That this House has considered the impact of local government reorganisation in the South East.
It is a pleasure to serve under your chairmanship today, Mr Vickers. I am grateful to the hon. and right hon. Members from across the House who will be contributing to this debate.
Local government is the tier of government that is most closely woven into people’s everyday lives. It is where national decisions become local realities: the roads we drive on, the services that support vulnerable families, the planning decisions that shape our towns and the community spaces that bring people together. It is for that reason that I support the principle of devolution. Decisions should, wherever possible, be taken by those closest to the communities they directly affect. But as is so often the case in public policy, the difficulty is not the principle, it is the implementation.
In Surrey, implementation is already raising serious concerns about scale, financial sustainability and a process that has moved forward with a troubling democratic deficit. This debate concerns the south-east of England more generally, but colleagues from across the region will speak about how reorganisation is affecting their own counties and communities. My perspective naturally comes from Surrey, where those concerns are already becoming clear. Size, remoteness and financial fragility are among them, and we must add to that mix the glaring democratic deficit.
I commend the hon. Gentleman for securing this debate. I spoke to him beforehand, so he knows what I am going to say. I want to support him—that is the reason why I am here—and I want to give an example that happened in my constituency and which is similar to what the hon. Gentleman is referring to. Two councils, Ards and North Down, were merged together, and one issue that was put forward as a “must do” was the financial and administrative savings with two councils being able to do the job of one, but that did not work out. Does the hon. Gentleman agree that while efforts to streamline governance should be welcomed, more action must be taken to provide adequate financial support to cover one-off reorganisation costs without compromising the delivery of services such as, for example, waste services?
As ever, I am grateful to the hon. Gentleman for his thoughtful, sagacious intervention. He will discover, if he is able to stay for the rest of my speech, that I will cover those fundamental topics: the funding of the transitional moment, and the certainty that joining two authorities together does produce long-term savings and the modelling that those assumptions rely on.
In late 2024, Surrey was placed on a fast-tracked path towards local government reorganisation. That process was triggered when the leadership of Surrey county council requested that the Government cancel the local elections that were scheduled for May 2025. That request was granted, and the result is that councillors elected in 2021 will now remain in office until April 2027, two years beyond their original mandate, and oversee one of the most significant and consequential restructurings of local government in our county’s history. The idea of cancelling elections has, more recently, fallen out of favour with both the Government and, as I understand it, the Conservative party. Sadly, for those of us in Surrey, that realisation came only after the Surrey Conservatives pulled the trigger on the policy that the Government had placed before them. Whatever one’s view of reorganisation, it is difficult to argue that such a profound change should proceed without giving residents the opportunity to pass judgment on those leading it. Local government reform should be carried out with democratic consent, not in its absence.
Alongside those democratic concerns sit serious financial questions. Over the past decade, several councils across Surrey pursued large-scale commercial property investments in an attempt to generate income as central Government funding declined. In some cases, those strategies have left councils carrying extremely substantial debt. The six councils that could form the proposed West Surrey council—Woking, Spelthorne, Guildford, Runnymede, Surrey Heath and Waverley—collectively carry around £4.5 billion-worth of debt. In my constituency, the then Conservative-led Surrey Heath borough council speculated wildly on commercial property between 2016 and 2019. It spent £113 million on a shopping centre with a knackered roof and a former department store riddled with asbestos. At the time, those purchases were described by the council’s then chief executive as “investments” that would help to secure the council’s long-term financial viability as Government funding declined. In practice, it amounted to a Conservative-run borough council borrowing heavily on the financial markets and through the public works loan board in the hope of defying the gravity of the cuts coming from Conservative central Government. Today, those assets are estimated to be worth around £30 million—not the original £113 million. They are operationally loss-making and together risk bankrupting my borough before we even reach unitarisation next year. Surrey Heath cannot afford to keep them but cannot afford to sell them because selling would crystallise the losses it has incurred.
My hon. Friend is eloquently explaining the serious financial situations that many potential unitary councils will be in. They will be saddled with such financial burdens that it will be difficult for them to deliver the services that local residents need. A three-year financial forecast for East Surrey has identified a potential £35 million deficit. The Whitehall funding settlement does not currently reflect the real cost pressures that such councils will experience. Does my hon. Friend agree that Labour needs to fix a broken funding system and not leave residents paying the price?
