Local Government Finances: Surrey

The amount of money that local government authorities have, such as Surrey county council and the new east Surrey and west Surrey unitary councils, has a huge day-to-day impact on residents. It determines the provision of services and the protection of our communities, and it is essential to the many businesses and voluntary organisations in the area through both policy and the many direct contacts held with local service providers.

We heard again this week claims that the Government are boosting funding for councils, but the reality does not live up to the rhetoric. Surrey county council’s budget is being reduced by over £50 million for the next financial year. Surrey is negatively impacted more than any other area despite increased demand and escalating costs just to maintain existing service levels.

The Government’s calculations simply do not provide enough money for statutory services such as adult social care provision—and we all know about the urgent action that is needed to improve the special educational needs system and support available for children, schools and families. Instead of investing in services, the Government are slashing central grant funding for Surrey. Despite that, Surrey county council has managed to put forward a balanced budget, thanks to hard work led by Councillor David Lewis, but the situation as it stands is unsustainable, and the risks are mounting. The Government need to act.

In addition to the counterproductive funding decisions being made by the Government, we have the added complication of local government reform. Changing the structures of local authorities is a complicated matter. It requires changes in contracts, staffing, location and every other aspect of running a large and complicated organisation, yet we have no information on how the transition will be funded. It cannot possibly come from existing budgets if services are to be maintained, given the situation I have outlined. There is no clarity on what will happen to staff during the transition. Many jobs are at risk, and some have already sought new, more stable opportunities elsewhere. All face additional pressures as a result of reorganisation, and the risk is that important decisions will be delayed, leaving Surrey stuck in stasis.

Beyond transition, we must look at the foundation of the new unitaries. We all know the concerns about local authority debt. Some councils, such as Runnymede borough council, which covers a big chunk of my constituency, were able to operate a commercial strategy with sound financial management, meaning that the risk of high debt was mitigated by clear controls and revenue provisions. However, they are the exception. Too many local authorities borrowed heavily without the knowledge or systems to manage the risk, and none did so more disastrously than Woking borough council.

Given the size of the authority, the failures at Woking are unparalleled, both in terms of the scale of the debt and the failure of financial management and scrutiny, yet, despite announcements that the Government are proceeding with local government reform, there is still no clear plan about what to do with the Woking debt. In October last year, the Government announced debt relief totalling half a billion pounds for Woking borough council in 2026-27, but that still leaves more than £1.5 billion of debt, and under the Government’s plans, that may shortly become the liability of residents across west Surrey.

The hon. Gentleman is giving an excellent speech that has really drawn out the pressures on his constituents, as well as on mine and on those of the hon. Member for Farnham and Bordon (Gregory Stafford). West Surrey unitary authority as a whole faces the prospect of beginning its life with £4.5 billion of debt. The hon. Gentleman raised a very important point about the vital public services that need to be paid for. My constituents are concerned that when west Surrey unitary authority comes into existence, those public services could falter and fail on day one, and I am sure his constituents are concerned, too. Through the hon. Gentleman, I ask the Minister for reassurance that that will not happen and that some kind of financial package will be offered to my constituents and those of the hon. Gentleman.

I thank the hon. Gentleman for his intervention, although it sounds like it was more for the Minister than for me. He has given the Minister time to prepare for his inevitable question, which I hope she addresses in her speech.

I thank the hon. Gentleman for letting me take the debate from Surrey to Staffordshire. There is concern in Newcastle-under-Lyme about what a potential new unitary may look like and about whether the debt of current councils will be carried over to it. I want to add my concerns to his. This is not a party political issue; it is about ensuring that people are not forced to pay off the debt accrued by others.

I thank the hon. Gentleman for his intervention. He is exactly right: through local government reform, all areas could be affected by the debt and other commitments of neighbouring authorities.

That brings me to the point I was about to make, which is that it really is not fair that my constituents in Runnymede could have to pay for the failed decisions of Woking politicians—both those in power and those who failed in their duty to scrutinise decisions—because those constituents never got to vote for them. The scale of the remaining debt, when combined with the debt of other local authorities, means that the new west Surrey unitary will be bankrupt from day one. New local authorities should be established on a sound and equal footing, so that the provision of services can be determined by local need. The Government need urgently to introduce a sound long-term financial plan for both unitaries in Surrey.

