,000 to a cost of living mitigation fund to support our most vulnerable families. That is practical, sensible, community-focused governance. That is what can be achieved when councils are run competently and with a clear sense of purpose.

We can contrast that with the chaos we have seen at Warwickshire county council, now run by Reform. Last week, after a gruelling 10-hour meeting, the minority Reform administration failed to pass a budget. The Liberal Democrats put forward an alternative that would have invested £20 million in tackling child poverty, protecting youth services, improving home to school transport, and investing in infrastructure for the future. For an extra 39p a week, we could have protected services for thousands of young people and vulnerable residents. Instead, Reform doubled down on cuts that would hit families hard, including changes that could leave children walking up to five miles to school, often along unlit rural roads. Reform and the Conservatives combined to block that investment, and then still could not agree a budget of their own, leaving the council in limbo. This Tory-Reform stitch up is costing residents in Stratford-on-Avon and across Warwickshire. As we look ahead to local reorganisation in Warwickshire, these choices matter even more.

[Mr Andrew Snowden (Fylde) (Con)]

On the point about Reform councils and the promises they made and the reality of that, in Lancashire they are trying to balance the books by initially consulting on closing 10 care homes and day centres and narrowing that down now to just the day centres. Does the hon. Member share my surprise that Reform MPs are not here to defend their record on what they promised versus the reality of a Reform-led council?

[Manuela Perteghella]

Yes, the Reform Benches are empty, as we all can see and as the British public can see, and this is really important because, as I have said, local government is the foundation of our places. It gives us our civic pride in our areas and is on the frontline of delivering services, so this is really disappointing, and there is chaos in Warwickshire; we are still without a budget. Stratford-on-Avon district council has made a clear case for a south Warwickshire unitary authority that reflects the real communities and keeps decision making closer to residents. Reform is pushing for a single county-wide super-authority that would centralise power, moving it further away from local people. At a time when trust in politics is fragile, we should be strengthening local democracy, not weakening it. We must keep local government local.

Local authorities are ready to play their part in delivering growth, tackling the climate emergency, insulating homes, improving air quality and building the infrastructure that our communities need, but they cannot do so if they are permanently firefighting. If we are serious about having strong communities and a strong economy, we must get local government finances right and not defund rural councils. We need to support them, so that they can deliver for their residents, rather than leaving them to pick up the pieces of national Government failure.

16:45

[Mr Clive Betts (Sheffield South East) (Lab)]

I first congratulate my right hon. Friend the Secretary of State and my hon. Friend the Minister for Local Government on this settlement; it is a welcome change. I also thank the Minister’s predecessor, my hon. Friend the Member for Oldham West, Chadderton and Royton (Jim McMahon), for his work in both opposition and government to get us to this better place.

I am now the deputy Chair of the Public Accounts Committee, and we recently produced a report on local government funding. I want to read out our cross-party conclusions:

“Local government finance is in a perilous state…Funding has not kept pace with population growth, demand for services, complexity of need, or the rising costs of delivering services. As demand for targeted services such as social care, special educational needs, and temporary accommodation has grown, there has been a significant reduction in spending on commonly used discretionary services, such as street cleaning and lighting, parks and gardens, and leisure services.”

That is a truth that councils up and down the country have experienced and dealt with for many years.

I congratulate councillors of all parties, in all councils across the country, for how they have performed during the years of austerity—they have continued to work, and to deliver efficiencies that some central Government Departments, as the PAC can testify, would do well to emulate.

[Peter Dowd (Bootle) (Lab)]

I thank the Secretary of State and his ministerial team for listening to my representations and those of my council. My experience of Tory Secretaries of State is that having them listen, let alone act, is about as rare as rocking-horse dung. The Opposition, who did not properly fund local government for 14 years, are now complaining and whinging about the position we are in. Does my hon. Friend agree that this is their responsibility, not the responsibility of this Government?

[Mr Betts]

Absolutely. I think that goes for both the Conservatives and the Liberal Democrats, as my hon. Friend will understand.

This Government clearly face a serious situation, and we must say that they have got some things very right indeed. First, we have the multi-year settlement, which has been called for, cross-party, for many years—it was certainly something that we called for when I was on the Housing, Communities and Local Government Committee, and the Committee is again calling for it now. It is good that we have one; it gives councils a degree of certainty, so that they can look to the future and plan ahead.

Fair funding has always been a subjective term; one side will say that something is fair funding, and the other will say that it is not. I just point out to the Opposition that Greg Clark, when he was Housing Secretary 10 years ago, promised a fair funding review on behalf of the then Conservative Government. However, we are still waiting for that review in 2024. The Opposition had their chance, but they did not take it. We now have a review to deal with the simple matter of some figures and data in the funding settlement being at least 20 years old.

[Natasha Irons]

I join colleagues in thanking the Secretary of State and the Minister for Local Government for their work on this matter. We talk about outdated data; places like my Croydon East constituency, in an outer-London borough, have been treated as though we have an endless pot of cash, or are endlessly wealthy. However, my constituency has pockets of some of the highest deprivation in the country—an issue that this funding formula seeks to address. Does my hon. Friend agree that this fresh approach, which brings an end to Tory austerity, is exactly what our councils need?

[Mr Betts]

I certainly do. My next point was going to be that deprivation is properly recognised in the funding settlement. The problem is that councils that have deprivation either across their area, or in part of it, have borne the burden of the cuts over many years. Under previous Governments, both coalition and Conservative, councils with the greatest need—which previously had the largest grants to reflect that need—faced the biggest cuts. This funding settlement gives the biggest increases to councils that faced the biggest cuts under the last Government; we are getting some restitution for the funding reductions that we suffered. The recovery grant is right, because councils need recovery when their funding base has been decimated, after grants that they needed were taken away from them. My one challenge to my hon. Friend the Minister is that the recovery grant lasts for three years, so there is a danger of a cliff edge in 2029, when those councils that now get it may suddenly lose it. The Minister is obviously trying to think ahead, which makes a change from previous Ministers, so let us start to think about that problem before it hits us.

I welcome the settlement for Sheffield. I think the comments made by the leader of the council—which is a cross-party council—were about the council’s concerns and the challenges it faced prior to this funding settlement. The finance director of Sheffield council has said that

“The figures announced in the LGFS back up the Government’s commitment to redressing the unequal cuts seen during the austerity years of the previous Government, and its aim to deliver more funding to deprived areas of the country.”

I think that is a fair statement from the officer responsible for the council’s finances. In this funding settlement, Sheffield has got about £55 billion more over three years than was anticipated under the previous proposals, which sort of fills the hole. In the past, we have been making cuts to essential services, but for the first time in 15 years, we can start a budget process without immediately looking at cuts to those services. Year after year of cuts—that has been the situation. Now, the budget can be balanced without those cuts, which is a fundamental change. We can start to look at some improvements and preventive measures for the future that will bring about the sort of change we all want. I say well done to the Government for getting us to that position.