I am grateful for my hon. Friend’s intervention. Labour may not have broken the local government system in Surrey but there is now an obligation to ensure that people who live in Surrey are not faced with the bankruptcy of their new unitary authorities on day one of those authorities’ existence, especially given the vital services that they will be delivering.
In neighbouring Woking—where there was another Conservative-run council in those fateful years—the gravitational denialism was even wilder. During the same period, Woking borough council accumulated debts that now stand at approximately £2.1 billion. It is said that that debt is so large that it directly impacts the Government’s borrowing capacity in international markets. Versions of that story are repeated across much of west Surrey: it is a pattern of behaviour that has, frankly, never been properly investigated. Its impact has been compounded by systemic failures in the auditing of local government accounts.
Is the hon. Gentleman astounded, as I am, that the majority of that debt is with the public works loan board, which sits underneath the Treasury. Where was the Treasury when that debt was being allowed to accumulate?
I could not agree more with the hon. Gentleman. I will come on to talk about a systemic failure, as I see it, in the power that section 151 officers of borough councils have in effectively signing off the ability of a council to repay debts when accumulated. That is a power that I think may be far in excess of the skills that they have. After all, there is no separate mechanism to determine—from the Treasury or from the PWLB, for example—the ability of a council to fulfil its obligations.
It is therefore entirely reasonable that residents ask a simple question: why should communities that played no role in accumulating that debt now be expected to inherit its consequences through a newly-created local authority? If reorganisation is intended to create a stable future for local government, it would be deeply concerning for any new authority to begin life already burdened with billions of pounds in inherited liabilities. I ask the Minister what assurances the Government can provide that any future West Surrey authority will begin life next year on a financially sustainable footing? It cannot be right that my residents face the realistic prospect of their new unitary authority being bankrupt or effectively bankrupt on day one of its existence, given the critical services that councils are expected to provide.
The scale of borrowing in Surrey also raises wider questions about financial oversight in local government—this is where I will answer the hon. Member for Crawley (Peter Lamb). Local authorities rely on statutory finance officers—section 151 officers—to ensure financial prudence, yet the scale of borrowing undertaken by some councils suggests that existing safeguards have not always been sufficient to prevent high-risk commercial strategies. This debate is often framed in terms of protecting section 151 officers from excessive political pressure, and that may well be necessary, but it is also true that section 151 officers hold significant authority within council structures and must themselves be subject to proper scrutiny and accountability—something that is often lacking.
I thank my hon. Friend for setting out with such exemplary clarity the challenges of going ahead with local government reorganisation, particularly on the timescales that have been set. He represents a Surrey constituency, while I represent a constituency in West Sussex, where we are currently awaiting the outcome of the Government consultation on whether the new unitary will be a single unitary authority covering all of West Sussex, second in size only to Birmingham city council, or our preferred option of two future west Sussex unitary councils.
Does he not agree that constituents need local decision-making and for there to be accountability, so that when pothole or SEND provision fails, constituents have a close relationship with their councils and can get the answers that they deserve?
I feel every sympathy with my hon. Friend’s campaign for two unitary authorities; I was very supportive of there being three unitary authorities for Surrey, and we were sadly denied that. That would have delivered the much more local accountability to which my hon. Friend refers. I wish her good luck in her campaign for two unitary authorities, and for the local accountability which, as she recognises, is so important for her constituents.
There is also a wider concern that I hear frequently from the voluntary and charitable sector. Many charities organise themselves around existing local authority boundaries. They rely on those relationships for funding, partnerships and the delivery of services. Local government reorganisation risks sweeping away that social infrastructure —boundaries change, funding streams shift and relationships built up over years can disappear overnight—but this is happening at precisely the moment that charities may be more important than ever, helping communities to pick up the pieces during a period of institutional upheaval and ensuring that vulnerable people do not fall through the gaps that inevitably appear during major restructuring.
Against that backdrop, local government reorganisation is creating substantial additional workload for councils and their staff, many of whom are already working under tight financial constraints and significant workforce pressures. Local government reform should strengthen local institutions, not weaken them. It should produce councils that are financially stable, democratically accountable and close enough to the communities they serve to understand their needs. Those are the standards that fundamentally matter, and the ones against which people across Surrey and the south east will judge the outcome of this process.
