With this we shall consider the following motions:
That the Referendums Relating to Council Tax Increases (Principles) (England) Report 2024–25 (HC 319), which was laid before this House on 5 February, be approved.
That the Referendums Relating to Council Tax Increases (Alternative Notional Amounts) (England) Report 2024–25 (HC 320), which was laid before this House on 5 February, be approved.
Today, we are confirming the major parts of the settlement announced in December, as well as reiterating the £600 million additional funding boost announced in January. Local government has welcomed the extra money as important in offering the ability to provide further support to children, particularly those with special educational needs and disabilities, while also being mindful of the increased demand for social care. Governments always need to take tough decisions, and despite the suggestions of some in this place, there is always a balance to be struck: infinite worthy demands, but finite resources. None the less, we recognise that it is important to support local government in the face of increasing demands for services and the rising inflation and costs that are the legacy of the war in Ukraine and instability in the middle east. That is exactly what we are seeking to do.
In recognition of those challenges, I am pleased to announce a settlement totalling nearly £65 billion for local authorities in England for the next financial year. The settlement includes an increase in core spending power of up to £4.5 billion compared with 2023-24; a £1.2 billion uplift to the social care grant, which can be used for children’s or adult services subject to individual local priorities; an increase in the funding guarantee, which will ensure that all authorities see a minimum increase in core spending power of 4% before any local decisions are made on council tax rates; additional support for rural councils through a £15 million increase to the rural service delivery grant; funding worth £3 million to support authorities experiencing significant difficulties because of internal drainage board levy costs; and additional funding for the Isle of Wight and the Isles of Scilly, in recognition of their circumstances and their physical separation from the mainland. As a result, available funding for local government in England will rise by 7.5% in cash terms for 2024-25.
I am most grateful for the Minister’s statement, and I am also grateful for the uplift in funding for the Island. As I understand it, that is higher than average—we are most grateful—and that took place after meetings between me and Ministers. I am also grateful that they have specifically mentioned and accepted the additional costs that the Isle of Wight faces by dint of being an island, and that we are in effect now catching up with other parts of or other islands in the UK. I am very keen for this uplift to be seen as permanent, and then to be built on. Will Ministers meet me to discuss ways in which we can ensure that the uplift for the Island and the recognition of island status are now fixed?
I am grateful to my hon. Friend for, while I have been in post looking at this portfolio specifically, his invite to the Isle of Wight, his support in facilitating that and his continued work on behalf of the Island. The change, which has been brought forward today by the Under-Secretary of State for Levelling Up, Housing and Communities, my hon. Friend the Member for North Dorset (Simon Hoare), and the Secretary of State, is in direct recognition of the work he has done, and I am grateful for it. I know that the Under-Secretary will meet my hon. Friend to continue that discussion.
Very briefly, is the Minister comfortable with our persisting in protecting our constituents from the local councils they elect with the referendum threshold? When are we going to allow local authorities to govern, and to suffer the consequences if the electorate disagrees with what they have done?
I am grateful to my right hon. Friend for raising a very philosophical important point, which is about the balance between local and national Government, and he is absolutely right to raise it. It is a long-standing principle of our local government settlement that we allow local councils the flexibility to be able to make decisions about the finances in their local areas, while also taking a general view that there are caps in place on how far they can go. I will come on to say more about that in my speech, but he raises an important point, and I know it will have been noted by my hon. Friend the Under-Secretary.
With available funding for local government in England rising by 7.5% in cash terms for the coming financial year, that significant increase will allow councils to continue to deliver local services. Thanks to the funding guarantee, all authorities will see an increase of at least 4%, before any council tax increases are taken into account.
We continue to monitor the financial health of all councils on a regular basis, using a range of data as well as extensive direct engagement. Examples of significant financial failure in local government remain low, but we will take action where necessary. We will always be ready to speak to councils should that be necessary, and should any have concerns about their ability to manage their finances or pressures that they have not planned for.