I also say well done to the Government for dealing with the ringfences—not just in the Minister’s Department but across Government, whether they be in transport, health or education. There are ringfences all around that restrict local councillors’ ability to do the right thing for their communities, so it is good that the Government have moved in the right direction. The current Select Committee and previous Select Committees have called for that change, and the Government have listened. To be fair, when Michael Gove was Secretary of State, there was an agreement that this needed to happen, but not much evidence that it did happen. I think we have moved in the direction that everyone wanted us to take.

This settlement is a good start. It steadies the ship after the cuts that councils with higher levels of deprivation have had to suffer, and it brings in a strong element of fairness. Now, I am going to challenge the Minister—I know she would not expect me to be completely complimentary. I come back to the point that the Chair of the Select Committee, my hon. Friend the Member for Vauxhall and Camberwell Green (Florence Eshalomi), made about the need for change. This is a good start, but there is a need for radical change. We came in with a manifesto of change; we have a large majority, and with willingness, we can deliver on it.

There are major issues in social care. I am still disappointed that we will not make changes to social care funding until 2029, after the review. I think we could make them more quickly. We are clearly moving on special educational needs and disabilities, but we need to move on children’s social care as well. There are things that some councils can do to help themselves; for example, Warrington council has started to build its own children’s home, so that it does not have to send children to very expensive private homes.

[Gideon Amos]

We may not agree on the cuts, which began in 2009, but the hon. Member has not yet touched on the removal of the remoteness uplift. Does he agree, in a cross-party spirit, that including a remoteness uplift just for adult social care, but not for children’s services or any other services, is contrary to common sense, and affects remote rural authorities more than others across the country?

[Mr Betts]

I will not go through every detail of this settlement. There is always a balance to be struck in local government settlements, and Ministers have to make their own judgments about that. It is the overall impact that I want to judge the settlement by. For me, this is a fairer settlement for those authorities with high levels of deprivation and some of the worst cuts in the years of austerity.

[Mr Snowden]

It is all very well to say that this is a fair settlement. On balance, councils that have Labour constituencies benefit from it, and councils that are represented by Conservative Members do not. The fairness can be derived from that.

[Mr Betts]

First, there are many more councils with Labour MPs. It might be the case that Labour MPs represent councils with higher levels of deprivation. That might be the simple explanation.

[Danny Beales]

I am an MP with a Conservative council, and a colleague from the Conservative Croydon council area—[Interruption.] Conservative Members cheer; unfortunately, it is a bankrupt Tory council, but luckily this Government are stepping in, have followed the deprivation and the need, and are properly funding that council, regardless of its political colour.

[Mr Betts]

Absolutely. Councils should be funded according to need, not according to political representation. [Interruption.] Before Conservative Members start, I do not know whether they are old enough to remember Dame Shirley Porter and Westminster council, and how they were stuffed with money over visitor nights, just to ensure Conservative victory at the local elections. But we will move on from that. That was a long time ago.

I say to the Minister that these are big challenges that need to be addressed. We have to get to grips with them. We also have a local government finance system that is fundamentally broken. The Chair of the Housing, Communities and Local Government Committee commented on that in her excellent speech. Moreover, the Select Committee in the previous Parliament made the same recommendations as her Committee did. In the modern age, how can we continue to fund local authorities using a council tax system based on valuations from 1991? It is nonsensical. It is not sustainable. Imagine asking someone how the value of their new house had been arrived at, and them saying, “Well, this is a guess at what it would have been worth in 1991, had it been built then.” This is ridiculous, and we must change it. It is also regressive. Michael Gove, the former Secretary of State, said that the system was regressive, and it is. Poorer households pay disproportionately more in council tax. It simply is not fair.

In every year since 2010, council tax has taken a higher and higher share of local government funding, placing a greater and greater burden on that part of the funding settlement, which is regressive. When the Chancellor made commitments during the election campaign not to increase certain taxes, council tax was omitted. Therefore council tax has been going up disproportionately. It is an unfair, regressive tax that hits the poorest hardest. We simply have to do something about that.

This comes back to the democracy point that the Chair of the Select Committee made. While this is going on, poor families have to pay disproportionately more, but in terms of local government spending, more is going on social care, homelessness and special education needs—the things that are really important, but which most people do not receive. That means that most people, particularly those on lower incomes, are paying more tax every year and getting less in services, because of the cuts to other services, as the Public Accounts Committee recognised. That is not sustainable. It undermines trust in local authorities. People say to me, “The council has put up my council tax, but I am getting less for it.” This really has to change.

[Mr Brash]

In Hartlepool, 70% of every penny the council spends is on social care, and my constituents pay, as a proportion of their property value and as a proportion of their income, far, far more than the more affluent areas of the country. As my hon. Friend has said, they do not receive the services that they need. Is it not time to abolish the council tax system?

[Mr Betts]

The reform needed is so fundamental that the system would not be recognisable from what we have now. That is how we have to try to move forward.

We were promised business rates reform, but what we have had so far is not reform, but some minor changes. Yes, we have had good changes to try to help pubs and leisure facilities, but it is not fundamental reform. We could look at what Denmark and Australia have done to reform their whole system of council finances based on land values. That is one alternative. Let us at least have a look at it. Let us at least accept the need for change, even if we cannot agree at this point on precisely what that change should be.

In bringing about that change, I say to my hon. Friend the Minister that we should look at giving local authorities more power to determine their own levels of taxation. We are an outlier in Europe in how centralised our local government finance system is. That is another challenge. It partly comes from the great inequalities we have between different parts of the country, which are much greater than in most other European countries. I welcome the ability for councils to introduce a tourism tax, but that is a minute step towards more say for local councils about the money they can raise. It is a welcome but very small step.

I congratulate the Minister on the reforms and improvements to the existing system. Those are welcome, and my city and my constituents welcome them. However, big challenges lie ahead in making more fundamental reform to the system and giving more powers back to local councils to determine what money they can raise. The Minister will probably not stand at the Dispatch Box today and say, “We completely agree. We are going to get on with it,” but the Government should at least start thinking about it.

17:01

[Bradley Thomas (Bromsgrove) (Con)]

I will keep my comments brief, and they will be focused on council tax. The reason they will be brief is that I was hoping to intervene earlier on the Secretary of State. He said that he did not want to dodge difficult topics and wanted to talk about promises, but he did not take an intervention from me, probably because he knew what was coming.

I will talk about broken promises and about difficult topics. The primary one affecting my residents right now across Bromsgrove and the villages, as well as people across Worcestershire, is the Government’s collusion with Reform to hike council tax by a staggering 9%. That will be the highest council tax increase that Worcestershire county council has imposed on its residents. It will likely be the highest increase in council tax across the country this year, and it is reprehensible, because prior to the general election in 2024, the Labour party stood clearly on a manifesto that said it would freeze council tax. Labour Members know as well as I do that they have no will to deliver that.

[Mr Brash]

Will the hon. Member give way?

[Bradley Thomas]

I will not give way, because the Secretary of State would not give way to me. I will not give way and be lectured to by Labour MPs who are not upholding their promises.