It is a pleasure to serve under your chairmanship, Mr Vickers.
Local government is an area of great interest to me. I did my master’s dissertation on models for English devolution; I have worked at the UK’s leading think-tank on devolution; for 17 years I worked as an adviser to local authorities, and I have served in local government in a county council and a district council, including almost a decade as a council leader. From 2015 onwards, I have also been involved in various devolution proposals for Sussex in one way or another.
I say all that because, despite that background, I still cannot get my head around what the Ministry of Housing, Communities and Local Government is trying to achieve with all this. That is despite talking to the director at No. 10, special advisers and Ministers on this policy area. In fact, the more I delve into it, the more opaque it becomes.
My understanding is that this reform all kicked off with Angela Rayner and Rachel Reeves—two people without any background in local government—making a deal: more money now, in return for local government reform. The only reason they thought it would deliver any results was that the County Councils Network had, for many years, been putting forward a document that seemed to set out a case that there would be financial savings if county councils were merged at the unitary level.
Those figures relied on population sizes of roughly half a million people—that figure is critical; I re-read all the statements made by local government Ministers on this before this debate, and it is a figure that has been repeatedly stated and was consistently pushed for the better part of a year. The reason was that, when we look at the County Councils Network figures, the £2 billion savings it talked about delivering, which it presented as if it were an annual statement—it is not, it is over five years—are achievable only when dealing with population sizes of 500,000 or greater.
I am very much appreciating and enjoying the hon. Member’s contribution to the debate. Can I suggest that, when it comes to getting local government in England on a sound financial footing, the real elephant in the room is putting social care on a financial basis so that councils can deliver decent social care to our communities?
There are three areas, and social care is one of them. The finances of upper-tier authorities have been totally compromised, initially by the costs of social care, where we have still not taken decisions all these years after the Dilnot review. We all know that social care is slowly bankrupting councils. Go to any single council presentation on local government finance—whether a unitary or upper-tier authority—and that is the thing that will be mentioned.
Then there is SEND, which again has absolutely crippled local authorities’ funding to the extent that we allowed them to keep it off their books because the cost would have bankrupted them. That has now been taken away from them to be covered centrally, so that is one less problem to deal with.
Lastly, there are the costs of temporary housing, which housing authorities, like the districts, are mandated to provide. They have no control over it, and are often dealing with the consequences of central Government decisions that move more people into the area and create that level of housing need. However, those costs ultimately stem from a failure of housing policy in this country.
Those are the three areas bankrupting local government. Despite the fact that local government started out as the most efficient part of the public sector and has become still more efficient since, taking sensible decisions to maintain its survival, it cannot deal with pressures that are not being dealt with centrally. If we deal with those three problems, local government finance problems will go away—but they are central Government’s problems to resolve, and we have not yet quite resolved them.
I accept that all that is in motion, but when I talk to people in local government, very few of them want this policy. The reality is the boundaries are most likely going to end up lasting for another half a century—just look at the pain we are going through now; we are not going to want to go through it all again. We should not be embarking on something that will last 50 years when we cannot publish the evidence base because it is so weak. A pause is now needed to reflect on these proposals. I will continue to argue more and more loudly for that, adding more and more things to the debate about the best outcome here. I say to Ministers, “You’ve inherited a mess from other people; it wasn’t of your making and I really wouldn’t jeopardise your careers seeing this through.”
May I remind the hon. Gentleman that we do not refer to other Members by name, but by their constituency?
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Councillors very often perceive that they are not allowed to overly scrutinise 151 officers because of members’ codes of conduct. Will the Government therefore consider whether additional safeguards or oversight mechanisms are needed to prevent similar situations arising again in the future, particularly as councils become larger, their finances become more complex and the risks become even greater.
There are also important questions about the size and structure of the authorities now being proposed. Under current proposals, the new West Surrey council would serve approximately 657,000 residents. By comparison, the average non-metropolitan unitary authority in England serves around 265,000 residents, with most serving fewer than 300,000. Authorities of the scale we are talking about today risk weakening democratic accountability, diluting local knowledge and making decision-making feel more distant from the communities they are meant to serve.