I thank my hon. Friend for his impassioned and powerful speech on this matter, with which I wholeheartedly agree. I think he is being somewhat polite in the way he describes what this unitary authority is going to be. Essentially, if it is saddled with the debt from Woking and a number of other boroughs, it will essentially be stillborn from the start, and residents in my areas of Farnham, Haslemere and the other Surrey villages that I represent will be worse off because of it. Does he not agree that the Government must write off that legacy debt, or at the very least ring- fence it, so that our constituents do not face the problems —to be frank, the absolute mess—left by other boroughs and their politicians?

My hon. Friend is a lot harder in his language on this issue and I very much respect him for that. At the very least, we need to have a well thought-out plan and strategy for what is going to happen with the block of debt. There is a variety of different options for how it can be managed and dealt with. Here is the fundamental problem that my constituents—service providers, charities and businesses—raise with me and are really worried about: that decisions made in a neighbouring local authority, which they have had no involvement in or dealings with, will have a material impact on them when the west Surrey unitary authority is set up.

I realise that the scale of the debt is a huge and complicated problem. I do not envy the Minister in trying to find a way through. I am glad that we have this forum for debate this afternoon, but we need to have these debates and discussions so that the west Surrey unitary authority—and, frankly, others that are being set up that face similar problems—can be dealt with fairly and so we know what is coming down the tracks. My residents are not going to be punished for decisions made in other authorities that they never had the chance to vote for. That is fundamentally unfair.

By the way, in some ways this is not something that we are unused to in my part of Surrey. We sit on the penumbra—just on the outskirts—outside London, and there are plenty of policies that come from this awful Mayor of London that affect us in a whole range of negative ways and which we do not have the ability to vote for. Unfortunately, this situation is far and away the most substantial we have faced, and there is so much fear, concern and uncertainty about what may be coming down the track.

Of course there is a huge irony in all this, because Surrey is one of the largest contributors to the Exchequer in our country. Cutting local authority funding, and impacting services and the many contracts that local authorities maintain, risks serious harm, not only locally in Surrey but to the national economy. Let us consider some examples.

In my area—perhaps in the hon. Member’s, too—we have had increased housing targets of up to 150% as a consequence of this Government’s decision. I understand their commitment to house building, but such targets open up the floodgates to opportunistic development—development that is unplanned. It requires incredible expertise in planning departments to ensure that such development is appropriate and that there is enforcement where necessary. Those are exactly the kind of services that risk being cut at just the time when we face the greatest pressure. Does he agree that we need some kind of financial resolution to ensure that these services are continued into the future?

I thank the hon. Member for raising housing targets and planning in local authorities. The majority of my constituency is covered by Runnymede local authority and, I think, roughly a third by Elmbridge local authority. In the Runnymede authority, there is a local plan, so there is no risk of the opportunistic development that he mentions. In the Elmbridge local authority, there is no local plan, so there is opportunistic development. Applications are under way that are causing huge concern to local residents in the Cobham, Downside, Stoke D’Abernon and Oxshott area in particular. In fact, at the end of last year, I wrote to the Secretary of State along with councillors from Elmbridge to raise our concerns about the fact that, because of local government reorganisation, again Surrey has found itself stuck in stasis.

There is a local plan in Elmbridge. Can that be put together by the time we hit the election of the shadow authorities? When you think about it, the term itself is an awful one—try knocking on doors and asking for support for the shadow authorities! What is Elmbridge to do? Do people living in the Elmbridge part of my constituency effectively have to wait a year and a half, until we have the full authority going when the shadow authority transfers over, before we can have some sensible progress when it comes to getting plans in place to protect people from opportunistic development? That is before we even talk about the scale of the housing targets, whose spread is disproportionate in Elmbridge; and I will ask the Minister later about the absence of a commitment for a Surrey mayor, who would in part be responsible for planning decisions. I hope Members can see that it is all a bit of a mess, and my constituents and local businesses are stuck in the middle.

No topic is more sensitive or concerning than where we find ourselves with special educational needs provision. We all know what happens when that is not fully funded. I welcome the work that the county council and Councillor Jonathan Hulley have been doing to improve transparency and engagement locally, really turning up the dial on what is happening for families and children with special educational needs, but ultimately we need national changes to services and support, and the funding to bring forward delivery. Without the local funding, the opportunities for children to reach their full potential are limited. It leads to failure demand, which is when services do not provide what is needed early on, thereby creating more demand in the system later, and that harms and limits children. That is notwithstanding all the pressures on families and siblings and on schools, which are going above and beyond to try to support those children.