We do not just provide funding through the settlement. Separately, we are proud that there is £15 billion of taxpayer funding in a suite of complementary levelling-up projects that will help grow local economies, create local jobs, improve local transport, provide local skills training and support local businesses, making real differences to real people’s lives in communities all across the country.
Since 2021, the levelling-up fund has been changing communities across the United Kingdom, with £4.8 billion of taxpayer funds allocated to 271 projects, kick-starting regeneration and funding vital projects across the UK. Our levelling-up partnerships are delivering regeneration, and 12 investment zones are driving innovation all across the country. In addition, there is £1.1 billion for 55 left-behind towns through the long-term plan for towns, which is reviving high streets and tackling antisocial behaviour, and more than 250 venues are to be saved through the community ownership fund.
Today should and could have been the day when the Government, after 14 years in power, finally fixed the crisis in local government. After a lost decade, they could and should have used today to turn the tide on the unsustainable and growing crisis in adult social care, children’s services and homelessness services, and finally to end the postcode lottery for those vital services that create the clean, green and safe communities in which working people deserve to live in return for the now record taxes that they pay under this Conservative Government.
After six years of single-year settlements, which started well before covid, today could and should have been the day when the Government brought forward a sustained multi-year settlement, but the Government have failed on every test. Councils of all political stripes up and down the country, covering cities, towns and counties, are being forced to the edge of survival. We know that councils are the first responder, and often the last line of defence for our communities. That they have managed to keep things going for so long is testament to their duty and public service.
I thank each and every one, every councillor of every party and every council worker, for the work they do for millions of people up and down the country. We owe them a debt of gratitude. From waste management to maintaining roads and parks, from providing housing assistance to supporting local businesses, councils are at the forefront of ensuring that communities can thrive and realise their full potential. Contrast that civic responsibility with a Government who seem happier treating local government as a political scapegoat than as an equal partner.
What support are councils receiving in this settlement? Six hundred million pounds recycled from elsewhere, and a continuation of the begging-bowl culture that continues on a never-ending loop, like groundhog day. In one of the worst cost of living crises for generations, it is a shameful indictment that the council tax bill is set to top £57 billion under the Conservatives, which is more than twice than under the last Labour Government. It stands as a matter of fact that people are paying more and more for less and less. Alongside the biggest tax burden in peacetime, that adds to the struggles households already feel when managing mortgages, food and energy bills. On top of that, working people will be slapped with yet another Tory bombshell. In fact, council tax bills under the Tories are set to rise by £13 billion over the next five years. It is clear as day that councils have been hollowed out, and they are now being told once again that the only solution is to raise council tax more and more.
The hon. Gentleman mentions audited accounts. Does he have an opinion on the audit of Plymouth City Council’s accounts? I was delighted to go to Plymouth on Friday, and debated the matter with the Labour leader of the council. It is clear that the Labour council’s accounts have not been able to be audited, because there is a question mark over £70 million being moved from capital spend to a pension pot. Does he have a view to share on his party’s situation in Plymouth?
I thank the hon. Member for inviting me to celebrate the success of Labour in Plymouth, and the work that our councillors are doing, after taking back control, to show leadership to the city. Plymouth is a proud place, and the Labour party there is making a huge difference. He may want to consult those on his party’s Front Bench when it comes to the submission of audited accounts, because there is an issue to reconcile here. Only 1% of councils have submitted accounts; how do we break through that bottleneck, given that the market is not responding? The Government will have to respond to that sooner rather than later. I politely advise him, if I may, to withhold his criticism, and to wait to see what his Government’s approach will be. I suspect he may be slightly embarrassed.
The Select Committee has written a report recently on local authority audit, which is a complete mess, with only 1% of accounts done on time. This is not a party political matter, as councils right across the country are struggling with this issue. One factor is low audit fees. Another is the complication of pension fund valuations, which is holding many accounts up. The likelihood is that the only way to get through that will be to agree accounts that are qualified because it has not been possible to confirm pension fund valuations. I hope that party political points are not made about councils and the qualification of accounts.
