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Local Government Finance 2025-02-05
05 February 2025
Lead MP
Jim McMahon MP
Debate Type
Ministerial Statement
Tags
Economy
Other Contributors: 45
At a Glance
Jim McMahon MP raised concerns about local government finance 2025-02-05 in the House of Commons. A government minister responded. Other MPs also contributed.
How the Debate Unfolded
MPs spoke in turn to share their views and ask questions. Here's what each person said:
Government Statement
Today, I am setting out the final local government finance settlement for England in the coming year. The Government acknowledges the difficulties faced by local authorities over recent years and aims to rebuild the foundations of local government with a plan focused on growth and empowerment. This involves moving away from competitive funding pots towards stable multi-year financial settlements. Core spending power for 2025-26 will be more than £69 billion, representing a 6.8% cash terms increase on this year. Despite challenging choices and trade-offs, no local authority will see a reduction in its core spending power. The settlement also addresses specific issues such as drainage funding, with an interim measure of increasing the levy grant by £2 million to £5 million.
John Hayes MP
Con
South Holland and The Deepings
Question
Asked about the drainage funding issue faced by local authorities in his constituency, particularly South Holland. He requested an additional grant to support these councils.
Minister reply
Acknowledged the disproportionate burden that drainage places on small district councils and has increased the levy grant by £2 million to £5 million as an interim measure. Committed to finding a long-term solution through wider reforms.
Salford
Question
Welcomed the statement but noted that Salford’s core spending for 2025-26 will increase by 8.7%, less than the 14% needed to meet higher costs in adult social care.
Minister reply
Agreed with the need for multi-year settlements and fundamental response to ensure local leaders have time and space to plan budgets effectively.
Hartlepool
Question
Welcomed the settlement, noting a £10 million increase in additional grant funding for Hartlepool but questioned the fairness of the council tax system.
Minister reply
Acknowledged criticisms of the regressive nature of council tax and committed to ensuring that every area gets decent local public services by providing top-up funding where needed.
Sutton and Cheam
Question
Called for a replacement for the council tax system with a progressive model of taxation.
Minister reply
Willing to work cross-party and through APPGs to understand potential solutions but managing expectations on consensus.
Steve Barclay MP
Con
North East Cambridgeshire
Question
Asked whether any council would be worse off considering the additional costs of employer national insurance contributions.
Minister reply
Acknowledged legitimate representations about third-party provider costs but noted that not all cost increases will be passed directly to local authorities due to contractual constraints.
Clive Betts
Lab
Sheffield South East
Question
While acknowledging the settlement, highlights the regressive nature of the council tax system based on valuations over 30 years old and suggests a need for a review.
Minister reply
The Minister agrees that there needs to be a long-term structural reform but emphasises the current immediate fiscal response to support councils over the current financial year, acknowledging the need to address local tax raising abilities and public service delivery costs.
Wendy Morton
Con
Aldridge-Brownhills
Question
Raises concerns about employer national insurance contributions not being fully funded by the Government and expresses worry about it affecting working people, leading to fewer public services and pressure on council tax.
Minister reply
The Minister clarifies that the funding is based on service expenditure costs, allowing councils flexibility in decision-making regarding in-house provision or contractual pressures. He cites support from the Institute for Fiscal Studies.
Matt Rodda
Lab
Reading Central
Question
Compliments the Minister’s approach and highlights the value of certainty in funding, praising the Government's support to local councils.
Minister reply
The Minister acknowledges the importance of linking council tax with quality public services and emphasises the need for a long-term overhaul of the current inefficient system.
Andrew Rosindell
Con
Romford
Question
Questions why outer London boroughs like Havering receive poor settlements despite having an oldest and youngest population in London, suggesting inequality in funding distribution.
Minister reply
The Minister agrees that past perspectives on inner-London pressures may not apply today due to moving pressures. He states that Havering has a 6.5% increase in core spending power.
Jas Athwal
Lab
Ilford South
Question
Raises concerns about outer London boroughs facing inner-London problems, an archaic funding system based on outdated deprivation statistics and the impact on areas like Redbridge.
Minister reply
The Minister acknowledges commonality in recognising specific funding issues but emphasises taking into account up-to-date population and deprivation statistics, local tax raising abilities, service delivery costs including rural or coastal community challenges.
Ben Maguire
LD
North Cornwall
Question
Cornwall council is now £1.3 billion in debt. What is the Minister’s plan to address future settlements, which will obviously be affected by very high interest rates on that enormous debt? The human cost is that the adult education centre in Camelford is now closing.