The Government stood on a manifesto to freeze council tax, knowing full well that they would not be able to deliver that. Worse still, last May, prior to the local elections, the Reform party stuffed leaflets through the doors of residents across Worcestershire and across the country pledging that it would cut council tax. Reform spoke about this DOGE—Department of Government Efficiency—programme for local government. It is interesting that not a single Reform Member of Parliament is here in the Chamber today to defend their record.

Where is this DOGE programme? Why has it revealed nothing? Reform thought that it could turn the sofa upside down, give it a good shake and £100 million would fall out. Well, that did not happen. Instead, I can tell the House what has happened in Worcestershire. Since last May, the overspend by the Reform administration has been £100 million. As a result, it has come cap in hand to the Government for emergency funding and for a council tax rise way in excess of inflation and of the 5% threshold for a referendum.

[Mark Garnier]

My hon. Friend and neighbour is raising incredibly important points about how our constituents were promised that their council tax would be cut and have been royally let down by Reform councillors. Can I embarrass my hon. Friend? It is worth remembering that many Conservative district councils do well. My hon. Friend led Wychavon district council within the last 14 years, and for five years it was deemed the most financially resilient district council in the country, and at the same time it did not increase council tax by a single penny. That is what Conservative councils deliver.

[Bradley Thomas]

I thank my hon. Friend and neighbour; he is far too generous. I was leader of Wychavon district council in south Worcestershire for five years, and we proudly froze council tax for five years consistently without cutting a single service. Local government is lean. It can be run efficiently and effectively without duping the taxpayer.

But let us return to that dupe. The Reform administration on Worcestershire county council went cap in hand to the Government, and the Government have granted it emergency funding. They have agreed and, in effect, colluded with Reform. Two parties have agreed to put up council tax for residents when both had promised that they would not do so, and Worcestershire residents are paying the price. My message to the Minister is very clear: if we want to maintain trust and integrity in politics at all levels, it is important for such promises to be stuck to and abided by, or else not to be made in the first place.

Most importantly of all, in the last 48 hours more than 1,100 Worcestershire residents have signed a petition opposing this increase. It is crucial that the issue goes to a referendum, and that the people of Worcestershire have their say.

17:05

[Mr Jonathan Brash (Hartlepool) (Lab)]

May I start with the hon. Member for Bromsgrove (Bradley Thomas), who did not give way when I asked him to? I will happily give way in a moment should he wish to correct the record, but he said that the 2024 Labour manifesto on which we stood promised to freeze council tax. No such promise exists in that manifesto, and I invite him now to correct the record.

[Bradley Thomas]

Residents across the country knew ahead of the general election that the Prime Minister had made various very public pledges that the Labour party would freeze council tax should it come to office. If there is a mistake on my part and those words were not in the manifesto, I apologise for that, but—here I return to my point about trust in politics—if we want residents across the country to have faith in the political system, it is important for politicians to stand by their promises, whether they are written in a manifesto or uttered on television.

[Mr Brash]

I would say that if we want there to be trust in politics, we need to be accurate in what we say in this place, but I appreciate the hon. Gentleman’s correcting the record.

The Minister understands exactly what I am going to say. I know how sympathetic and supportive she is in this respect, and I hope that in the coming days we will be able to deal with the issue that I am going to raise. I thank her for her support in recent weeks.

I want to be clear about what Hartlepool is facing, and about why I cannot regard the current settlement to be fair and also believe it to be self-defeating. Hartlepool now has the third highest number of children in care in England. That pressure has been made worse by other local authorities placing families in my town, leaving us with a £6 million overspend in children’s social care alone. My brilliant Labour council has already taken decisive action, halving that projected deficit in-year and establishing a robust, credible plan to eliminate it entirely. That plan is exactly what the Government say they want to see: it means fewer children coming into care, more early intervention, stronger families and better outcomes. It includes strengthened early help and family support, a dedicated edge-of-care team, a refreshed in-house foster care model, safe reunification pathways, wholesale SEND reform, enhanced support for care leavers, and better workforce planning. This is a serious, preventive change, not a sticking plaster solution.

But here is the problem: these reforms require short-term stability to succeed. The settlement does not recognise the sheer number of children in care in my constituency. It undermines prevention, which means that we are likely to see more children in care, more long-term costs, and worse outcomes. That is why I see this settlement as self-defeating. Ministers will rightly point to percentage increases in funding, but those percentages mean far less in Hartlepool than they do almost anywhere else, because our baseline is already so low. The cost of a child in care is exactly the same in Hartlepool as it is anywhere else.

When we look at it in cash terms, the reality is stark. The increase in the Government grant for Hartlepool this year is just £3 million, which is equivalent to funding around six children in care. After weeks of discussions and representations, the final settlement for Hartlepool has remained unchanged, yet down the road—this sticks in the craw for me—Reform-led Durham county council has received an additional £3.7 million this year, which means that it is reducing the amount by which it is increasing council tax. The increase in Durham’s final settlement is more than our entire increase this year. I cannot describe that as fair funding.

As we have heard from many Members from across the House, the unfairness is compounded by a broken council tax system. Hartlepool has one of the weakest tax bases in the country, with a high proportion of homes in band A. A 1% increase in council tax in Hartlepool raises a fraction of what it raises in wealthier areas, yet our residents already pay far more, both in real terms and as a share of their income, than those living almost anywhere else in the country. The settlement simply does not change that reality.

Governments of all stripes talk about core spending power, but half of that core spending power is achieved by raising council tax. That hammers the poorest communities the most, and it is a regressive tax. That is not fairness; it is entrenched inequality. To make matters worse, changes to deprivation measures and population assumptions mean that Hartlepool’s needs are being systematically underestimated. Official forecasts put our population at under 94,000, yet the Office for National Statistics data shows that it is already closer to 100,000—growth that is driven in large part by other councils discharging their homelessness duties into my constituency. Hartlepool is not asking for special treatment; we are asking for support to deal with a problem that is not of our making.

[Mr Snowden]

The hon. Member is touching on an important issue that affects a lot of councils across the north of England, including Blackpool, which neighbours my constituency. Larger metropolitan areas are effectively exporting their children-in-care problems to much cheaper areas, such as Blackpool and Hartlepool, which the hon. Member represents. Some kind of restriction on how far councils can move children who are being put into care might stop the dumping of children in care in areas where housing is cheaper.

[Mr Brash]

I thank the hon. Member for his comments, and I endorse them wholeheartedly. I have heard stories of London boroughs and Birmingham city council putting families in taxis with the threat, “Get in the taxi, or you’re homeless.” They do not know where they will get out at the other end, and they discover that they are in Hartlepool only when they arrive. It is left for our council to deal with the pressure and the additional SEND needs, and for our council to deal with the children, who sometimes end up in care. It is a disgraceful practice that should rightly be cracked down on. I know that the Minister is alive to this problem, and it needs to be dealt with.