First, I thank the Select Committee for the work that it has done in this area. Last week, we received the report “Financial distress in local authorities”, and a great deal of work has been done to understand the detail and the contributing factors. There is no doubt that the accountancy regime for pension funds is a contributory factor to the delay in some cases. We need to know that councils are financially resilient, and that the financial settlement is robust. Where there are issues, an early warning system should allow them to be picked up earlier, so that if an intervention is required, it is made at the right time and in the right way, whereas now, section 114 notices are being issued at a rate not seen for the past three decades. That cannot stand, and it is not sustainable. We look forward to the Government’s response on that.
On the wider point about cross-party agreement, I think all of us and the Local Government Association, which is cross-party, would welcome with open arms the day when party politics was taken out of local government finance, and when there was consensus on how to fund local public services. I sincerely hope that after the next election, when those on the Government Front Bench are in opposition, they join us in that call, but let us wait and see.
The Government will know, as we do, that because of the financial fragility of local councils and the lack of an early warning system, it now takes only a small shock to send town halls into financial meltdown; the resilience just is not there. The Local Government Association has done a fantastic job in leading from the front and ensuring that adequate support is supplied when needed, but it cannot be expected to lead the charge on its own, nor should it be expected to. Councils need certainty and stability. They need to have the fear and anxiety of financial bankruptcy removed, so that they can continue to deliver for local communities. Councils need to be given adequate time to plan ahead for the fiscal year. Labour would support local councils where the Government have failed.
It is a pleasure to contribute to this debate, which for me is the highlight of the parliamentary calendar. Relentlessly, year after year, I have contributed to the debate with great fondness. Last year, I remember vividly the Under-Secretary of State for Levelling Up, Housing and Communities, my hon. Friend and next-door neighbour the Member for North Dorset (Simon Hoare), advocating, from the Back Benches, for a great rural tsar. Of course, nowadays we have the great rural tsar sat on the Front Bench; I am pleased about that. I am also pleased that the debate has three hours of protected time, which is valuable. None the less, I will try not to take up too much time, Mr Deputy Speaker.
Each year, I stand up in this place to make the case not just for rural West Dorset, and Dorset as a whole, but rural Britain, in what I believe are some of our most important discussions and decisions about enabling the capability of local government. Most years, I have stood here and protested that we in Dorset have been in need of our fair share of government finances; indeed, in many previous years, we have not received that. But today is not D-day. Today is S-day, because my hon. Friend and neighbour—knight in shining armour that he is—is charging over Bulbarrow hill and through the Chalke valleys to Dorset Council in Dorchester, to deliver a £4 million boost to its finances. That is to be greatly welcomed. My other neighbour, my hon. Friend the Member for South Dorset (Richard Drax), who cannot be with us as he is away on parliamentary business with the Defence Committee, has asked me to reflect his views, so that my hon. Friend the Minister understands full well that we very much appreciate this in Dorset, after many years of campaigning for a greater and fairer share.
However, it is important to note that we still need to address the fundamental structural issues that we face in local government funding. I recognise that that is a vast task, which will take considerable work. I hope that, in winding up, my hon. Friend the Minister can give not just me but a number of colleagues who are in their places real confidence that the Government intend to achieve that in relatively short order, and that we will ensure that a fairer share of taxpayers’ money is allocated to where it is required.
I am a proud serving Somerset councillor and am fully aware of the issues Somerset is facing. However, those issues have occurred not just over the last nine months, under the new Somerset Council; they have been very long drawn out. Indeed, between 2010 and 2016, Somerset faced one of the longest council tax freezes—I think it was the longest for any council across the country—under the last Conservative administration, which led to huge pressures on funding in Somerset. Indeed, under Conservative administration, the council was nearly drawn into bankruptcy in 2019 due to pressures on adult social care. Would the hon. Member agree that the issue is not a party political stance, as he is trying to make it, but the legacy left by a previous Tory administration? The issues that we face in local government go across all colours.