Minister reply
We are committed to working alongside councils to transform SEND provision and improve outcomes for young people. We understand the impact of dedicated schools grant deficits on council finances and will work with councils, parents, teachers, and schools to address these issues.
Jim McMahon
Lab
Question
Local government reorganisation will accelerate the need to do that in some areas, because we will have to reconcile the creation of unitaries with the inherited debt liabilities.
Minister reply
We are fully sighted on this and committed to working alongside councils to work through these issues. We understand the immense pressure that councils are under and will support them in setting their budgets while considering the impact on local taxpayers.
Luke Myer
Lab
Middlesbrough South and East Cleveland
Question
I welcome the focus on deprivation. Will the Minister commend the work of Middlesbrough council, which has led the council out of a best value notice?
Minister reply
The characteristics of strong civic leadership are clearly on display in Middlesbrough, but we know that it is not at the end of the improvement journey and will continue to support them.
Lee Dillon
LD
Newbury
Question
My own council, West Berkshire, a small unitary authority, now has only 2% of its net revenue budget in reserves. Will the Minister stand with West Berkshire council and grant exceptional financial support so it can continue to deliver important services?
Minister reply
We will review the submission made by West Berkshire council in good faith and in the spirit of partnership and confirm exact allocations later.
Andy McDonald
Lab
Middlesbrough and Thornaby East
Question
The shadow Minister is generous in giving way. He quite correctly praises councillors. Does he think, as we move forward with the changes, that it would not be a bad idea to start thinking about how we compensate councillors for their efforts? Many of them give up so many hours of their week and do vital work for very little by way of recompense.
Minister reply
I can only reiterate what the hon. Gentleman has said: they do fine work and most do not do it for money but because they have the interests of their local communities at heart.
Will Quince
Con
Dagenham
Question
I will come on to that, but we do have a different perspective. The point that I am making principally right now is that there are rising costs on councils, both in direct costs through national insurance and through indirect costs, which are not fully covered by this settlement.
Minister reply
The reality is that rural areas will face higher council tax increases to make up for reduced central funding, despite the cost increases of providing services in rural areas.
Clive Betts
Lab
Sheffield South East
Question
Can the shadow Secretary of State just explain his comments? I agree with my hon. Friend that the hon. Gentleman one of the more reasonable Members on the Conservative Benches. He said that the Government are switching money away from a needs-based formula to one based on deprivation.
Minister reply
Of course there are some needs around deprivation, but that is not the entirety. The major cost drivers for local authorities are the things I outlined earlier: adult social care, special educational needs and temporary accommodation.
Natasha Irons
Lab
Great Grimsby
Question
I had hoped that we could move away from this pitting area against area. I can assure the shadow Secretary of State that I am from an urban area with high deprivation, but with very high transport costs for children to get to special educational needs placements, and also massive temporary accommodation costs.
Minister reply
I do not want to be party political, but it is not us who are changing the formula. The reality is that this Labour Government are robbing Peter to pay Paul.
Andy McDonald
Lab
Middlesbrough and Thornaby East
Question
We were doing so well. We were talking about fairness across the board and not pitting one against the other—so far, so good. But given the shadow Minister’s comment, may I just remind him of the words of the former Prime Minister, the right hon. Member for Richmond and Northallerton (Rishi Sunak), in the garden in Tunbridge Wells, where, when talking about his time as Chancellor of the Exchequer, he mentioned having transferred funds deliberately away from deprived and challenged areas to more affluent ones?
Minister reply
I think my right hon. Friend the Member for Richmond and Northallerton was talking about fairness, which we all believe in.
Gareth Snell
Lab/Co-op
Stoke-on-Trent Central
Question
Under the formula that has been proposed and on which we will vote this evening, Stoke-on-Trent city council will receive a recovery grant of £8.2 million. I hope that the shadow Minister is not saying that, were the Conservative party still in Government, we would not receive that additional cash, and would therefore be £8.2 million worse off.
Minister reply
It is interesting, because the loss of the rural service delivery grant cost my local authority £14 million, so it depends where we draw the line and what the priorities are.
Luke Akehurst
Lab
North Durham
Question
My residents in North Durham are in a local authority area, County Durham, that is rural and deprived. I assure the shadow Minister that the previous version of the formulas was not designed to help that kind of rural authority. It may have helped wealthy rural authorities, but it did not help areas that suffered from both the difficulty of providing services in a rural area and the extreme need caused by deprivation.