Ministers have suggested that having larger authorities will deliver financial efficiencies. In support of that argument, the Government have relied on modelling produced by the County Councils Network, which happens to be chaired by the very same leader of Surrey county council who locked Surrey into this fast-track pathway in the first place. Despite several Parliamentary questions seeking clarification, it remains unclear what independent modelling the Government have undertaken to substantiate those claimed savings. I ask the Minister again: have the Government undertaken their own economic modelling of the projected financial benefits of local government reorganisation in Surrey? If so, will that modelling now be published publicly?
Finally, we should recognise that all of this is unfolding while councils continue to deliver vital services under considerable strain. In my constituency, the concerns most frequently raised with me relate to special educational needs and disabilities provision. Hundreds of families contact me about problems with education, health and care plans—incorrect names, incorrect details, long delays and support packages—that simply do not meet the needs of the children concerned.
For the past three years, Surrey has recorded the highest number of SEND tribunal appeals nationally. At the same time, residents regularly contact me about deteriorating road surfaces, potholes causing vehicle damage and wider infrastructural pressures. These are not abstract policy debates; they are real challenges affecting families who rely on local government services every single day.
The problem, when we come down to it, is this: for the Labour party, that is completely unelectable. We have pockets of support within the south east, but we do not have larger footprints. With the politics unravelling around this question, we have started to talk about smaller sizes for unitary authorities, but here we run into a problem: unitary authorities do not save money. Merging existing councils saves money. We could merge districts together—that would save money. We could merge counties together—what an idea!—and that would save money. We could merge existing unitaries together—that would save money. However, when we start creating unitaries, we are merging two different tiers together; if that is a smaller footprint than existing upper-tier authorities, it will always end up costing more money than the alternative.
We now have a proposal that will not deliver politically or financially. I will return to the finances in due course, because the situation is much worse than people think it is. This proposal is somehow still on the table long beyond the original document that set this all out. If there are other figures on this then, like the hon. Member for Surrey Heath (Dr Pinkerton), I would be delighted to see them. I have asked for them repeatedly. However, when Governments do not release data, we come to the conclusion that they do not have data that backs up their case. The evidence base here is very hard to find.
The other argument that comes up very frequently is that two-tier areas are too complicated and people do not know who runs what. I have lived in two-tier areas essentially my entire life, apart from when I was at university, and that is not something I have come across, despite being in roles where I might expect to come across it very regularly. If we say tiers are a problem, adding mayors across the country and encouraging people to set up third-tier authorities increases the total number of tiers at the local government level. It adds to the complexity rather than decreasing it.
We hear bizarre arguments about issues such as waste collection and waste disposal authorities, as if the idea that someone collects the bins and someone gets rid of them is complicated. What particularly grates my gears about that argument is that there are many unitary authorities that are not waste disposal authorities. Take the Thames valley waste authority as an example—take Greater London—take Greater Manchester: in all those areas, waste is collected that is then disposed of on a larger footprint. There are many such areas where the powers do not perfectly align, and people manage to get through them without any great deal of controversy.
The argument for much of this change, particularly with the mayoralties, was that we were would get wider public sector reform, which would deliver astounding savings. The problem with that argument is that the footprints that the change was supposed to create would align the mayoralties, the police authorities and the integrated care boards, so that we would get all the services in one area and they could deliver efficiencies. However, we are now talking about creating police authorities on a larger footprint than the existing mayoral footprint, so the two would no longer correspond. There will be a much more complicated structure now, with deputy mayors sitting on different boards in relation to it. Similarly, the ICBs have had to expand, so they no longer go along with the devolution footprint.
The only form of public sector reform that we can now carry out around this process is reform of local government on its own, and that will not deliver the projected savings. Most of the areas that a district council deals with and most of the areas that a county council deals with do not interface in any meaningful way when it comes to savings. If they did, the County Councils Network report, which it paid PwC to produce in order to create the strongest possible case for reform, would have put that forward. Instead, the report solely states that savings can be made by reducing senior officer numbers. As anyone who has been involved in the sector knows, many of those posts no longer exist in the numbers that they did at the time that the PwC report was formed. At this point, such figures simply do not exist.
