Budget debate: Protecting Working People, House of Commons, Monday 4 November 2024

• As conveners of place, and providers of vital public services, councils are central to supporting the life chances and livelihoods of all citizens. It is encouraging that the Chancellor has announced £1.3 billion of extra funding, through the local government finance settlement, for the next financial year. Together with council tax flexibilities and locally-retained business rates, this will provide a real-terms increase in total core spending power in 2025/26 of around 3.2 per cent. This will help meet some – but not all – of the significant pressures in adult and children’s social care and homelessness support. However, the Government needs to give urgent clarity on whether councils will be protected from extra cost pressures from the increases to employer national insurance contributions.
• Other measures announced in the Budget, including the Extended Producer Responsibility, special educational needs and disabilities (SEND) uplift, Household Support Fund, Bus Service Improvement Plans funding, local roads maintenance, resource funding for homelessness pressures, and the Kinship Allowance pilot represent over £4.5 billion in additional funding.
• In our Budget submission, we called for Government to deliver a fundamental shift towards investing in cross-cutting community services that underpin the wider determinants of health, well-being and prosperity. There is substantial evidence that preventative spending in areas such as welfare, adult social care, children’s social care, housing and homelessness services improves people’s lives and reduces long-term costs to the public sector. We’re pleased to see new, additional and continued funding for preventative services that support families, including for childcare, children’s social care reforms, piloting a Kinship Allowance, breakfast clubs, an extension to the Family Hubs programme and the Household Support Fund.
• To truly embed a preventative approach to public services, the long-term benefits of spending on prevention must be routinely considered in all Treasury and departmental spending decisions. This will mean developing a more sophisticated understanding of social return on investment, as well as ensuring councils are resourced to pilot and evaluate preventative services to understand where investment is most effective.
• Rising housing costs are acutely impacting many in our communities, driving hardship and homelessness. We’re pleased that the Government announced measures to help councils to build more social affordable homes, including an increase in the Affordable Homes Grant, Right to Buy Reforms, and consulting on a 5-year social housing rent settlement. In the long term, we want Government to work with us to roll out five-year local housing deals to all areas of the country that want them – combining funding from multiple national housing programmes into a single pot. This could support delivery of an additional 200,000 social homes in a 30-year period.
• New funding for homelessness services is welcome. However, we’re disappointed that the Government did not address the temporary accommodation subsidy gap, which cost councils £204 million in 2022/23, and is diverting vital funding from homelessness prevention. The Local Housing Allowance rate for private rents will also remain frozen at current levels for 2025/26, meaning housing benefit will continue to lag behind the cost of private rents. In our Budget submission, we called for the Government to continue up-rating LHA to the 30th percentile of local rents to prevent homelessness. Previous LGA analysis shows that for every 1,000 households experiencing a shortfall between LHA rates and rent, 44 will require temporary accommodation.
• We’re pleased that the Government has listened to councils and partners and has committed to sustaining the Household Support Fund (HSF), by providing an additional £1 billion for HSF and discretionary housing payments until 2025/26. This will help councils support residents who are unable to afford the essentials, as well as providing integrated, preventative services to reduce financial hardship. In the long-term, we want to work with Government to ensure that the mainstream benefit system meets households' essential living costs, as part of a cross-cutting preventative approach to reducing poverty.
• The Government announced several measures to support people into quality jobs and address economic inactivity. These policies will be most effective through a place-based approach, which we have set out through our most recent Work Local proposals. The LGA looks forward to engaging with the Get Britain Working White Paper and shaping the delivery of skills and employment support, so it works in every area.

A significant number of households continue to struggle to meet their essential living costs through employment and/ or the national benefits system.

The LGA has consistently highlighted the benefits of funding local welfare support on a more long-term, sustainable footing to allow councils to reduce poverty and support residents facing severe hardship. We are therefore pleased the Government has listened to councils and partners and has committed to sustaining the Household Support Fund (HSF). The Government will provide £1 billion to extend the Household Support Fund and Discretionary Housing Payments into 2025-26.

We want to work closely with Government and stakeholders so that crisis support remains available to people who need it, connected to wider advice and services that prevent poverty and strengthen households’ financial well-being and resilience.

