Inner-London Local Authorities: Funding

Luke Taylor Excerpts

Tuesday 10th February 2026 Westminster Hall

[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 ---

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

It is, as always, a pleasure to serve under your chairship, Dr Murrison. I thank the hon. Member for Dulwich and West Norwood (Helen Hayes) for securing this important debate at an opportune time.

“The streets of London are paved with gold”—or so the saying from the tale of Dick Whittington goes. But of course the point of that saying was to remind us that he did not, in fact, encounter riches and utopia when he got to London. That has been inner London’s story for centuries: portrayed as pampered by the rest of the nation while its people grapple with some of the biggest challenges imaginable.

I am a proud Londoner, I am an MP and a still councillor in London, I am my party’s spokesperson for London, and I know vividly how drastic the challenge is across London. I have knocked on doors across the city and heard directly from residents about their challenges, their fury at the last Conservative Government and now their disappointment with the Labour Government. London is a city where 2.3 million people—that is twice the population of Birmingham, and one in four people in the city—live in poverty. According to data from the Trust for London, that figure rises to 38% for non-white households and 53% for single-parent households. It is a city where SEND deficits and adult social care deficits have thrown council finances into uncertainty for more than a decade. It is a city where, perhaps most shockingly of all, a teacher in every school can walk into their classroom in the morning knowing that, on average, at least one of their pupils at any given time is likely to be living in temporary accommodation.

Year after year councils in London have been asked to do more with less. Reform of the system is long overdue, with the current formula not having been properly updated in more than a decade—not to mention the fundamental unfairness of the council tax system to raise money for local services. We were told by the Government that there would not be a return to austerity on their watch. It was a claim that most of us could believe, not just because they are a Labour Government with a social democratic tradition, but because they are a Government full of former councillors and council leaders who have seen at first hand that the reality of austerity is often most severe in local government. It is therefore outrageous that they have presented a funding review that simply doubles down on the disastrous cuts.

Over the next three years, per capita funding, when council tax contributions are removed, will reduce by £109 in Camden, by £79 in Lambeth, by £75 in Southwark, by £37 in Lewisham, by £180 in Wandsworth, by £54 in Greenwich, by £220 in Hammersmith and Fulham, by £86 in Islington, and by £247 in Westminster and in Kensington and Chelsea. What is that if not Labour austerity?

The current formula makes use of the index of multiple deprivation as the central measure of poverty but, as has been said many times, the IMD as currently designed does not properly reflect housing costs, housing poverty and what it means to be poor in a city where rent alone can swallow well over a half of a working person’s income. If we build a funding formula that ignores housing costs, we build one that blatantly ignores inner London.

I am an engineer and know bad maths when I see it, and the proof that the Government’s latest announcements, published just this week, are smoke and mirrors is right there in the forecasted effects. Two thirds of the purported increase in total funding in London comes from the assumed council tax increases. When we account for that fact, we see that over the three-year settlement period, only two of the 12 inner-London boroughs—Hackney and Tower Hamlets—receive a real-terms funding increase per capita from the Government. Government Members like to talk about the austerity during the coalition period, but perhaps they would like to reflect on those figures for per-capita funding when council tax contributions are removed, which are a result of this Labour Government, and the effect on their inner-London residents.

I have lots of data, which I am sure the Government know to be true, but a person does not have to be expert to know that the Government’s numbers do not add up—they just have to walk a few miles away from this place. I thought Labour Members were supposed to be in tune with and sensitive to inequality, yet here we are in a palace that is increasingly a boundary to their views while just a few minutes away, in Lambeth, Southwark, north Kensington and Chelsea Riverside, people are suffering because their councils are choked of the funds that they need to protect them. The support that this Government promised to deliver never materialised. Those working people have already been hit by inflation, the cost of living and rising transport fares. They now face not just lesser services but the prospect of huge council tax hikes because of this mess, which Labour might not have made but is doubling down on.

Londoners are sick of being utterly let down while being told that they have never had it so good, or that they have a Government and a mayor who are on their side. I do not doubt that Labour Members’ intentions are good, that they got into politics for the right reasons, or that they have had incredible achievements as councillors—I am proud to have done that myself—but I sincerely ask them to please get their house in order and provide what London needs. With the devil in the detail of their unfair funding review, they are proposing the exact opposite. They have just a couple of months to get their act together before the local elections, but I suspect that for most Londoners the die is already cast against Labour because of its lack of care.

This is not a sustainable foundation for any public service system. It is not fair funding; it is the accelerated starvation of a vital part of the public realm, masked by cosmetic changes. The Minister has heard it from around the Chamber; it is not just me ploughing a single furrow. If the Government are casting about trying to understand why people are not warming to their efforts—perhaps more so this week than ever before—they should remember that although they can mask an unfair funding formula under snappy headlines and public relations gloss, they cannot make it function as a good policy just by wishing it so. That is government by magical thinking.

I am racking my brain trying to imagine why Members on the Government Benches cannot see the wood for the trees on this topic. I can only guess that they simply do not grasp the true value of well-funded, well-functioning and truly independent local government. I know that that is not true for some of the Members in this Chamber, who have come from local councils in inner and outer London. However, they are unwilling to challenge the dangerous idea that local government is a derivative of central Government, and the fact that the mayor’s powers are being used as a convenient shield by a Labour Government who are quietly keeping London in their back pocket for whenever they need someone else to carry the pain—because that is what the fairer funding review amounts to. It is hard to see it as anything other than a plan for managed decline of our cities, with inner-London boroughs first in the firing line.