I thank the hon. Lady very much for her intervention. She and I are frequently in Westminster Hall debating these matters with great passion and vigour. I know that she feels as strongly as I do about these matters, but it will probably come as no surprise to her to hear that I do not agree with her conclusion. Previous Conservative administrations who ran Somerset Council left a considerable legacy in terms of reserves. Since the Liberal Democrat Council was elected and started serving last year, a number of decisions have been made across the board that have ended up in the lap of council tax payers in Somerset.I am alarmed about that, because ahead of the Dorset local elections, a number of constituents in West Dorset look with great horror at what is happening in Somerset, and wonder what is truly the case.
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I know I speak for the whole ministerial team when I say that we cherish our close working relationship with local government partners. Every year, we have the opportunity, through consultation on the provisional settlement, to listen to them even more keenly, along with the public and right hon. and hon. Members, on the funding proposals for the coming financial year. The number of responses was particularly high this year at 267. The Under-Secretary, who is the Minister for local government—he is sitting beside me—engaged personally with over 90 Members and local government leaders. We are grateful to all who responded, and I pay tribute to the work my hon. Friend did in listening.
It was after listening to these views that the Secretary of State announced in January an additional £500 million to bolster social care budgets, which are a key concern for councils. We have heard about and listened to councils in relation to pressures on social care services, particularly for children, which we know have increased. The £500 million uplift to the social care grant, announced on 24 January, can be used for children’s or adult services, subject to local priorities. That is on top of the £1 billion in additional grant funding for social care in 2024-25 confirmed at the provisional settlement in December.
Overall, this means that, in the next financial year, local authorities with social care responsibilities will receive £5 billion through the social care grant, £1.1 billion through the market sustainability and improvement fund, £500 million through the discharge fund and £2.1 billion through the improved better care fund, and that is on top of their local decisions about funding for social care in their area. We recognise that some councils can generate more income from council tax to fund social care, so we have equalised against the adult social care precept since it was introduced, and we will continue to do that in the coming financial year.
As my hon. Friend the Member for Isle of Wight (Bob Seely) indicated, we have heard through the consultation—we know this from our constant contact with local government partners—that the sector is keen for progress across the board, not just in authorities with social care responsibilities. We will support all tiers of government, so we have announced an uplift of the funding guarantee proposed at the provisional settlement. This means that every council will see a 4% increase in its core spending power before any local decisions are made about council tax.
We have also heard about the particular impacts in rural areas, which is why we have announced a £15 million increase to the rural services delivery grant. That is making available a total of £110 million of taxpayers’ money, in the second successive year of above inflation increases. In recognition of the unique circumstances facing our island authorities and their physical separation from the mainland, we are increasing funding to the Isle of Wight and the Isles of Scilly.
However, we are clear—I do not hesitate to repeat it today—that this money is for the frontline services on which our communities rely. It is not to be put aside for later use, nor wasted on myriad council hobby-horses and schemes. Taxpayers deserve value for money. So many of those involved in the settlement—so many parts of the community and so many parts of the local government sector—do that brilliantly already. The small number that do not are on clear notice this afternoon that they must do so. To ensure that, we are asking all local authorities to produce productivity plans, which will encourage them to set out how they will improve service performance and reduce wasteful expenditure.
Turning to council tax, we continue to strike the balance between giving councils flexibility to make local decisions, to meet local pressures and support the most vulnerable, and continuing to seek to protect council tax payers from excessive increases. In any constitutional settlement that divides responsibilities between central and local government, it must follow that local government has the ability and the responsibility to raise some of its own funds, and that it is held to account for the decisions it makes to do that. So this year, as in previous years, we have set core referendum principles of up to 3%, plus 2% for the adult social care precept.
