Inner-London Local Authorities: Funding

Helen Hayes Excerpts

Tuesday 10th February 2026 Westminster Hall

[Helen Hayes (Dulwich and West Norwood) (Lab)]

I beg to move,

That this House has considered funding for local authorities in inner London.

It is a pleasure to serve under your chairmanship today, Dr Murrison. My constituency includes part of the London borough of Lambeth and part of the London borough of Southwark. Before I was elected to this House, I spent five years as a local ward councillor in Southwark. I just managed not to overlap with the Minister, who was also a councillor on Southwark council and stepped down in 2010 as I was being elected.

Being a councillor is deeply rewarding, with a responsibility for delivering services in a way that makes a direct difference to people’s daily lives. From recycling to street cleaning, adult services, children’s social care, roads, parks, playgrounds and council housing, our councils are responsible for important aspects of the fabric of everyday life. They affect people’s quality of life and, in doing so, play a vital role in building trust and confidence in politics, the Government and public services.

I am proud that, as a councillor, I helped turn around a local primary school in a deprived area of my ward from being one of the worst in the borough to one of the best. I am proud that we delivered road safety improvements at a number of dangerous junctions in the ward. I am proud of the work that we did through tenants and residents associations and local community organisations to bring people together and build community. I am also proud that, despite more than a decade of Conservative and Lib Dem austerity, Southwark continued to keep the borough clean and open new libraries. It was one of the first councils to fund universal free school meals for primary-age children and it is a borough of sanctuary that supports the refugees and asylum seekers who are part of our diverse community.

I remember very clearly the Labour group meeting in 2010 in which we were briefed on the coalition Government’s local government funding settlement for Southwark. There was a stony silence in the room as the newly elected cabinet member for finance told us how big the cuts were and the services and investment that the council would no longer be able to deliver as a result.

We had no idea how much worse the cuts would get over the coming years such that, a decade on from the 2010 election, our councils were receiving 60% less in grant funding from central Government, and the capital grant for new council homes had been decimated. That marked a huge shift in local authority funding away from the certainty of grant funding and towards retained business rates, the new homes bonus and endless small, short-term pots of funding, often requiring resourcing for a bidding process.

At the same time, our councils saw rising need. Our ageing population has meant an increasing need for adult social care, and the erosion of support for families has resulted in more children being taken into care and the cost of expensive placements increasing. The rising numbers of children with special educational needs and disabilities has increased the costs of school placements and home-to-school transport.

That is all before we get to housing. Inner-London boroughs are at the epicentre of our national housing crisis. Spiralling rents and a lack of security in the private rented sector mean that more and more families have turned to their council for support with housing, while the lack of investment in new social housing and the loss of council homes under the right to buy has meant that they have had to be housed in temporary accommodation, which is very expensive and often the worst-quality accommodation. London councils are currently spending £5 million a day on temporary accommodation—that is £5 million a day into the pockets of some of the worst landlords, and at times paying for damp, mouldy, overcrowded homes, often far from a family’s home, neighbourhood, community and their children’s school.

[Jim Shannon (Strangford) (DUP)]

I always try to be helpful to the hon. Lady and all hon. Members. We have many brownfield sites in my constituency and there are many in London where the hon. Lady refers to there being a housing crisis. Does she feel that there should be a focus on trying to use those sites for social housing and improve the housing problems that London clearly has?

[Helen Hayes]

I am grateful to the hon. Member for his intervention. I will come on to talk about those sites in my constituency that have planning permission but currently are not funded to build the social homes that could be on those sites. I think that is an important part of how we solve these challenges.

The Conservatives’ interventions to reduce social housing rents have also been disastrous for the ability of our councils to fund the maintenance of social housing and to fund new social homes. Southwark council calculated that Conservative-imposed rent cuts and freezes will cost the council’s housing revenue account £1 billion over 30 years. What is a very small saving for tenants has had a really big impact on the ability of councils to keep up with the maintenance needs of their social housing stock.