This can only be justified by misunderstanding the aphorism that I began with and not grasping that London’s streets are considered to be paved with gold only when it suits those who wish to ignore its many challenges. I invite the Minister to explain more clearly how a reduction in per-capita funding over the next three years for residents in 10 of the 12 inner-London boroughs that are the subject of this debate will result in better services for those residents.

--- Later in debate ---

[Alison McGovern]

The reason for my perplexed state is that during the period of consultation with Members of this House, I met 140 Members of Parliament on the settlement. I am sorry if the hon. Member has had the message that I will not meet her, because my office door has literally been open to Members over the recent period. We can discuss this at any point. The fact is that the London borough of Richmond is in the least deprived decile. While she rightly stands up for her borough, when I look at some parts of the country that have been forgotten for far too long, I feel that it is right that we have taken the decision through the settlement to reconnect funding with deprivation. But I can discuss that with her in detail in the future.

I want to make some points about cost. Local governments are still under pressure, and despite the increase of nearly 25% that I mentioned, that pressure will remain because of the costs that they are facing. That is why we are taking action now to support local authorities as we move towards a reformed special educational needs and disabilities system. The first phase of support will address historic deficits accrued, as was mentioned by the shadow Minister. All local authorities will receive a grant covering 90% of their high needs dedicated schools grant deficit, subject to the approval of a local change plan.

We are also fixing social care services, on which many people, including in London, rely. We are changing children’s social care in a generation by rolling out the Families First Partnership programme, backed by more than £2.4 billion of investment across this multi-year settlement. We are providing about £4.6 billion of additional funding, available for adult social care, by 2028-29, compared with ’25-26. When it comes to children’s care, the issue is not only that the costs are unsustainable, but that we are failing in our duty to so many children, and that is why we must change.

It is important to recognise that some places, including some inner-London boroughs, benefited disproportionately from the old system. However, we are supporting those places to plan for changes with transitional arrangements, including by protecting their income and providing additional flexibilities. For London, we are providing more than £550 million for income protection over the multi-year settlement.

[Luke Taylor]

The Minister mentions additional flexibility. Within that does she include allowing what I think are five inner-London boroughs, including Wandsworth, to increase their council tax by up to 10% without a referendum? Is that the additional flexibility that she mentions?

[Alison McGovern]

We set out that flexibility when we made the provisional statement, and there will be more details of that in the Chamber tomorrow. I am at the slight disadvantage of speaking between the publication of the settlement and the full debate in the House of Commons tomorrow. There will be more detail tomorrow for the hon. Gentleman.

The council tax bill for a house worth £5 million in central London can be less than the bill for an ordinary family home in places such as Blackpool and Darlington. It is not fair that properties worth so much more pay less council tax and receive comparatively better services than elsewhere, because of Government subsidy. Removing referendum principles for the six councils, as we have said, will allocate more than £250 million more funding for places with higher need, instead of subsidising very low bills for 500,000 households under those councils.

I want to turn to the direct questions from my hon. Friend the Member for Dulwich and West Norwood, who led the debate. She raised the issue of the costs of temporary accommodation, and she was absolutely correct to do so. I refer her to the homelessness strategy, which I published just before Christmas. The problems in temporary accommodation are very geographically concentrated. I am anxious to work with London councils, including her councils, to get children and families out of poor-quality, expensive temporary accommodation and into better-quality temporary accommodation that will be more reasonably priced for local authorities—even if it is still temporary, because some of what we are paying for is very poor value.

My hon. Friend mentioned LHA rates and asked whether I will work with the DWP and Treasury. I can tell her that I am doing so. The Housing, Communities and Local Government Committee Chair, my hon. Friend the Member for Vauxhall and Camberwell Green (Florence Eshalomi), also raised that with me in another setting. I will happily update the House as we go. My hon. Friend the Member for Dulwich and West Norwood mentioned a stalled site in her borough, which sounds like a dreadful waste. I will alert the Housing Minister and the Secretary of State to that. They were anxious to bring forward their plan for London with the Mayor of London for this very reason, but I will refer them to this debate. She asked about a visitor levy, which other Members mentioned too. I will take those comments as input to the consultation on a visitor levy.

My hon. Friend and the shadow Minister mentioned EFS. Again, shockingly, I found myself agreeing with the shadow Minister: that system should have been used sparingly and for exceptional circumstances. It is becoming less exceptional, and we have to get to the heart of why councils are in this position. Some of that is about costs, as we have said, but there are also other things, like reintroducing local audit, that I believe will help to defend the system and make it more sustainable as we go. My hon. Friend also asked about SEND deficits, which I have mentioned.

We are making changes that we believe are necessary to change public services and get local government back on its feet. By realigning funding with need and reforming services that put pressure on local government, we will empower local leaders to deliver for communities in London and across the country. Unlike many people, I firmly believe that it does not matter whether someone lives in a northern town or city, in the midlands, the south-west, Scotland, Wales or London—poverty is poverty, and we should respond to it all.

[Helen Hayes]

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

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

[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.]

[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.