🏛️ Local Government Finances: London

• Funding Challenges in London Boroughs:
  • London boroughs are facing an unprecedented financial crisis due to insufficient funding, with boroughs receiving 28% less funding per Londoner than under the last Labour government.
  • Seven London boroughs require over £400 million in exceptional financial support to avoid effective bankruptcy in 2025-26.
• Homelessness Crisis:
  • Homelessness is a significant financial strain, with London councils spending £4 million per day on temporary accommodation, an increase of 68% in one year.
  • One in every 50 Londoners is homeless and living in temporary accommodation, including nearly 90,000 children.
• Local Government Funding Formula:
  • The current funding formula, unchanged since 2013, does not account for population growth, demographic changes, and high housing costs, leading to a mismatch between funding allocations and actual need.
  • There is a call for a comprehensive review of the funding formula to reflect the current needs of London boroughs, particularly in outer London areas.
• Impact of Population Growth and Demographic Shifts:
  • London’s population has grown by 900,000 in the last 15 years, increasing demand for services like social care and temporary accommodation.
  • There is a noted disparity between inner and outer London in terms of funding and service demand, with outer London boroughs facing growing financial strain due to outdated funding allocations.
• Government Response and Proposed Solutions:
  • The government has committed to a multi-year funding settlement starting from 2026-27 to provide councils with planning stability.
  • Additional measures include a £233 million allocation for homelessness prevention, and the government is working on a long-term housing strategy to address the root causes of homelessness.
  • There is a call for fiscal devolution to empower local authorities to raise their own revenue and address the structural funding issues.
• Cross-Party Perspectives:
  • There is a cross-party consensus on the need for funding formula reform to better reflect the changing demographics and needs of London boroughs.
  • Both Labour and Conservative MPs emphasized the importance of local government in delivering vital public services and the need for adequate funding to maintain these services effectively.

The session on local government finances in London displayed a moderate level of disagreement, warranting a rating of 3 out of 5. The disagreements were primarily centered around the historical and current financial policies affecting local councils, with a clear divide between the Labour and Conservative parties. However, the debate also showed a significant level of consensus on the need for reform and the challenges faced by local authorities, which moderated the overall level of disagreement.

Examples of disagreements include:

1. Historical Blame and Policy Critique: There was a notable disagreement on the historical impact of government policies on local finances. Labour MPs, such as Mr. Calvin Bailey and Helen Hayes, criticized the previous Conservative government’s austerity measures and their impact on local councils since 2010. In contrast, Conservative MPs like Peter Fortune and David Simmonds attempted to shift some of the blame to earlier Labour administrations, particularly referencing the period starting in 1997. This back-and-forth on historical responsibility for the current financial state of local councils highlighted a significant point of contention.

2. Funding Formula and Distribution: Another area of disagreement was the fairness and effectiveness of the current funding formula. While there was a consensus on the need for reform, the specifics of how the formula should be adjusted and the distribution of funds were debated. For instance, Jas Athwal and Luke Taylor emphasized the need for updated data and a fairer distribution, particularly for outer London boroughs. Conversely, Conservative MPs like Julia Lopez and Andrew Rosindell argued that the formula has historically disadvantaged outer London and called for a more radical overhaul.

3. Impact of Recent Government Decisions: The recent increase in employer national insurance contributions was a point of contention. Conservative MPs, such as Julia Lopez and David Simmonds, criticized the Labour government’s decision, arguing that it added financial pressure on local councils. In response, Labour MPs like Danny Beales defended the increase, highlighting other financial uplifts provided by the government, such as increased public health funding and homelessness support.

Despite these disagreements, the session also demonstrated areas of agreement:

• Need for Reform: There was a broad consensus on the necessity of reforming the local government funding formula to better reflect current needs and demographic changes. Both sides acknowledged the outdated nature of the current system and the need for a more equitable distribution of funds.

• Challenges Faced by Local Authorities: MPs from all parties recognized the severe financial pressures faced by London councils, particularly in areas like homelessness, social care, and special educational needs. This shared understanding of the challenges helped to moderate the level of disagreement.

• Commitment to Collaboration: The Minister, Alex Norris, emphasized the government’s commitment to working collaboratively with local councils and MPs to address these issues. This approach was welcomed by many MPs, indicating a willingness to move forward together despite past disagreements.

Overall, while there were clear points of contention, the session also showed a willingness to engage constructively on the issues at hand, leading to a moderate level of disagreement.