Local Authority Finances

Question

Asked by

To ask His Majesty’s Government what assessment they have made of the state of the finances of local authorities.

My Lords, I beg leave to ask the Question standing in my name and declare my interest, as set out in the register, as a vice-president of the Local Government Association.

We have listened carefully to local authorities about the pressure that they are facing. That is why we have announced that the final local government finance settlement for 2024-25 will now make available £64.7 billion, an increase of 7.5% in cash terms on last year and above inflation. The department continually monitors the local government sector through data and direct engagement with individual councils. This includes considering the impact of inflation and wider economic circumstances.

My Lords, I congratulate the Government on that 7.5% increase for the local financial settlement for the coming year. However, council leaders also say that what makes planning very difficult is that they do not get much warning of these final settlements and increasingly spend more and more of their budgets on the statutory obligations. They are spending a much-reduced amount on the preventive measures, despite the evidence of the social and financial benefits of prevention. Can His Majesty’s Government commit to producing a medium-term financial strategy to help local authorities to plan the effectiveness and impact of their spending much more effectively?

My Lords, in recent years we have tried to give more clarity around elements of the settlement on a multi-year basis. We will continue to do this for the next spending review and beyond.

My Lords, one of the big problems that local authorities have is dealing with more and more homeless people. Section 21 on no-fault evictions is still on the statute book and causing more problems for the local authorities that have to deal with a mass increase in homelessness.

I reassure the noble Lord that the Government are committed to abolishing Section 21 evictions. That is what the Renters (Reform) Bill, currently being considered by the House of Commons, will do. Additionally, we have put wider support in place to tackle housing pressures, through building more affordable homes and, for example, increasing the level of the local housing allowance.

My Lords, does the Minister regret that the parlous state of local government finances is having a terrible effect on the provision of services by charities and not-for-profit organisations? We are hearing of closures of vital services such as Citizens Advice and Age UK, but there are also the very small charities which have great preventive work and enable a lot of pressure to be taken off the National Health Service and other social services.

My Lords, we recognise the pressures that local government is facing. That is why we have announced such a substantive increase into the funding for councils this year. We recognise that the voluntary sector is often an important delivery partner for local authorities in the work that they do. They will benefit from the settlement that we have announced. My department also works carefully with, for example, the Department for Culture, Media and Sport, which leads on the voluntary sector, to ensure that we understand the impact on the voluntary sector and the interplay with local government.

My Lords, local authorities are no longer run by Derek Hatton, Ken Livingstone and Ted Knight, the bogeymen of 40 years ago, but the legislation which they provoked is still with us—rate capping. As a result, many well-run upper-tier local authorities struggle to provide good-quality adult and children’s services despite the increase and are looking at Section 114 notices. Against a background of devolution and promotion of local accountability, has the time not come to review the rate-capping policy?

My Lords, we are committed to broader reform of local government finance, but we have said, in recognition of the disruption and uncertainty caused by the pandemic, that this will be something for the next Parliament. We have also set out ambitious proposals when it comes to devolution of greater powers and greater financial decision-making to local government. That starts with the trail-blazer authorities in Greater Manchester and the West Midlands but will be on offer more widely across the country.

My Lords, whenever there are questions about local government funding in your Lordships’ House, we consistently hear Ministers tell us how much more funding has been granted, but I cannot help wondering if someone in DLUHC needs a new battery for their calculator. The data from the House of Commons Library reveals that there will be a £5.8 billion shortfall in the coming financial year, when prices are adjusted for inflation. Every council bar one—the Greater London Authority —is expected to experience a real-terms cut in funding, with 218 authorities, which is more than two-thirds, experiencing a reduction of more than 30%. We heard the Minister’s figures again today, but what would she say to the leader of Plymouth City Council, whose funding has reduced from £110 million in 2010 to £12 million in 2024?

My Lords, I do not recognise the figures that the noble Baroness has put forward. The settlement, which we announced in its final form, represents a real-terms increase for councils compared to last year. There is also a funding floor in place to ensure that, before decisions on council tax are taken into account, councils across the board have certainty. I would be interested to know what additional finance the party on the Benches opposite is planning to put into local government.

My Lords, I remind the House that I am a vice-president of the Local Government Association. The Minister said a moment ago that the Government have listened carefully to local government, so she will know that local government thinks it needs £4 billion to restore its finances, yet there was an allocation of only £600 million to meet the crisis in funding local public services. Could she explain why that sum was so low?

My Lords, I disagree that the amount was low. It was an additional amount on top of the provisional settlement, which sees the core spending power for local government rising from £60.2 billion this year to £64.7 billion next year—both a real-terms increase and a 7.5% cash increase. That is substantial. When we look at local government funding, we engage across the sector and look at wider economic pressures. We take it all into account when reaching a settlement.

My Lords, does the Minister agree that cuts in local government funding started in 2010 after the banking crisis and have accumulated, in real terms, year on year? That being so, many non-statutory services have been withdrawn, particularly in family support, and statutory services have been reduced to crisis intervention in many authorities. Is there any real hope that the Government will recognise that there is a severe problem in local government finance?

My Lords, of course I acknowledge that, in 2010, difficult decisions had to be made about public finances both centrally and in local government. However, in recent years, we have seen real-terms increases in the finances going towards local authorities. I also recognise the pressure that they face on issues such as adult and children’s social care and special educational needs provision. We have seen real increases in demand. Alongside additional funding, we need to look carefully at the right reforms to put in place to help manage that demand, without just putting in more and more funding.

Is there any appetite within the Government to look at the existing structures of local government? It seems increasingly difficult to justify having parish councils, town councils, district councils, county councils and unitary authorities. Is it not time to review the value for money we get from these different tiers and possibly to rationalise them?

My Lords, the levelling-up White Paper set out our ambition for every part of the country that wanted a devolution deal in place to have one. As I referred to earlier, we are seeing trail-blazers of greater devolution in mayoral combined authorities, where we can put power back into the hands of local communities.

My Lords, I recently read an article in the Financial Times on the state of our local authorities. It states that, due to all the budget cuts over the last 14 years, to make ends meet they are resorting to

“Asset stripping the public realm”.

The symbols of our civic identities are being sold off, which is diminishing our towns and cities and undermining our civil cohesion. Does the Minister agree with that assessment?

No, I do not agree with that assessment at all. We have put in additional funding to local government—not just this year, but in many recent years. In addition, we have put in significant funding, for example through the levelling up funds, to invest in local community assets that will build pride of place and develop local economies.