[The Minister for Local Government and Homelessness (Alison McGovern)]

I thank both my hon. Friend and the hon. Member for Fylde (Mr Snowden) for their comments. My hon. Friend is rightly talking about the financial consequences. Does he think—as I do, and as I am sure the hon. Member for Fylde does—that the abysmal outcomes for children are what we should care about? I am sure he agrees with me that this issue ought to be a priority.

[Mr Brash]

I absolutely agree. Just this week, there have been stories in my local press about a family with children who have been moved to a place where they have no connections, no familial links and no understanding of the local community. The Minister is absolutely right: those children are suffering as a result of the behaviour of councils.

[Natasha Irons]

I want to add my voice on this point. In Croydon, we find ourselves in a similar situation, in that inner London boroughs put their children into our part of London because the housing is slightly cheaper. I also have constituents who have faced exactly the situation that my hon. Friend outlined: being threatened with homelessness, with the council discharging its duty, if they do not take a placement in Birmingham. In some cases, that means people losing their job, their children losing places at school, and losing all connections with their family. There needs to be a holistic look at how we support councils to keep families locally, but also at how we prevent councils having to pick up the tab for these terrible situations.

[Mr Brash]

I absolutely endorse all that; part of that work needs to be taking a very close look at the funding settlement. We need to look at whether councils that may have done very well out of the settlement are still moving people out of their areas, even when they have extra finances from this Government.

[Mr Snowden]

I thank the hon. Member for giving way, as he gives me a chance to respond to the Minister as well as to himself. As a former police and crime commissioner for Lancashire, I saw at first hand the impact on communities of cities miles away in effect dumping children into high crime, high deprivation areas simply because the housing is cheaper. Dealing with the damage that has on children’s life chances—let alone the impact on communities already struggling with regeneration by adding to the problems—is paramount. I would be more than happy to meet the Minister and the hon. Member to discuss how we take forward this issue not only on the Fylde coast, but across the north.

[Mr Brash]

I will take up the hon. Member on that invitation. He mentioned Blackpool, and I know that the Members who represent Blackpool and Stoke—in the top three areas for the number of children in care—would also be very interested in his offer.

Without support to deal with the gap in our in-year funding for children’s social care, the risks are clear: prevention will fail, costs will rise, and vital community services such as youth provision, libraries and community hubs will be under threat. I fully support my Labour council colleagues, who have been clear that they are not prepared to make those cuts, which would be so self-defeating in the round.

This is a moment of profound seriousness for my constituency. Hartlepool has a plan for children’s social care that is aligned with the Government’s agenda, but we now need a settlement that gives us a fair chance to deliver it. I have spoken today with our council leader and colleagues in Hartlepool, and they are distraught, despondent and profoundly worried about what the future holds—in just a matter of days, when the budget is due to be set in Hartlepool—so I appeal to the Minister for any piece of support she can give me.

17:17

[Clive Jones (Wokingham) (LD)]

The settlement is unfair, and it is a disaster for my constituents. Wokingham borough council is already the lowest funded unitary authority per capita in the country, as it was under the Conservative Government for more than 10 years. As a result of this so-called fair funding review, the Labour Government are cutting a further £43 million from Wokingham borough council’s budget.

Wokingham is a Liberal Democrat-run council, and it has done its best over the last four years to balance the books while coping with massively growing adult social care costs. When I was leader of the council, I tried to improve the settlement, and my successor has continued to do so. These cuts will drive councils that are already struggling with rising costs for social care and children’s services to possible breaking point.

For 2025-26, Wokingham borough council allocated 39% of its budget to adult social care and 25% on children’s services. So much of the council’s budget is allocated to vital statutory services provided to residents, whether that is supporting SEND education, home-to-school transport or social care for vulnerable adults. The Government’s cuts to funding will have significant implications for these services—implications that need to be to be grappled with and planned for by councils. The settlement, though, provides little information for local authorities such as Wokingham on how to manage SEND costs until 2028, or on how existing deficits, which increase every day, will be resolved. I urge the Government to provide a clear timeline for when councils will receive certainty on the SEND deficit. Without a clear timetable, responsible financial planning is not possible.

We cannot just consider short and medium-term solutions. I have spoken to many local care providers, and I have seen through casework that there is a real problem with spiralling provision costs and availability. The Government must bring forward a fully funded long-term plan for adult social care reform, ensuring that local authority funding settlements are not determined by the escalating costs of a social care system that is bankrupting councils and placing unsustainable pressure on the NHS. Action needs to be taken now, after years of Conservative neglect.

From 2016, David Cameron and the five subsequent Prime Ministers promised reform to adult social care, and yet they achieved nothing. Ultimately, the Government need to re-think their fair funding review 2.0 if they want to avoid starving councils like Wokingham of much-needed cash to run their vital services.

17:20

[Anneliese Midgley (Knowsley) (Lab)]

After 14 years of the Tories and coalition Governments, councils like mine in Knowsley were cut to the bone. When I was elected, my constituency was the third most deprived constituency in the country—we did not just experience pressure; we were absolutely stretched to breaking point—and deep and sustained cuts went hand in hand with a huge and rising demand for services. That is the legacy the previous Government left behind: unfair, fragmented and underfunded, and stacked against places like mine.

I welcome that the Labour Government are taking a fundamentally different approach, and one that sees local councils as part of the solution to rebuilding Britain, not part of the problem. It marks an important change, far from the days of the former Prime Minister, the right hon. Member for Richmond and Northallerton (Rishi Sunak), boasting at a summer garden party in Tunbridge Wells about changing funding formulas to divert public money away from deprived urban areas like Knowsley; those days are over. Instead, areas like mine—those hardest hit by historic funding cuts—will see greater investment, based on need and deprivation.

I thank the Secretary of State and the Minister of State for listening to me, to my colleagues in this place—including my hon. Friend the Member for St Helens South and Whiston (Ms Rimmer), who is in her place next to me—and to all those across the Liverpool city region, as well as to my council’s representations on the provisional settlement consultation, which would not have met the challenges we face in Knowsley. It was absolutely right that they engaged with us constructively and worked to address issues that would have left Knowsley struggling.

In Knowsley, after being battered by the Tory and coalition Governments and austerity for so many years, the pressures we face remain very real. People really need to feel better off in their everyday lives, with improved public services, children’s services and adult social care. They really need to feel the benefit of a Labour Government to truly demonstrate that austerity is over. We need to more, and I echo the words of so many of my Labour colleagues about the regressive nature of council tax.

Labour Governments invest in and improve lives in communities like mine: youth provision that gives young people safe places to go; positive role models and real opportunities; better support for the children who need it; help for families who have too often been left fighting the system alone; community spaces and parks, so we can feel pride in place and in where we live; and living high streets, libraries, leisure centres and more. I know the Government are committed to doing that for Knowsley and I know that progress takes time, so today I celebrate, but tomorrow—it will be no surprise to the Minister to hear this—I will fight again for better still.