The Conservatives were happy to cut our councils’ budgets to the core and did not worry about the erosion of services that inevitably followed. Reform imagined that our councils were full of waste and profligacy, only to find that they are lean organisations that have constantly innovated in the face of austerity but that, over time, have become stretched, sometimes to breaking point.

A budget settlement based on a definition of deprivation that did not include housing costs, as was originally proposed, would have had absolutely dire consequences for inner-London councils. The reality is this: if rent eats up so much of someone’s income every month that they cannot afford the bare essentials, or if the only property they can afford to rent is so bad that it causes them and their family to become ill, then they are deprived and they face exactly the same consequences of that deprivation as anyone else anywhere in the country who simply does not have enough money to get by.

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

rose—

--- Later in debate ---

[Dawn Butler (Brent East) (Lab)]

rose—

[Helen Hayes]

I give way to my hon. Friend the Member for Vauxhall and Camberwell Green (Florence Eshalomi), the Chair of the Housing, Communities and Local Government Committee.

[Florence Eshalomi]

I thank my hon. Friend, my constituency neighbour, for making such an impassioned and powerful speech. I declare an interest in that my constituency also covers both Lambeth and Southwark. She is talking about housing costs, which we know are so expensive in London. We have seen housing costs rise over 15 years, pushing more people into homelessness and temporary accommodation. Does she agree that the Government should look at the subsidy paid for temporary accommodation, which has been frozen since 2011? In real terms, rents have continued to go up in our constituencies.

[Helen Hayes]

My hon. Friend is absolutely right. The maths on temporary accommodation costs simply does not add up at the moment. I have more to say on that a bit later in my speech.

[Dawn Butler]

I thank my hon. Friend for her important speech today. Brent council, which covers my constituency, spends £100,000 a day on temporary housing. We have around 40,000 people on the housing waiting list. It is impossible to match that need, but it is also important to understand that councils, as my hon. Friend has said, are trying to innovate. Housing costs in inner London need to be taken into consideration with any calculations.

[Helen Hayes]

My hon. Friend makes the point very well. It is the reality of people’s lives. People come to all of us who represent constituencies at the heart of the housing crisis in the most desperate of circumstances—in circumstances that everybody would agree are completely unacceptable—and there is no relief for them, because the options that are on the table are simply unaffordable, and what is affordable is unacceptable.

I am grateful to the Government for listening and for changing the deprivation criteria to include housing costs. I also completely recognise the very deep poverty and deprivation that affect other parts of the country. I grew up in the north-west and before I was elected to Parliament, I worked with communities all over the country. This should be about not pitting different areas of our country against each other, but resourcing and empowering local authorities right across our country to meet the needs of their communities. Some of those needs are universal, and some are specific.

While I welcome the changes made to the formulae in recent weeks, inner-London councils will still remain in a very difficult financial situation as a consequence of the settlement that was finalised yesterday.

[Luke Taylor (Sutton and Cheam) (LD)]

I welcome the tone of the hon. Member’s comment at the end there. I will use the examples of Lambeth and Southwark. When we pull out the contributions from council tax and look only at the money that is coming from central Government, over the next three years, Lambeth residents will have £75 per capita removed from their support from central Government, and Southwark residents will have £75 per resident removed. Does she agree that that is not good enough from a Labour Government?

--- Later in debate ---

[Helen Hayes]

There are different ways of looking at the analysis and I am sure that the Minister will speak in detail on the way that the Government have apportioned funding based on the formula. The reality of the settlement as finalised yesterday is undoubtedly that our councils are in a very stretching situation indeed, and that could lead to difficult situations ahead. One of the areas where the Government could really help our councils is by looking at the costs that they have to bear as well as the resources that they have to meet those costs. I will come on to make some of those points in a moment.