At the same time, it remains the case that some council reserves are significantly higher than prior to the pandemic. For some, that will be for good reasons, but a number of councils have reserves well in excess of 100% of their core spending power, and the latest data shows that about half of all local authorities have seen their unallocated reserves grow since the 2019-20 financial year. It is for those councils to decide the appropriate balance between council tax increases and the use of reserves to fund services, depending on their local context. However, I very much hope that they will consider their unallocated reserves, and I hope that appropriate questions are asked in each locality where that applies by those who are interested.
At the provisional local government finance settlement, in consideration of the significant failures of a number of councils—Thurrock Council, Slough Borough Council and Woking Borough Council historically—and their need for ongoing exceptional financing support, the Government proposed that bespoke council tax referendum principles should apply. We are today confirming those principles, with a core council tax referendum of 8% for Thurrock and Slough and of 10% for Woking. As councils with adult social care responsibilities, Thurrock and Slough will also be able to use the 2% adult social care precept, and the councils can make use of the additional flexibilities provided to support their financial recovery.
At the provisional local government finance settlement, the Department set out that councils could seek additional support from the Government via the exceptional support framework. As part of that process, the Government were prepared to consider representations from councils on council tax provision. In recognition of the scale and nature of the council’s failings, and its precarious financial situation, the Government have decided not to oppose a request from Birmingham City Council for the flexibility to increase council tax by an additional 5% above referendum principles, to start paying for the historic failures of the Labour council.
We have heard requests from devolved authorities about the benefits of tax being retained in the area where it is raised. The trailblazer deals with Greater Manchester and the west midlands are unprecedented in their reach, and include a significant transfer of fiscal power. Sixty per cent of England is now covered by a devolution deal, which is up 20% since the levelling-up White Paper was published. We will continue to expand and deepen local devolution in England through the devolution framework and the work of the Under-Secretary of State for Levelling Up, Housing and Communities, my hon. Friend the Member for Redcar (Jacob Young).
Finally, I wish to make a general point about how local government is financed. Many right hon. and hon. Members, as well as colleagues in the sector, have emphasised the need for reform in the system—I heard that when I was covering this brief—particularly of the funding formula. We have heard those concerns loud and clear. Today we continue to restate our commitment to reform and modernise the local government finance settlement and system in the next Parliament, to deliver the most effective financial settlements for councils—[Laughter.] I hear noises from the Opposition Benches. If Opposition Members had wanted to say that at the beginning of this Parliament, when covid started and when we asked our local authorities to do the most extraordinary things, that would have been an interesting position for the Labour party had it been in government at the time. We took decisions that were necessary at the time. We are restating our commitment to reform. That is what a sensible, proportionate and reasonable Government do, and it demonstrates yet again the difference between a Labour party that is seeking to play at being a Government and will be unsuccessful, and the actual difficult decisions that are being taken every day on the Government Benches.
In a year that has seen unprecedented increases in demand for social care, housing and other vital local government services, the Government have listened and are providing more support. The above-inflation funding increase will allow councils to carry on delivering the local services on which we all depend. Because local authorities must be accountable to local people, we are putting in place ways to ensure that they are working effectively and efficiently. We have a long-term economic plan that is working. We are supporting local councils with what is needed, and ensuring that they spend wisely. That is exactly what the Conservatives have done throughout this time and what we will continue to do, and I commend the settlement to the House.
The Institute for Government shows that core spending power will still be 10% lower, even after today’s uplift, than before the Tories came to power. That does not even take into account the rocketing demand in social care, children’s services and homelessness services. Ad hoc injections of cash, while perhaps offering modest relief, are a painful repeat of the sticking plaster politics that have left the country, our politics, and our public services much weaker. The Government’s reckless approach is undermining the fundamentals of local public services. Stability is needed to ensure that older people get the high-quality care they deserve and that councils are in the best place to give children the protection they need, to help put an end to the crisis in homelessness that the Government are perpetuating, and to keep our public services running where this Government have hollowed them out elsewhere in the system.