Minister reply
We all have different views on this matter. Many parts of my constituency are not wealthy and have deprivation that is not sufficiently catered for by some of the formulas.
Florence Eshalomi
Lab/Co-op
Vauxhall and Camberwell Green
Question
Welcomes the real-terms funding increase in the settlement, highlights the additional funding for children’s social care prevention grant, raises concerns about national insurance contributions affecting councils as large employers, queries if impact on staffing pressures has been considered. Questions what work has been done to assess the risk of freezing Local Housing Allowance and its effect on homelessness services across the country.
Question
Raises concern about lack of proper assessment by officials when considering the impact of freezing local housing allowance on homelessness.
Minister reply
When we considered that issue in the Public Accounts Committee, it was pretty obvious that officials had not done any proper assessment of the impact that freezing the allowance would have on homelessness. Something ought to be done.
Florence Eshalomi
Lab/Co-op
Vauxhall and Camberwell Green
Question
Asks about details of public health grant for 2025-26, its impact on addressing major health inequalities such as drug and alcohol services and smoking prevention.
Florence Eshalomi
Lab/Co-op
Vauxhall and Camberwell Green
Question
Queries about additional long-term steps the Government will take to address local government auditing, seeking a timeline for updating the House on consultation results.
Betts
Lab
Sheffield South East
Question
The hon. Member must accept that part of the difficulty we have in a two-tier system is the inability to move money around that system. There is around £2 billion in the two-tier system that could be freed up through reorganisation of local government, so will he stop looking both ways on reorganisation, and give a commitment on behalf of his party that the Liberal Democrats will support it?
Minister reply
I thank the Minister for admitting that the 0.3% rise in DCN funding is happening. I do not think he can say that the Liberal Democrats and I are looking both ways on unitarisation, based on the statement earlier and the questions that took this debate later than Members might have wanted. We have concerns about unitarisation, particularly about the way that the Government are doing it.
Jim McMahon
Lab
Sheffield Brightside
Question
The hon. Member must accept that part of the difficulty we have in a two-tier system is the inability to move money around that system. There is around £2 billion in the two-tier system that could be freed up through reorganisation of local government, so will he stop looking both ways on reorganisation, and give a commitment on behalf of his party that the Liberal Democrats will support it?
Minister reply
We welcome reform of local government but cannot accept that it is imposed upon councils and local areas. My county council has 14 days of reserves left which highlights the severity of the financial situation.
Gareth Snell
Lab
Stoke-on-Trent Central
Question
Stoke-on-Trent will get £8 million from the recovery grant, and we are the fifth poorest city in the country. The hon. Member and I want to see services in our communities funded, so I urge him not to fall into the false trap that the Conservatives are setting by trying to pit our councils against one another.
Minister reply
We should not have councils competing against each other but recognise deprivation and the cost of delivering services. We fear removing the rural services delivery grant will exclude rural councils from critical funding.
North Cotswolds
Question
Questions about the impact of Treasury rules on local government, the late arrival of public health grants, councillor abuse, and pension rights for younger councillors. He also raised concerns about the rural-urban divide in funding allocation and the need for proper auditing to ensure that council funds are used wisely.
Vauxhall and Camberwell Green
Question
Echoed concerns about councillor abuse, pension rights for younger councillors, and the importance of public health grants being timely. She highlighted that local councillors often face significant financial and emotional burdens.
Question
Asked whether there would be support from his party to reorganise funding systems, focusing on the urban-rural divide in services like social care.
Minister reply
Sir Geoffrey Clifton-Brown responded that devolution should be built from the bottom up, allowing local people a real say in future service delivery.
Jim McMahon
Lab
Stoke-on-Trent Central
Question
Asks about the timetable for when councils will receive their statutory elections, and what support they will get along the route to submit proposals. He also questions how this unlocks devolution further down the line.
Minister reply
The Minister indicates that all councils in the 21 two-tier areas for reorganisation will receive their statutory elections, and individual councils will need to decide whether to apply or not. Proposals submitted by November would be expected, but he notes it is a short timeframe with support capacity along the route. The door is open to areas wanting to talk about mayoral devolution.
Tewkesbury
Question
Requests clarification on how long there will be after receiving the letter for the county council to work up a proposal that might be acceptable to the Government, emphasising the need for adequate time to consult people widely.
Minister reply
The Minister indicates he will write to the Member and put a copy in the Library so everyone else can benefit. He also responds to the question about whether the newly elected council will stay in place for four years, indicating that more details might be provided later.