[Bell Ribeiro-Addy (Clapham and Brixton Hill) (Lab)]

My hon. Friend and constituency neighbour in Lambeth is making an excellent speech. The arbitrary cap, which I believe was initially created in the fair funding review, created the unintended consequence of leaving Lambeth missing out on the funding that it would have otherwise received. That means that Lambeth has lost out on £47.5 million over three years. As she knows, that money is urgently needed to protect our local services. Although, like me, I am sure that she welcomes the uplift to the recovery grant that was announced yesterday, does she agree that it is not enough to meet the needs of our constituents and our local authority with its ever-growing costs?

[Helen Hayes]

My hon. Friend makes the point about the recovery grant very well. I will come on to some practical suggestions for what the Government could do to alleviate that situation in the short term.

Council tax equalisation, such that the grant is now based on each area’s share of the national tax base and not actual local tax levels, penalises low tax base, high-needs areas like Lambeth and Southwark. The business rates reset will wipe out historical strong growth in some inner-London boroughs, and falling numbers of children will also have an impact through the children’s formula, even though need is growing and increasingly complex.

The risk is that our councils are left in an increasingly precarious situation and are forced to make impossibly hard choices about local services in the face of increasing need. Having agreed the final funding settlement—it is welcome that it is for three years, which gives our councils more certainty—there is more for the Government to do to help councils bring down their costs and reduce need, so that service delivery is manageable within the resources that are available.

On behalf of my councils of Lambeth and Southwark, I have a number of asks of the Minister. Our councils desperately need help with the costs of temporary accommodation. The average cost of temporary accommodation in London has risen by 75% over the last five years, and the number of people seeking help with their housing has also increased dramatically, yet the amount that the Government pay councils to subsidise temporary accommodation has been frozen since 2011. Will the Government work towards increasing the subsidy so that it is closer to the actual housing costs that our councils face?

Temporary accommodation is the least stable form of housing and it has terrible consequences for residents. I have known many constituents to get up at 5 am to travel long distances by bus to keep their children in the same school and give them some stability. Those costs could be saved if more residents could afford to rent privately, yet the freezing of the local housing allowance has made that increasingly impossible. Will the Minister work with her counterparts in the Department for Work and Pensions and the Treasury to increase the rate of local housing allowance to stop private renters from needing temporary accommodation? Some of the £5 million that is spent every day by London local authorities on temporary accommodation would be much better deployed keeping residents in stable homes through the local housing allowance than propping up the most awful situations in temporary accommodation.

With the application of the £35 million cap, councils in receipt of the recovery grant currently face a cliff edge. For Lambeth council that will mean, as my hon. Friend the Member for Clapham and Brixton Hill (Bell Ribeiro-Addy) said, a loss of £47.5 million over the next three years. If the cap was removed for just next year, it would give the council an additional £11 million to reduce the savings that it is currently having to plan for. Will the Minister consider that?

Councils have expressed concern to me about the Government’s assumptions about the level of council tax receipts. Will the Minister work with councils to ensure that the assumed level of council tax receipts closely matches actual council tax collections? The social housing crisis requires that new social homes are delivered at pace. In my constituency, we have council and housing association-owned sites with planning permission that are not currently being delivered because the soaring inflation caused by the Liz Truss mini-budget priced them out of viability.

The Government’s commitment to invest £39 billion in social housing is very welcome, but will the Minister ensure some of that funding is urgently made available to London boroughs that have sites that are ready to build? We urgently need that.

The overnight accommodation levy is very good news for London but it must be apportioned to where it is most needed. Will the Government mandate that at least 50% of the funds raised by the levy are retained locally by London boroughs to cover the costs incurred by services affected by tourism and to support local growth?

[Joe Powell (Kensington and Bayswater) (Lab)]

The Government are looking at how the overnight stay levy might be used, and there is some really welcome potential, for example where major events in London happen in one local authority but impact many. I completely agree with my hon. Friend on the 50:50 split. Does she agree that that could help to smooth out some of the longer-term funding issues coming out of the settlement, by providing additional capital that councils could use, for example, on public realm and public safety works?

[Helen Hayes]

I agree completely. The levy is a really important source of additional revenue into London, and it is so important that it is spent where it is needed. That does mean allowing councils to retain some of the receipts—I would say 50%, as London Councils is calling for—in order for them to do exactly that.