I thank the hon. Member for Runnymede and Weybridge (Dr Spencer) for opening this debate on the important topic of funding for local government in Surrey and for the thoughtful, constructive and eloquent way in which he made his remarks. I also thank him for acknowledging that we have inherited a very challenging context. I do not intend to do any party political back and forth, but the reality is that the inheritance was incredibly tough. We are working at pace to rectify that, in an impossible context for everyone involved.

We share the hon. Member’s view that local government is on the frontline of delivering services to the people of this country. It can do so only when central Government works with it in partnership to overcome the shared challenges that we face. Our local government reforms, including funding reforms and reorganisation, will enable local councils that are empowered to deliver local services and equipped to drive economic growth and to work in the interests of their communities. That is a shared goal and a shared priority, and we will work with anyone across any political party in order to deliver it.

I turn first to the local government finance settlement. I put it on the record that this is the most significant move yet to make English local government more sustainable. That is a core priority against the really tough backdrop that local authorities across the country are having to navigate. We are delivering fair funding, targeting more money to the areas that need it most and then putting in place multi-year settlements for the first time in a decade. That will give councils the certainty to make the longer-term calls so that they can take a more preventive approach and do less crisis management.

For the local authority in Surrey, by the end of the multi-year settlement period in 2028-29 the provisional settlement makes available almost £1.5 billion of core spending power—an increase, in totality, of 7.3% compared with 2024-25. We acknowledge that there has been a cut in the core grant but, as has been the case for the past decade and a half, we look at the totality of core spending power, and it is going up. That does not in any way negate the fact that it is a tough context for local government to have to operate in, having had to operate in a really tough context for the past decade. However, we are trying to give sufficient flexibility in the approach that we are taking to enable local authorities to weather that.

Motion made, and Question proposed, That this House do now adjourn.—(Taiwo Owatemi.)

We are simplifying and consolidating 36 revenue funding streams worth over £56 billion over three years, which we hope will provide greater flexibility, stability and certainty for local authorities.

We recognise that funding reform is just one part of the story. That is why we are committed to simplifying local government by ending the two-tier system and establishing new single-tier unitary authorities. I think the end goal that Members across the House are trying to get to is consistent. There is common ground: we want authorities that are sustainable and strong and can deliver for constituents. The Secretary of State has decided, subject to parliamentary approval, that Surrey will move towards two unitary councils: east Surrey and west Surrey.

The question of debt was raised, and rightly so. We are very alive to the pressure facing the new unitaries because of the historical debt. As the hon. Member for Runnymede and Weybridge says, we have announced an unprecedented commitment to repay, in principle, £500 million of Woking borough council’s debt in 2026-27. That is the first tranche of support, and we will continue to explore what further debt support is required and how we can work with the new west Surrey authority to resolve the debt issue. We are clear that residents are at the heart of this, and it is our collective responsibility to ensure that we are delivering for them. We are committed to working together to make sure that they are protected and have the quality and level of services that they deserve.

From what the Minister says, it sounds as if she accepts that the remaining debt is still unsustainable to be dealt with at a local level. Is she teasing us with a future announcement of further moneys, or is it more of a general ambition?

I would do no such thing as tease with announcements that sit with the Chancellor. What we have said to partners on the ground in the local authority is that this is a shared problem and we are committed to working together to find a resolution. We understand the pressure that the historical debt will place on the new authorities. It is incumbent on all of us to find a way through that ensures that, on the other side of it, we have local authorities that are sustainable, can survive and can deliver the quality of services for the local residents that is required.

I think the Minister said a moment ago that she would work with the west Surrey authority to resolve the issue. At what stage in the process does she anticipate a decision and resolution? The west Surrey authority will not be an operational statutory unit until spring next year. We have elections to the shadow authorities this year. As I understand it, those shadow authorities will not have any powers until vesting day, when they are transferred to the full-fat authority, so the current county council and the district and borough councils will still have statutory powers.

Is the Minister saying that there will be no debt resolution until the west Surrey unitary authority is set up? Is she saying that there will be a resolution when the shadow authority is in place, or will we have a resolution before the elections this May? That is really important for our residents, who need to know what set-up the councillors they are voting for will have to deal with. Can she guarantee, or even say that it is her ambition, that she will get this resolved before we get to those elections?