Inner-London Local Authorities: Funding

Debate between Helen Hayes and Bell Ribeiro-Addy

Tuesday 10th February 2026 Westminster Hall

[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?