Question
My hon. Friend refers to the spend on temporary accommodation, which the Select Committee heard evidence about. He may be aware that, collectively, London councils are spending £4 million a day on temporary accommodation. Does he agree that this is unsustainable?
Minister reply
I agree with my hon. Friend that it is not sustainable. It is also bad for children, families, councils and communities.
Sarah Dyke
Lib Dem
Glastonbury and Somerton
Question
The removal of the rural services delivery grant will force rural councils to make more difficult financial decisions in order to continue providing vital frontline services. The consultation stated that this grant failed to account properly for rural need, but no published evidence has been provided for its removal, and the grant is being removed a year early.
Minister reply
I thank my hon. Friend and recognise the contribution she has made for that section of our society. I agree that far more needs happen.
Andy McDonald
Lab
Middlesbrough and Thornaby East
Question
Local authorities are complex environments, with many facing effective bankruptcy putting essential services and jobs at risk. By 2025-26, councils in England will have received a 15.9% real-terms cut in their core spending power compared with 2010-11.
Minister reply
I welcome this year’s local government finance settlement, which represents a cash-terms increase of almost 7% and more than four times the real increase on the past year.
Robbie Moore
Con
Keighley and Ilkley
Question
I rise to speak on behalf of my constituents across Keighley, Ilkley, Silsden, Craven, Worth Valley, and indeed my wider constituency area. I want to focus on a specific part of the Government’s announcement and the real frustration that all my constituents will now face, as a result of the Government's decision, a 9.9% increase in their council tax... Will the Minister therefore take steps to address those concerns and look to the upcoming spending review to deliver the finances and provide a long-overdue £15 minimum hourly rate for those workers who served us so incredibly well—I think of the covid days of maintaining those public services—so that they are properly compensated for their work?
Anna Dixon
Lab
Shipley
Question
As the hon. Member well knows, the cuts made to local government by the Conservatives when in government, through the grant, hit councils such as Bradford district and those mentioned by other hon. Members the hardest... Does the hon. Gentleman agree with my assessment?
John Lamont
Con
Berwickshire, Roxburgh and Selkirk
Question
As ever, my hon. Friend is doing an excellent job of standing up for his constituents in Keighley and Ilkley, and exposing the failures of Labour-controlled Bradford council... Does he agree that many local authorities across the UK are having to take money away from vital services to fund this tax hike by the Labour Government?
Robbie Moore
Con
Keighley
Question
I would like to understand the current Government’s position on my campaign to pull my constituency and Shipley—I believe I speak on behalf of many Shipley constituents—away from Bradford council so that we can have our own unitary authority, spend our own council tax and business rates in our own area, ensure that our local priorities are indeed prioritised, and leave Bradford city to make its decisions. What is the Minister's position?
Minister reply
As the hon. Gentleman knows, he and my predecessor put the idea of a breakaway council to his own Government, who rejected it as a complete non-starter. Let us work together across Bradford for the benefit of all our constituents.
Gareth Snell
Lab/Co-op
Stoke-on-Trent Central
Question
Does he believe that has happened to Bradford in isolation? Does he believe that his is the only council that has looked at its services and budget and said, “This is tough”? What about Stoke-on-Trent?
Ellie Chowns
Green
North Herefordshire
Question
I welcome some aspects of what the Minister is proposing. It is important to not always fire political shots at each other and to look for common ground and give credit where it is due. I represent the wonderful North Herefordshire constituency, which has received a settlement that is well below the national average, well below the average for comparator councils, and well below what is needed to provide the services that residents need and deserve.
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North Cotswolds
Question
A lot of councils are seeing their reserves diminish and may face section 114 agreements. Will the Minister commit to working closely with councils to prevent this situation?
Minister reply
The local audit office is crucial for ensuring that local authorities receive expertise and support, which my hon. Friend the Minister will work on with the Committee to ensure local authorities' finances are carefully managed.
Rushanara Ali
Lab
Question
Did you hear the Minister's opening remarks about an 'investment' of £538 million in respect of national insurance contributions to provide a grant for local authorities? Would it not be better to pursue a lower tax, higher growth agenda rather than taxing our way into prosperity?
Minister reply
There is no silver bullet to solve the difficulties we face. In challenging circumstances, we have invested an additional £5 billion in local government. This settlement puts councils on a sounder financial footing and addresses the inherited issues by moving them from crisis management to prevention.
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