The only people I can find who have any difficulty with the idea of two-tier areas are civil servants and politicians from unitary authority areas. One might imagine what other people might feel if we went to their areas and tried to impose our culture upon them. There has also been the claim that these reformed authorities will be engines for economic growth and housing delivery, but let us think about it in this way: I was the leader of a local authority that delivered over four times our Government-assessed numbers for housing, whereas—unfortunately—Mid Sussex district council, which was previously under Conservative control, often did not even have a core strategy for that entire period, never mind delivering any actual housing numbers.
We are about to create unitaries where the areas that deliver large volumes of housing, and that need such housing at an affordable rate, will be swamped by rural communities. What do we think will be the dominant factor in these new authorities, where the politics is controlled by rural communities? Will it be a focus on economic development? Will it be a focus on housing delivery? Or will it be stamping down on those two things, as we have seen time and time again? This plan does not deliver on the Government’s missions; it kills them off, as many Members have tried to point out in recent times. The reality is that demography is destiny, and rural communities will have control over those authorities.
Returning to the issue of finance, in my area the actual cost of the merger is estimated as three times greater than the estimate put forward so far. In fact, even on the most optimistic assumptions, on these footprints no savings would be delivered until the end of the next Parliament—but it is more likely that there would not be any saving at all. In fact, the situation gets even worse than that. Who knows when most of the country’s leisure centres were built? I will give Members a clue—it was in the early ’70s. What happened in the early ’70s? We merged all the district councils, and they looked at their accounts and said, “I am not handling this over to the next council”, and they got busy spending.
We can see that in the country currently. The reality is that, until the protections come in with the new authority, people will be getting money out the door. Debt is going up, budgetary decisions are being postponed and savings are being put off in order to invest in local communities while there is one last chance to do that. Over the next 12 months, section 114 notices are far more likely than in any preceding period.
I will move on to the issue of democracy. Resident satisfaction surveys of local authorities have consistently shown a positive correlation between the perception of a local authority and the size of that authority. It is not the other way around, as though suddenly authorities delivered much more effectively when they got to a much greater footprint—why would that be the case? More remote Government is not necessarily going to make people any happier.
Currently, the average size of authorities in the UK is seven times larger than not the European average, but the authorities in the European country with the next largest—and this programme will make our authorities 14 times larger than those. Why are we such an outlier? Why are councils in Europe, which have far greater powers and far greater money than we do, apparently perfectly capable of running their local areas, while in our areas we have to bring things up to a central Government level? Again, I think that the civil service has far more to do with this programme than any actual rational thought does.
The changes will also prevent people from having any meaningful relationship with councillors. In the UK, we are far less likely than in any other part of Europe to have independent councillors. The reason is that with footprints of this size we cannot build a meaningful relationship with a councillor. The distance cuts people off from their democracy and any sense of control, and increases their scepticism. Conversations about area committees are frankly meaningless; anyone who has actually worked with those structures knows they do not replace meaningful representation.
The fundamental problem we will run into is geography. When we strive to get population sizes in rural areas, we come up with enormous geographies; for my patch, we are most likely talking about an area in excess of 50 miles wide. Greater London is just over 30 miles wide. What common interests can exist in that footprint? What common services? What common identity? We will end up with competition between the different communities in those areas, and policy will be driven by those communities whose voices are heard loudest in whatever administration is in control. That will, again, mean that the rural beats out the urban. Urban communities such as mine, which includes some of the most deprived parts of the country—certainly in the south-east, at least—will lose out as a direct result of the restructure.
There are 71 Labour constituencies that trusted us at the last election, but that will see their quality of life decline as a direct result of the policy as well. When we look at the numbers, it might well be that if the Labour party, sacrificed those 71 constituencies, it would never be in office again. I am sure that Opposition Members would be delighted; it is why I thought they would be pushing the policy, not the Members on the Labour Benches. Talk to any Labour party organiser and they will say that the policy undermines our organising model. They are up in arms.
Most Labour Governments in the last century would not have happened had there been a reform such as this. We are arguing for a policy that no longer reflects the principles on which it was first brought together. It no longer reflects the same goals: it will not save us money, it will be more remote and it will undermine the deprived communities that this Government are allegedly in place to serve. It is clear that the advice given to Ministers in MHCLG is poor; we have seen that in just one month, with fair funding miscalculations that took place, and we have seen that with the elections, with the conclusions that we now all have to deal with.
Having been through the detail of the policy over and over again, I cannot see any way that it is not another example of that poor advice.