I want to pay heartfelt tribute to Knowsley’s council leader, Councillor Graham Morgan, who was first out of the traps on what we needed. He has been relentless throughout the consultation, making the case for not just my borough but the whole of the Liverpool city region, standing firm to ensure that the settlement is fairer. His persistence and counsel, along with that of colleagues across Knowsley, gave me the arguments and evidence I needed to stand up for our community in this place. It was true teamwork in action—the benefits of Labour MPs and a Labour council working together. I also want to put on the record the work of our metro mayor, Steve Rotheram. He, too, fought for a fairer settlement for our city region with passion, clarity and determination.

This is the start of the road to a brighter future for Knowsley. Today marks a clear turning point from austerity, instability, cuts and neglect under the Conservatives to investment, fairness, partnership and certainty under Labour. I welcome the change of direction, but I will continue to fight for more and for better every single day for my constituents.

17:26

[Graham Stuart (Beverley and Holderness) (Con)]

It is a pleasure to take part in this debate, which has had a number of distinguished contributions, not least from the hon. Member for Knowsley (Anneliese Midgley). As she rightly said, at a time when the cost of living is biting so much on so many, people really need to feel better off.

The hon. Lady also highlighted the regressive nature of council tax, which is why it is so regrettable that this settlement is built on the basis of putting up council tax on everyone. It is exactly what the previous Labour Government did, too; they doubled the level of council tax over their 13 years in office. In contrast, over the 14 years of the Conservative Government, council tax grew only a little more than inflation, as it was held down for many years, although it did go up and down over time. That is the history: Labour puts up council tax. Its spokespeople speak about how terrible and regressive it is, and then in government it visits that on people in constituencies across the country.

The Government have used the expected 4.99% annual rise in council tax in all their figures to claim that there will be increased spending power. That is based on sticking up tax by 5%, and then another 5%, and then another 5%—it is compounding.

[Mr Brash]

Will the right hon. Gentleman give way?

[Graham Stuart]

I will come to the hon. Gentleman in a while.

The impact for those in the cheapest or lowest-value homes in the East Riding—very often people in rural areas, with poorly insulated homes, costly transport and low income—will, by year three, be £200 a year out of already taxed income. That is the reality of what this Labour Government are visiting on poor people in my constituency and other constituencies around the country, while they crow about it being fair. There is nothing fair about it.

The local government finance settlement will mean only one thing for families in Beverley and Holderness: higher council tax bills, at a time when every other bill is soaring—thanks, again, to this Government. The Secretary of State for Energy Security and Net Zero is signing up for the most expensive deals imaginable and putting up the price of energy, while the jobs tax—one of the most economically irrational taxes imaginable—taxes jobs and brings in no money, because employers simply employ fewer people. That is what that £26 billion hit on the economy comes down to.

[Mr Brash]

Will the right hon. Gentleman give way?

[Graham Stuart]

I will come to the hon. Gentleman, but I will make a little more progress first.

I know the reality from talking to my constituents. Jenny in Cherry Burton says that she cannot really afford to shop for healthy food as half her money is gone before she even gets home, forcing her to make choices that no family should have to make simply to get through the week. Andrew in Beverley faces rising energy bills, which I have touched on, and rising food prices, all while supporting his two children, who are at university and cannot find part-time work; previously, they would have done, but now they cannot find part-time work because those jobs have tended to disappear. There are fewer and fewer opportunities for young people to get on the jobs ladder and, for those at university, to supplement their income while they pile on student debt, which will only go up even more as time goes on.

These are not abstract pressures but lived realities, and this settlement will pour on yet more misery. The Prime Minister says that every minute not spent talking about the cost of living is a minute wasted, but warm words do not warm homes.

[Mr Brash]

The right hon. Member made a point about core spending power. I share his irritation at the use of core spending power, because such a large percentage of it is in council tax, but it was introduced in 2016 by the last Conservative Administration. The concept of core spending power including council tax was introduced by the Conservatives. What did he say about it at the time?

[Graham Stuart]

I do not remember the specifics of that, but I can say that, whereas the last Labour Government doubled council tax despite it being regressive, that did not happen under the Conservatives, whatever introductions there were. Those taxes were held down, because that is what conservatives do. They recognise that it is better to leave money in the pockets of people to make their own decisions, not take it away from them.

Families across the East Riding are now asking a very simple question, because they know that promises do not pay bills. How will this local government finance settlement, and the £200 council tax bombshell that follows it, help them cope? Let us be clear about what is happening: the Chancellor underfunds, councils are squeezed, council tax rises, and families pay. Council tax is, as many Labour Members have said, regressive. The lower the income, the heavier the burden. The smaller the home, the sharper the hit. At the very moment that household budgets are tightest, this Government tighten them further.

Nowhere is that clearer than in social care. In the first Budget since Labour came into office, the Chancellor allocated over £20 billion to health. Why did they not recognise that so many of the problems in the NHS actually come from the failure of funding in social care? It could so easily within the same spending envelope have eased the pressure on the NHS by better funding social care so that to keep those who are ready to leave hospital from occupying the beds that they do—they have for the past few years, and they do today.

The Government did not put sufficient additional money into social care, and in Beverley and Holderness, with an ageing population and rising adult care needs, that imbalance matters. Instead of funding care properly at source, Ministers shift the cost on to council tax payers—and then they claim that they have fixed it.

I saw the real-world cost of squeezed council budgets when I visited Sunk Island last month. On Sunk Island Road and Brick Road, residents endure patch upon patch of repairs that are never truly repaired. They are paying more yet still waiting for lasting fixes. This is the pattern: more tax, less certainty, higher bills, patchwork results.

Government should strengthen communities, not squeeze them, so I ask the Minister: when families are stretched to breaking point, why is this Government’s answer yet another bills hike? In Beverley and Holderness, the only change that this Government appear to deliver is the small change left in people’s pockets after the Chancellor has emptied them.

[Ms Rimmer]

What can councillors do to fund the statutory duties? People were given much better in the past, but we have to ration the services. They are quality services, and the integrated health has helped us with our social care. I do not want to go into party things, but the fact is that, under the Conservatives, St Helens lost £127 million a year from the support grant. We were left with something like £9 million or £11 million from the Government—that is all it was.

The only way councils can get the funds to provide services is from the Government and income to the councils. Where should we get the funds from? We have no assets to sell, and we get very little. Yes, we have low-paid jobs, so it is a hike, but what we should be doing is taking it from the broadest shoulders; they should be bearing the burden. It is inappropriate and incompatible that the people on the lowest pay the biggest proportion of their incomes on the necessities of life, while others have mansions—some people have a cottage and nothing else. We do not all have a mansion in London, so we need to look at wealth.

[Graham Stuart]

I thank the hon. Lady, who always speaks passionately and with deep knowledge of her community. As she says, she does not make unnecessary party political points.