This Government’s approach is short-term and reckless, and it saves nothing. In the end the cost is huge, and we can see the consequences today. It cannot be right that there were more section 114 notices last year than in the previous 30 years combined. That is not a coincidence; it is the result of a toxic mixture of the Government’s financial mismanagement, and a deep and worrying lack of accountability. To make matters worse, the early warning system that could have raised the red flag earlier has been dismantled. In 2010, the coalition Government announced the closure of the Audit Commission. It was not without its faults and certainly was not universally well received, but removing the early warning system in its entirety was clearly going to set up problems for the future. Councils were left to inspect financial risk themselves, rather than seek value for money or even address issues of what is now clearly a broken audit market. The facts speak for themselves: in 2022-23, just five of the 467 councils delivered their audited accounts on time. That is just 1% of councils submitting audited accounts before the deadline.
Single-year settlements do not provide the certainty or stability needed for planning ahead. We recognise that councils need something more than that to end this disjointed approach. Labour will embed transparency in the relationship between local and national Government, and move towards multi-year funding settlements for councils that allow them to plan well ahead. We will give towns and cities the tools that they need to foster local growth and deliver better public services. Should we be privileged enough to form the Government after the next election, Labour will empower councils to get on with the job that they have been elected to do.
Finally, we will see a radical transfer of power away from Westminster and into the hands of the British people through the landmark take back control Act, but we will not wait; where we can accelerate improvement, we will. We want a new relationship between central and local government as genuine partners in power. We want to see the right powers in the right places. Our communities are resilient, and so are our councils, but we need to do far more to work, hand in hand, as true partners going forward.
The £110 million through the rural services delivery grant is much welcomed. That funding of up to £3.2 million for some areas—including Dorset—is much better, but is that enough to deal with the issues we have to face? From discussions that I have had in the House before the debate, I have a real sense that it is not. The additional £1.5 billion for social care is enormously welcome. A third of the community that I represent in West Dorset is over 65, so it has additional social care requirements. Are we in Dorset really getting our fair share of £1.5 billion, given that we are talking about a few million pounds? That is a question for us to ask.
In the wider context of making the case for rural Britain, I remind my hon. Friend and neighbour the Minister, and the Minister for Housing, Planning and Building Safety, that we have had high-energy debates, it is fair to say, about local government finances with both of them. I would like to reiterate some of the unfairness that remains in the “urban versus rural financing” debate. Rural areas still receive some 59% less per head in settlement funding than their urban counterparts; in real terms, that is about £111. Rural residents will also pay on average 20% per head more in council tax than their urban counterparts—although we should probably take Somerset to one side in that assumption. Rural residents receive on average 13% less per head in social care support overall than residents of urban areas, which is very important when it comes to providing that care in constituencies such as mine and those of my hon. Friends.
West Dorset constituency, which I am proud to represent, has an enormous county boundary with the county of Somerset. Many of my constituents use services and facilities in Somerset, and vice versa. It is fair to say that over the past month, many of my constituents and people in Somerset have looked with absolute horror at how the proposed council tax increases will affect them. For the benefit of the House, I would like to clarify the extent of those increases in real terms. Those living Yeovil can expect a 90% increase in the town council precept, while those living in Taunton, the county town of Somerset, can expect a 200% increase. In real terms, that is an increase of between £109 and £277 per annum in the town council precept alone.
I am well aware of this matter because a Somerset councillor, a Liberal Democrat, works in my constituency and contributes frequently to the Liberal Democrat leaflets that are shared in West Dorset. I should say that he is the head of the Somerset Council audit committee, of all committees; I can confirm that his mantra is “raise taxes and cut services”, which is definitely what is happening in Somerset. In November 2022, the Somerset Liberal Democrats said that they needed an additional £35 million because of a financial difficulty that they had experienced. There was no reporting of any finances to the council for five months, and then, all of a sudden, out of nowhere, came a black hole of £100 million.