Asked by
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 Parliamentary Secretary, HM Treasury () (Con)
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.
(Lab)
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?
(Con)
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.
(CB)
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?
(Con)
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.
(Con)
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.
(Con)
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.
(LD)
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?
(Con)
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.
Noble Lords
Oh!
(Con)
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.
(GP)
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?
(Con)
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.
(Lab)
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?
(Con)
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.
(Con)
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.
(Con)
My noble friend sets out the rationale for the decision that was
taken, and the Government have made sure that, in the
commission’s place, we have strong controls so that local
government spending is done in the best possible way.
The (CB)
My Lords, arts facilities will be among the first to go when
local authorities have no money. The wonderful Lightbox gallery
in Woking, not far from me, is now under threat, as indeed is
funding elsewhere for symphony orchestras and much else. I repeat
what others have asked: will the Government properly fund our
local authorities, which have been underfunded for years, so that
all our cultural and leisure amenities are allowed to survive and
thrive?
(Con)
My Lords, I repeat what I said about the recent spending review
being the largest increase to core spending powers for local
government in over a decade. Additionally, we have put
significant support into the arts and culture sector through not
only the culture recovery fund during the pandemic but, for
example, support to swimming pools— they face high energy costs
during the current period of inflation—in the last Autumn
Statement. We continue to provide that specific support.
(Lab)
My Lords, have the Government not been fiddling with the local
government finance system for years? Do we not now need an
academic study to come forward with a plan for local government
funding that takes into account deprivation and the need to
spend?
(Con)
I do not agree with the noble Lord’s analysis but, as I said to
the noble Baroness in my Answer, our approach takes councils’
relative needs into account. We recognise that this may need to
be looked at again but, to provide councils with certainty, that
will not be done during this spending review period; it will be
looked at after the next Parliament.
(Con)
My Lords, we currently give three-quarters of local councils
their grants from the centre. It is a higher figure than for
anywhere in Europe, except tiny Malta, hence the assumption on
all sides is that the solvency of local authorities is ultimately
for central government. Does the Minister not agree that it would
be healthier for democracy if local councils raised a higher
proportion of their own budgets, so that there was a proper link
between taxation, representation and expenditure?
(Con)
My Lords, the Government are moving towards such steps—for
example, through mayoral combined authorities and other areas
where we are devolving both greater control of funding and powers
to those areas to act. With that comes greater
accountability.
(Con)
Can my noble friend say whether the Government have received any
proposals from His Majesty’s loyal Opposition on where additional
funding for local government is to be provided from?
(Con)
I have not received any such representations, but they have
perhaps gone to the department for levelling up; I will ask it if
it has ever received such representations from the Opposition
Front Bench.