The one thing that unites the House, including the Government Front Bench, is a recognition that the funding system is broken. I spent many years campaigning, across different funding pots, on the distribution. Everyone looks at the quantum, but they do not look at the distribution. It is easy to get into a world of complexity, and the number of people who turn up for meetings on distribution gets very small, but it is actually critical. We need a new funding settlement, and how we deliver that, given the political realities, is to go in early and hard. Unfortunately, this Government have not done that. They are delaying and delaying, and as their political potency weakens, it becomes harder and harder to deliver. It is a bit like the police reorganisation we touched on earlier today. It is unlikely to happen in the dribs and drabs of a Government who are struggling.

We need a long-term settlement that is based on need. There is no perfect assessment of that, but what we have is complexity, as we heard in the brilliant speech from the hon. Member for North Norfolk (Steff Aquarone) on the Lib Dem Benches earlier. The system has elements about how many pubs there are and what some level of cost was in 1991 and all sorts of other things. The truth is that, in this most fundamental set of services—my hon. Friend the Member for Ruislip, Northwood and Pinner (David Simmonds) rightly identified 800 of them—for the constituents in the deprived areas of the hon. Member for St Helens South and Whiston (Ms Rimmer) and in mine, nobody can see the transparency. Perhaps we should look on the Back Benches initially for a cross-party view on building a fairer funding system.

There is one more thing, and I do not know why no one has talked about it very much in my 21 years in this place. The fact that a £200,000 house in Beverley pays a lot more council tax than a £2 million flat in central London is absurd, and very rarely does anybody mention it. We need to fix things, but if we cannot fix something as absolutely inexcusable as that—and, collectively, we have not—it is no wonder the public are looking at us so askance.

I would be happy to talk to the hon. Members for St Helens South and Whiston and for Hartlepool (Mr Brash) and others to see where we can make some common ground on having a more rational system, because at the end of all this, the complexity and lack of transparency end up in social failure. As the hon. Lady rightly and passionately says, it is those who are the most vulnerable and the least able who pay the highest price, and whether that is in her part of the world or in mine, that is not acceptable. We have all come here to make it a better place, and one of the things we need to fix is this.

17:37

[Terry Jermy (South West Norfolk) (Lab)]

I was first elected back in 2008, when I stood in a by-election for my local town council. I was 22. It was by chance, really, that the opportunity came up to put myself forward to stand to represent my local community. As it happened, I beat the headteacher of the local high school in that by-election. Up until recently, it was my favourite election win. I went on to stand for the district council a few years later, and a few years after that, I stood for Norfolk county council.

I ended up spending more than 12 years in all three tiers of local government in Norfolk, and what I found was a world of local government officers and local councillors working incredibly hard to serve their local communities and trying to save money and almost work the impossible by constantly striving for efficiencies by doing whatever they possibly could. Good councils and good councillors are a real force for good. They can achieve so many wonderful things, but they are overshadowed in many ways by national Government. I want to put on the record my thanks to local government. We saw this during covid, because it was local government, particularly, that really rose to that challenge to serve.

I was elected, as I say, in 2008, and for the vast majority of my time as a local councillor, we saw cut after cut after cut. Every single February budget-setting council meeting was a constant battle to try to save money. Both councils—Breckland district council and Norfolk county council—were Conservative-led under a Conservative Government, and we were cutting services constantly. We ended up with massively weakened resilience, and the services that bound our communities together were eroded. These were not just numbers on a balance sheet. In Norfolk, it meant we were closing children’s centres, removing support for disabled people, closing the youth service in Norfolk entirely, and selling off assets. It was just this constant battle. I understand the predicament the Government are in and have a significant amount of sympathy because it will take years to undo those constant cuts and the eroding of that resilience; it will not be easy to turn that around.

I want to make three points to the Minister. The first is about rural services. I am proud to represent South West Norfolk, a very rural constituency. I cover half of two districts: Breckland, and King’s Lynn and West Norfolk. They are very rural councils, and it is expensive to provide services to a rural community. I am pleased that social care in particular is being acknowledged as expensive. Social care is particularly expensive across the whole county of Norfolk, but other district council services in rural areas are expensive too, specifically planning. We are a Government that want growth. We want growth all across the country, including in rural areas. We massively need to support planning services in rural areas to achieve growth potential and not have lingering planning applications sat waiting on determination. It is difficult to recruit planning officers for rural district councils, and that is a barrier to growth in rural areas.

The other area is housing. I have been constantly shocked and concerned about the state of housing in my constituency. There are huge issues with rural housing, such as damp, mould and draughts—all sorts of challenges that we are dealing with in my office. Housing challenges in rural areas are expensive, and we as a council often have to transport people from one end of the county to the other or out of the county because there is a lack of suitable temporary and emergency accommodation.

The second point I want to make is around hidden deprivation. The council ward I represented was, despite being in a rural area, within the top 10% most deprived in the country. We had very low wages, poor health and low skills and educational attainment. I am concerned that intense deprivation in rural areas is masked by more affluent surroundings in so many Government metrics. I hope the Government come up with a system that properly accounts for and recognises intense deprivation in rural areas and does not just look at the overall council boundary.

The last point I want to make, which was touched on by the hon. Member for North West Norfolk (James Wild), is about internal drainage boards. I appreciate that it is slightly niche because this is relevant only in a certain number of constituencies in the country—certainly in Norfolk, Cambridgeshire and Lincolnshire. These critical pieces of infrastructure remove water from significant amounts of land, both residential and agricultural. If we did not have IDBs, so much of our land, particularly agricultural land, would just not be usable, and it would weaken this country’s food security.

I have dozens of IDBs in South West Norfolk, and I have spent a lot of time visiting them. They do incredible work, but the finances of councils that have internal drainage boards in their areas are experiencing great impacts. In King’s Lynn and West Norfolk borough council, for every pound of council tax paid, 43p goes on IDB levies. In the 2025-26 financial year, the council is spending £3.7 million just on levies. Many councils obviously do not have that expense—they are unique pressures for those areas—but the costs of IDBs have gone up a lot because the electricity cost of manning the pumps is also going up.

My constituency has the largest pumping station in Europe at Wiggenhall St Germans, and there is a network across the area. That give me the opportunity to mention a pumping station in Welney that I visited a couple of weeks ago, where I met Ken Goodyer, Patrick Clabon and Carl Nunn.

My real concern about IDBs is that the infrastructure is 50 or 60 years old, costs a fortune to maintain, and will fail at some point. We need to invest in IDB capital and revenue costs. I urge the Government to continue support for councils affected by IDBs, because it is crucial infrastructure.

17:44

[John Milne (Horsham) (LD)]

We have heard a lot about the coalition years and austerity, to the extent that I began to wonder whether I had misread the title of the debate. Whatever the rights and wrongs of austerity, it was the conventional wisdom at the time. Had we been in coalition with Labour, I think the same thing would have happened, perhaps under another branding. At the time, I was living and working in the Republic of Ireland, which carried out a much more severe austerity, and its economy bounced back very well. Whether that was because of or despite austerity is an argument for the economists.

I thank the hon. Member for St Helens South and Whiston (Ms Rimmer) for her comments about not wanting this to be a zero-sum game, taking away from some at the expense of others. I very much agree with her and other Members who said that deprived areas and inner urban areas had been unfairly treated over a very long time. I wholly agree that something needed to happen, but not at the expense of rural areas such as the one I represent.

