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Financial Distress in Local Authorities
01 February 2024
Lead MP
Clive Betts
Debate Type
Ministerial Statement
Tags
Social CareEconomyTaxationHousingBusiness & TradeChildren & FamiliesLocal Government
Other Contributors: 9
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.
How the Debate Unfolded
MPs spoke in turn to share their views and ask questions. Here's what each person said:
Government Statement
Social CareEconomyTaxationHousingBusiness & TradeChildren & FamiliesLocal Government
Government Statement
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.
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.
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
Shadow Comment
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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