To ask His Majesty’s Government what assessment they have made of the impact of inflation on local authorities’ budgets; and how many local authorities they estimate will issue Section 114 notices in this financial year.
The Government recognise the pressures that councils are facing. The 2023-24 local government finance settlement provided councils with a 9% increase in core spending power in total, demonstrating how the Government stand behind councils. Councils are responsible for managing their budgets. Any decision to issue a Section 114 notice is taken locally by the chief finance officer. The Government stand ready to speak to any council that has concerns about its ability to manage its finances.
My Lords, I thank the noble Baroness for her Answer. The Institute for Fiscal Studies report last month concluded that the current funding system is not fit for purpose. It pointed out stark geographical differences in spending for local government, with the most deprived 20% of areas receiving 9% less than their estimated needs, while the least deprived 20% received 15% more. If the Government are serious about levelling up and the 700-page Bill we have just completed on Report is not ministerial flim-flam, when will the Government set out the timeframe for funding reforms that align local government funding with levelling-up goals?
My Lords, the existing system for local government funding directs increased resource to those councils with greater need. We understand the desire for clarity on distributional reform. We have confirmed that we will not be proceeding with the review of relative needs and resources, or a business rate reset, in the current spending review period, but we remain committed to improving local government finance in the next Parliament, and we will work closely with local partners and take stock of the challenges and opportunities they face before consulting on any further potential funding reform.
My Lords, the Minister will understand that, due to the cuts that have taken place in local government, some authorities are in real terms said to be not yet back to where they were in 2010. That being so, will the Government consider a major review of the fundamental funding of local government services?
My Lords, I just set out the position on broader reform to the funding system for local government. The Government recognise the pressures that local authorities are facing. At the spending review 2021, the Government confirmed that councils in England would receive £4.8 billion of new grant funding between 2022-23 and 2024-25 to meet pressures in social care and other services. We also recognised in the Autumn Statement last year that the position on inflation had changed the position for councils, and set out additional funding to respond to that.
My Lords, is it not tragic that Birmingham—once the jewel of local government, thanks to Joseph Chamberlain and his son Neville, the reforming lord mayor in the early 20th century—should have been reduced to its present pass? What is to be done about this great council? Should it be split up? Its present position is truly tragic.
My Lords, as we speak, my right honourable friend the Secretary of State for Levelling Up is giving a Statement to the House of Commons on action to be taken on Birmingham City Council. It is the Government’s intention to appoint commissioners in that instance, but there will be a period of consultation, I believe, before that is brought forth.
My Lords, the Minister said that the Government have finally recognised that councils are facing financial difficulties. However, the Government have been defunding councils over a number of years, so even with the relatively small increase this year, they are still 25% down on the levels they had in 2010. How does that fit with the levelling-up agenda?
My Lords, I do not recognise the figures that the noble Baroness has put forward. She will know, having been part of the coalition Government in 2010, that the situation this Government inherited from the Benches opposite required difficult decisions to be taken at the time.
The Benches opposite may not like being reminded of their record, but it remains a fact. The reality is that in the recent spending review we have committed more money to local government services, and that was increased further last year at the Autumn Statement in light of the inflationary pressures that councils are facing.
My Lords, this Government can promise what they like for the next election, but the fact is that they are not going to be in power, so all those promises come to nothing. What this Government have done is to reduce council budgets and make severe cuts. I heard only today from councillors from East Hertfordshire Council that the Government have cancelled four big infrastructure projects. How can councils carry on if this Government do not support them, which they are not doing?
My Lords, the Government are supporting councils. This is not about what is happening after the next election. In this spending review period, councils will receive £4.8 billion of new grant funding—the largest annual increase in core funding in over a decade—and that was further topped up at the Autumn Statement last year, recognising the pressures that councils face. Councils are doing an excellent job up and down the country, and we support them.
My Lords, does the Minister agree that one of the reasons so many local authorities are in such financial trouble these days is because there is a lack of external scrutiny and transparency since the scrapping of the Audit Commission in 2015?
No, I do not agree. In recent years, a small number of local authorities took on excessive debt through their commercial strategies and investments. The Government have taken action both to bring this practice to an end and to revise the framework by which local authorities can borrow and invest. The levelling-up Bill expands statutory powers to directly tackle excessive risk within the local government capital system.
My Lords, the scrapping of the Audit Commission was one of the best functions of the previous coalition Government. The Audit Commission wasted billions of pounds of public money.