Commons Sense

House of Commons · Ministerial Statement

Financial Distress in Local Authorities

01 February 2024 · 9 other contributors

Opened by Clive Betts Lab Sheffield South East

Local Government

Summarised by AI from the official record, so it can contain mistakes.

Read the full transcript on Parliament.uk

At a glance

Clive Betts raised concerns about financial distress in local authorities in the House of Commons. A government minister responded. Other MPs also contributed.

Key points

  • The Levelling Up, Housing and Communities Committee reports on the financial crisis facing English local authorities.
  • Over six years, eight councils have issued section 114 notices declaring bankruptcy; previously, none did over an 18-year period.
  • The Local Government Association estimates one-fifth of councils may be in distress within a year due to a multi-billion-pound funding gap.

How the debate unfolded

MPs spoke in turn to share their views and ask questions. Here's what each person said.

Government Statement

Clive Betts

The Levelling Up, Housing and Communities Committee reports on the financial crisis facing English local authorities. Over six years, eight councils have issued section 114 notices declaring bankruptcy; previously, none did over an 18-year period. The Local Government Association estimates one-fifth of councils may be in distress within a year due to a multi-billion-pound funding gap. Core spending power has decreased by 26% since 2010 due to central government grant reductions and council tax increases. Councils face rising expenditures in social care, special educational needs services, and homelessness. The Government announced £600 million of extra funding but this is insufficient; the report recommends reforms including a revaluation of properties for council tax, additional bands, business rates reset, and multi-year settlements.

Other contributors (9)
  • Bob Blackman Con Harrow East

    Question

    Does the Chairman agree that a national pool of funding is needed for local authorities when demand-led services such as adult social care, children’s social care and homelessness dramatically increase their financial burden?

    Minister reply

    The Minister acknowledges the need for a different method to fund social care beyond council tax. He emphasises the challenge of people paying more in taxes but receiving fewer services, which is not sustainable.

  • Khalid Mahmood Lab Birmingham, Hall Green

    Question

    Commends the hon. Friend's work and highlights issues faced by Birmingham City Council under special measures due to lack of funding and reserves, emphasising that local government funding is a critical issue.

    Minister reply

    Recognises Birmingham's specific problems including equal pay issues; acknowledges general pressure on local government as reported by witnesses from the sector.

  • Stephanie Peacock Lab Barnsley South

    Question

    Thanks the hon. Friend for his report, noting Barnsley Council's significant budget cuts and lack of levelling-up funding; inquires about a decision on a cultural fund bid.

    Minister reply

    Expresses willingness to provide funding if possible but highlights issues with individual pots not being joined up; suggests moving towards single pots reflecting local needs.

  • Nadia Whittome Lab Nottingham East

    Question

    Thanks the hon. Friend for his work on the report, emphasising Nottingham City Council's financial struggle due to high cuts in funding since 2010; asks about making local government funding fairer.

    Minister reply

    Agrees that funding should be made fairer but notes different perspectives on what constitutes fair funding; highlights outdated data in current system.

  • Richard Burgon Lab Leeds East

    Question

    Thanks the hon. Friend for his report, noting significant cuts to Leeds City Council's funding since 2010 and its impact on essential services; calls for support of measures outlined in the report.

    Minister reply

    Acknowledges funding cuts as a result of reduced central government grant and council tax increases; emphasises need for fundamental reform.

  • Imran Hussain Lab Bradford East

    Question

    Highlights 14 years of ideological austerity leading to financial crisis in local authorities, noting Bradford Council's £100 million cuts from 2015; calls for immediate funding and blames the Government if not provided.

    Minister reply

    Acknowledges that while some councils may face difficulties due to their own issues, general problems stem from funding shortages; mentions issues with Bradford’s young population and related services.

  • Jim McMahon Lab/Co-op Oldham West, Chadderton and Royton

    Question

    Thanks the hon. Friend for his report on local government finance settlement and audit breakdowns; expresses concern over removal of early warning system due to audit problems.

    Minister reply

    Acknowledges importance of securing local government audit by end of year; highlights that councils should not be blamed for qualified accounts.

  • Simon Hoare Con North Dorset

    Question

    Thanks the hon. Member and his colleagues on the Committee for their work, agrees on importance of certainty and security in local government funding through multi-year settlements; proposes cross-party working for long-term reforms.

    Minister reply

    Acknowledges merit in cross-party working to achieve general support for social care funding reform but notes complexity.

Shadow Comment

Bob Blackman

The shadow minister questions whether the Government should establish a national pool of funding for local authorities dealing with demand-led services such as adult social care, children’s social care, and homelessness to address financial burdens during sudden increases.

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