I applaud the Government for taking action on this issue—it had been kicked down the road for many years—including by writing off 90% of SEND deficits. That must have been a difficult decision, but it had to be done; those deficits could never have been paid for by local authorities. The Government are committed to centralising SEND spending for 2028-29, but we are not sure how far that commitment will truly go. Will it cover only the high-needs block deficits, or will it reflect other costs around SEND provision, such as home-to-school transport? In counties like West Sussex, where my constituency is, SEND transport costs have risen dramatically over recent years. Those pressures do not sit neatly in one budget line; they rip across children’s services and transport budgets.

We are still awaiting clarity on what will happen with education, health and care plans. Michelle Catterson, the head of Moon Hall school, has spoken clearly about how vital EHCPs are to families. Sustainability cannot be achieved by weakening the legal right to EHCPs, or by diluting councils’ duties to fund them. I am concerned that that is about to happen. When Ministers are asked directly about what will happen to EHCP protections, the answers are far from clear. Parents must have certainty. EHCPs must not become a back-door route to cost-cutting.

I also have serious concerns about the evidential basis for elements of the settlement. My local council, Horsham district council, was initially projected to operate with a healthy surplus, but the Institute for Fiscal Studies has now flagged miscalculations in the business rate valuations, and the council’s position has been inverted into a deficit. Many councils operating with business rate pools, as Horsham district council does, have found that funding formulas did not properly account for those arrangements until very late in the process. As the District Councils’ Network has warned, changing allocations between the provisional and final settlements because of revised policy assumptions is deeply destabilising. Councils are entitled to ask on what evidential basis those formulas are constructed.

Departmental research from 2018 suggests that population is often a more accurate predictor of need than deprivation alone, yet the settlement has put all the weighting into deprivation. Why? Can we see the justifications and rationales? Deprivation exists across the country, including in rural communities, such as mine. It may be in pockets, but it is still there, and it is felt just as deeply. We know that geography is a major cost driver for councils. Rural councils face longer travel times for care workers, higher transport costs for schools, dispersed populations, thinner provider markets and recruitment challenges, yet metropolitan councils are projected to receive significantly higher per-head funding increases. In some comparisons, Government-funded spending power rises by around 20% in metropolitan areas, but just 2% in rural areas. In county areas like West Sussex, when it comes to the funding increases, approximately 98p in every pound will have to be raised locally, as opposed to just 58p for metropolitan areas, which is a terrific difference. That imbalance raises legitimate questions about fairness between places.

That brings me to what may be the most fundamental inconsistency. The Government recognise remoteness as a cost factor in adult social care, so why is remoteness not consistently recognised in children’s services, school transport and wider service delivery? How can distance and sparsity increase costs for adults, but apparently not for children? If geography drives costs—in rural counties, it definitely does—then that must be reflected consistently across all funding formulas.

Finally, the reintroduction of the recovery grant is welcome in principle, but why is its allocation still based on deprivation indicators from 2019, when more recent data exists and has been used elsewhere across Government? When millions of pounds are being distributed, councils deserve clarity that allocations reflect current realities, particularly given the economic shifts of recent years. Without that transparency, we have mistrust. Councils stand ready to work with Government, but in return they must have fairness, clarity and clear evidence.

17:49

[Richard Foord (Honiton and Sidmouth) (LD)]

The final settlement for local government finance does not bring good news for Devon. Research by the Rural Services Network has shown that urban councils will have significantly more Government-funded spending power per head than rural councils.

By 2028-29, urban councils will have seen a 20% increase in Government-funded spending power, compared with an increase of just 2% for rural councils, yet on average, wages in the rural economy are lower than the national average wage. The settlement will place a significantly greater expectation on council tax payers in rural areas to cough up. Let us consider what effects that might have on residents of mid and east Devon by noting what things are already like for people living in one village in east Devon.

Dalwood is a village with a population of about 460. It is half a mile from the main road—an A road—and one of the two access routes to the village has been under water since November. I heard from one resident that the state of the road is so poor that she was charged £1,000 for car repairs as a result of negotiating the pitted, crumbling access road. She makes the point that east Devon residents pay some of the highest rates of council tax in the country. In a league of the highest rates in the country for a band D property, east Devon is rated 305 out of 350, where residents in the 350th local authority are paying the most.

The Government announced last month that they will be making available £7.3 billion for road maintenance over the next four years. When people in Devon hear numbers like that, they wonder whether officials and contractors are going to the cash machine, drawing out the money, mixing it with paste, using it to make papier-mâché and filling the potholes that way. The reality is that the money is not finding its way to Devon.

Devon has the largest road network in the country, at 13,000 km. Last March, the repair backlog for the roads in Devon alone would have required an extra £384 million. The reality is that Devon was able to spend little more than £60 million on road maintenance last year. To take another example, one resident of Sidmouth wrote to me recently to say:

“I for one have paid out for damages to my vehicles in five and a half years the sum of £5,100.”

They continued:

“Here we are living in the UK, an advanced country, with the lanes, A roads and B roads in an appalling state of repair”.

That is the context of the local government settlement as it relates to Devon.

The local government settlement has removed the remoteness uplift from the area cost adjustment. The settlement does this in all the relative needs formulas, with the one exception of adult social care. I am glad that the Government have acknowledged that adult social care costs more when it is delivered in a rural area, but they have shown themselves to be blind to the needs of rural communities by removing the remoteness uplift from other areas of local government, including road maintenance.

Councils in rural areas do not enjoy the same economies of scale as urban areas. The countryside requires more bases from which services can be delivered. It has fewer contractors and less competition. I urge the Government to think again about the remoteness uplift.

[Madam Deputy Speaker (Judith Cummins)]

I call the shadow Minister.

17:54

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

The Prime Minister said that there would be no tax rises on working people. I imagine that the working people who are about to receive a £500-a-year increase in their council tax, the working people in Westminster expecting an 82% rise in their council tax, and those in Wandsworth expecting an 87% rise in their council tax as a result of this settlement will wonder if “working people” was a phrase that applied to them. Those in our business community who heard the Prime Minister say to them that a Labour Government would introduce “permanently lower business rates” will wonder where the massive rise in their business rates bill has come from.

There are things in the reports before us that give us the opportunity to make tweaks and changes, and make progress. I am grateful to the Minister for the interest that she has shown, for example, in the way that the local growth fund—the method of distribution of which is having a huge impact, particularly on colleagues in Northern Ireland—offers scope for some adjustment. However, it is very clear that the recovery grant that the Secretary of State spoke about still bears little or no relation to the pressures arising from the statutory duties on local authorities. As we have heard from Member from across the House, it leaves councils tens of millions of pounds short of the money that they need to do the minimum required of them by this Government, and that is before addressing some of the broader, more general issues.