Exceptional financial support was designed to be a temporary intervention to support councils with acute financial pressures, but the consequence has been a growing number of councils running structural deficits. Will the Minister set out in greater detail how the Government intend to support councils to exit EFS so they are not held back by growing deficits?

Finally, the announcement yesterday on SEND deficits is very welcome. It is a clear recognition that the current costs of SEND provision are totally unsustainable. Writing off 90% of SEND deficits will only help if the forthcoming SEND reforms are properly funded and designed such that they are financially sustainable. What is the Minister doing with the Department for Education and the Treasury to make sure that councils’ statutory SEND responsibilities are properly funded when the schools White Paper is published?

Our councils and councillors are a crucial part of the bond of trust between local residents and the politicians and governments that serve them. We cannot leave our councils in the position in which the Conservatives were happy to leave them, with no answer to the needs of their local populations because they do not have the resources to deliver. Our local residents need and deserve clean streets, well-kept parks and open spaces, good-quality road services, good adult social care and effective children’s services, good-quality homes in the social rented sector, and proper support for children with SEND. They deserve nothing less, so that they can trust that government is there to deliver for them. We owe it to our dedicated, hard-working colleagues in local government to support them.

--- Later in debate ---

[Helen Hayes]

I am grateful to all hon. Members who have contributed to the debate today, particularly the hon. Member for Bromley and Biggin Hill (Peter Fortune), who is a great champion for his constituents and his borough of Bromley, and to my hon. Friends the Members for Vauxhall and Camberwell Green (Florence Eshalomi), for Clapham and Brixton Hill (Bell Ribeiro-Addy), for Kensington and Bayswater (Joe Powell) and for Brent East (Dawn Butler) for their interventions and for speaking up for their boroughs. I am grateful to the Minister for her response.

I believe I am 10 years older than the hon. Member for Sutton and Cheam (Luke Taylor), so I would say very gently to him that perhaps my memory goes back a bit further. When I was elected to Southwark council, it coincided with the arrival of the coalition Government and the beginning, presided over by the Liberal Democrats in government, of some of the deepest cuts to local government funding that we have ever seen.

[Luke Taylor]

Will the hon. Member give way?

[Helen Hayes]

I am not going to give way during this very short summing-up. [Interruption.] I would say to him that listening to his impassioned pleas on behalf of inner-London boroughs does sound a little bit like the arsonist complaining that the fire brigade is not putting out the fire quickly enough. [Interruption.]

[Dr Andrew Murrison (in the Chair)]

Order.

[Helen Hayes]

I urge the hon. Member to reflect with a bit of humility on what his party did to local government funding when it was in power.

[Luke Taylor]

Will the hon. Member give way?

[Helen Hayes]

I am not taking an intervention; I have been really clear about that.

I am grateful to the Minister for her response. I fully appreciate the challenging situation that she is in, the complexity of her brief and the pressures that she is facing from colleagues and from councils all across the country. I appreciate deeply her commitment to local government, and her deep understanding of its workings and the challenges that our council colleagues face. I am encouraged by her assurances on local housing allowance in particular, and on the costs of temporary accommodation. I look forward to seeing progress on those points and will certainly remain engaged on those issues. I would be hugely grateful for anything that the Minister can do to unlock the stalled sites. We have three in my constituency—two of them are council-owned and one is owned by a housing association. Between them, they have the capacity to deliver quite a good number of council and social homes. We would really like to see those come forward quickly.

I believe that the Minister has good intentions in the settlement that has been announced today. I support her in her aim of reconnecting local government funding with deprivation and ensuring that funding is fairly distributed, but the challenges that our councils face will remain. There is further work to do, and I hope to be able to engage with her further on behalf of my boroughs as we seek to repair the damage that has been done over a long period of time, and get things back on a better footing so that our councils can deliver for our communities.

Question put and agreed to.

Resolved,

That this House has considered funding for local authorities in inner London.