We have two motions before us. One of them is on the report on local government finance, and the other is on the report on the referendum limit. I am sure that we have all noted the complete absence of any Reform Members in the Chamber. I pay tribute to the champions of Worcestershire, my hon. Friends the Members for Bromsgrove (Bradley Thomas) and for Wyre Forest (Mark Garnier), who spoke up for residents against an authority that, having been part of a party that promised no rises in council tax and cuts in office, is now looking to top the league table with the largest council tax rises in the country this year. It should be ashamed of its misinformation to residents during election campaigns.

Let me mention some of the things that I hope the Minister will address in her summing up. The first is what the measures in the report do to support housing delivery. We know from the recent report by Savills that 23 of London’s 33 boroughs report that the net figure for new homes being commenced this quarter is zero. Lambeth council has been very public about that, and has reported net zero new social homes. The Secretary of State and the Chair of the Housing, Communities and Local Government Committee, the hon. Member for Vauxhall and Camberwell Green (Florence Eshalomi), are particularly familiar with that. It is clear that housing delivery is collapsing at a time when lofty ambitions are being set, and at a time when the grants for homelessness are cash-flat, as are care costs, and costs relating to vulnerable children and care leavers.

It is clear that for all the bluster, the smoke is clearing, and the mirror is not particularly shiny. The impact of the relentless rises in national insurance contributions and business rates, as well as an additional £750 million of costs to local authorities from changes to the emissions trading scheme, will put huge pressure on the ability of local authorities to deliver.

It having been said that the Secretary of State wanted to move away from a bidding process, we now hear that the funding that has been announced, without any detail, for special educational needs deficits will be the subject of a bidding process to the Department for Education, and there will be a requirement for a reform plan. It will be interesting to hear how that plan differs from the safety valve agreements that many authorities already have in place, which are reducing SEND deficits year on year.

What is clear in this settlement is that the Government are not meeting even their own standards on local government. Local democracy is paying the price, with elections cancelled and taxes relentlessly rising. This statement must be seen for what it is: it is a council tax bombshell; it is a business rates bombshell; it is part of a picture of a Labour Government who simply cannot manage the money.

18:00

[The Minister for Local Government and Homelessness (Alison McGovern)]

It is my pleasure to close this debate, despite the fact that I must apologise to the House. Many Members will know that I suffer from chronic migraine, and I have been having an attack over the past couple of days, so my contribution might not be as long as it might otherwise have been. In show business and in politics, the show must go on, albeit my speech might be slightly shorter than it would have otherwise been, but I think that will be a cause of joy for many Members—[Interruption.] Calm down.

The Secretary of State and I know what a difference the hard work of councillors, frontline staff and all our mayors makes, and we pay tribute to them for everything they do for their communities, as many Members across the House have done. But we also know the consequences of the unfairness of the funding system. The last decade and a half of austerity was felt by the most deprived local authorities, because the link between funding and deprivation was broken.

The shadow Minister seemed to imply in his remarks that he thought that the link ought to simply be with statutory duties, rather than any consideration at all being taken of the impact of deprivation. I would just say to him that those communities that suffered most, that were left out for far too long and that have struggled with the consequences of deprivation will wholeheartedly disagree with him. That is why today we are restoring the link with deprivation and ending the irrational inequality of the previous funding system. We are, as many have said, providing the first multi-year settlement in a decade, we are investing in changing our public services, and we are simplifying funding for local government.

[Graham Stuart]

Will the Minister give way?

[Alison McGovern]

The right hon. Gentleman has had ample time to contribute, and while I would normally give way with gusto and have a bit of political knockabout with him, today is not the day for that.

I would like to take this opportunity to thank the right hon. Gentleman and everybody else who has contributed today and also to thank those who contributed to the consultation on the provisional settlement and the Members who made representations to me directly. There could be no quick fixes. We cannot undo over a decade of damage overnight, but the settlement we are discussing today is our most significant move yet to make English local government more sustainable, and I am committed to going further in coming years to fix the pressures our councils are facing. The Secretary of State set out the various mechanisms that we are employing to do that in his opening speech. This Labour Government have backed local governments through action, and since coming to power we have made available a nearly 25% increase in core spending power in ’28-29, worth £16.6 billion.

I shall briefly turn to the points Members made. The hon. Member for Taunton and Wellington (Gideon Amos) relayed the situation with regard to flooding on the Somerset levels. I send my support to his constituents and will work with the Flooding Minister, my hon. Friend the Member for Kingston upon Hull West and Haltemprice (Emma Hardy), as required. The Chair of the Select Committee, my hon. Friend the Member for Vauxhall and Camberwell Green (Florence Eshalomi), and the former Chair, my hon. Friend the Member for Sheffield South East (Mr Betts), told me to be bold and I will try, but I look forward to their support in persuading all our colleagues in this place to vote for whatever bold solutions we come up with. Members including my hon. Friends the Members for Hartlepool (Mr Brash) and for Croydon East (Natasha Irons) and the hon. Member for Fylde (Mr Snowden) talked about failures in children’s care, and I feel sure that we will work together on that.

Many Members talked about their experiences of councils struggling yet often achieving, despite that struggle, to provide great innovative services on lean budgets, and we applaud them all for that.

[James Wild]

Will the Minister give way?

[Alison McGovern]

I am determined not to give way, if that is okay—I think we need to bring this debate to a close. [Interruption.] The hon. Member for North West Norfolk (James Wild) asks me about remoteness from a sedentary position. I have discussed this issue in detail with many Members on a one-to-one basis, and I repeat that there are other ways in which the settlement accounts for the actual costs of providing services, such as the area cost adjustment and other means. I do not agree with what has been said, but I do not want to detain the House any longer.

I had a wonderful January engaging with many Members across this House on the settlement; it was a fascinating opportunity to hear about the uniqueness of every area. I particularly thank my colleagues from Knowsley, St Helens, Gateshead and Banbury for the way in which they engaged on this settlement and contributed to how it looks today.

I thank all Members once again for their valuable contributions today. The Government are under no illusion about the scale of the challenge that local authorities face as they continue to deal with the legacy of the previous system, but our changes will make a big difference. They will get money to where it is needed most, creating a fairer and evidence-based funding system and—most importantly to me and many others—restoring the link between funding and poverty.

Question put.

18:06

Division 427

Question accordingly agreed to.

Ayes: 277

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Labour: 272
Independent: 3
Democratic Unionist Party: 1
Your Party: 1

Noes: 143

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Conservative: 85
Liberal Democrat: 50
Reform UK: 3
Independent: 2

Resolved,

That the Local Government Finance Report (England) 2026–27 (HC 1604), which was laid before this House on 9 February, be approved.

Motion made, and Question put,

That the Referendums Relating to Council Tax Increases (Principles) (England) Report 2026–27 (HC 1605), which was laid before this House on 9 February, be approved.—(Gen Kitchen.)

18:20

Division 428

Question accordingly agreed to.

Ayes: 279

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Labour: 272
Independent: 3
Democratic Unionist Party: 1
Your Party: 1

Noes: 90

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Conservative: 85
Reform UK: 3
Independent: 2