The LGA has long held the view that local welfare should not be relied upon to fill gaps in the national social security system. In the longer-term, we want to work with Government to ensure that the mainstream benefit system meets households' essential living costs, as part of as part of a cross-cutting preventative approach to reducing poverty. This would help to reduce the need for discretionary support, enabling councils to provide complementary support for residents who fall through the cracks or those who have complex needs.

The Chancellor announced that the government will providing £233 million of additional spending in 2025-26 on homelessness, taking total spending to £1.0 billion in 2025-26. While we’re pleased that the Government is providing additional funding, councils are spending more than £1.74 billion on temporary accommodation in 2024.

The number of households living in temporary accommodation has surged by nearly 90 per cent in the past decade, now exceeding 117,000, including 151,630 children. 

Most of the costs for temporary accommodation cannot be recouped by councils due to limits on temporary accommodation housing benefit subsidy, which is frozen at 90 per cent of 2011 Local Housing Allowance (LHA) rates.

In 2022/23 councils in England spent £936 million on housing benefit expenditure towards the total temporary accommodation bill and were only reimbursed £731.5 million by the DWP, which diverts funding away from homelessness prevention.

Moreover, the LHA rate for private rents will remain frozen at current levels for 2025/26, meaning housing benefit will continue to lag behind the cost of private rents. In our Budget submission, we called for the Government to continue up-rating LHA to the 30th percentile to prevent homelessness. Previous LGA analysis shows that for every 1,000 households experiencing a shortfall between LHA rates and rent, 44 will require temporary accommodation.

An acute shortage of social and affordable homes, and rising rents in the private rented sector continue to acutely impact the lowest income and vulnerable families, driving hardship and homelessness.

In our Budget submission, we made the case for councils to be empowered to build more affordable, good-quality social homes quickly and at scale. This will be vital to ensure everyone has access a safe and genuinely affordable home, while improving public finances through reduced housing benefit and temporary accommodation expenditure. The Budget contained several measures that will help to boost councils’ ability to build desperately-needed affordable housing for local communities, including:

• A £500 million boost to the Affordable Homes Programme to build up to 5,000 additional social and affordable homes.
• Consulting on a new long-term social housing rent settlement of CPI+1 per cent for five years to offer certainty for social housing providers and give the sector the confidence to build more social homes
• Extending the discounted Public Works Loan Board Housing Revenue Account lending rate until March 2026.
• Reducing discounts on the Right to Buy (RTB) scheme and enabling councils in England to keep all the receipts generated by sales.

We’re pleased that the Government has listened to our calls to increase Affordable Homes funding and continue discounted Public Loan Works borrowing rates. This will provide much-needed additional support for council housebuilding projects. In the long term, we want Government to work with us to roll out five-year local housing deals to all areas of the country that want them – combining funding from multiple national housing programmes into a single pot. This will provide certainty and efficiencies and could support delivery of an additional 200,000 social homes in a 30-year period.

We’ve long called for RTB reform, as it has become increasingly impossible for councils to replace social homes sold through the scheme. These measures will help to support the replacement of sold homes and to stem the continued loss of existing stock. The Government has extended the cost floor period from 15-30 years, meaning that the purchase price cannot be lower than the total spend on construction, repairs or maintenance of the property over a 30-year period. Although the LGA previously called for the cost floor to be indefinite, we’re pleased the Government has partially acted on our recommendation to reduce discounts.

A 5-year rent settlement is a step in the right direction in providing certainty for councils on rental income, but to really strengthen and provide stability to Housing Revenue Accounts, a minimum 10-year rent settlement is needed, alongside restoration of lost revenue due to the rent cap and a review of the self-financing settlement of 2012. This would better support long-term business planning to ensure councils can deliver high quality homes and associated support for their tenants.

Get Britain Working

The Chancellor announced that, as part of the Get Britain Working White Paper, the government is investing £240 million to trial new ways of getting people back into work. The government plans to tackle the root causes of ill-health related inactivity, support young people who are ‘not in education, employment or training’ (NEET), and help people to develop their careers.

The LGA looks forward to engaging with the Get Britain Working White Paper which will build on the Back to Work Plan announcements and reforms made by the Department for Work and Pensions in July. These can be put to best effect through a place-based approach which we have set out through our most recent Work Local proposals. There are many similarities between the Government’s proposals and the LGA’s Work Local plan.

Skills England

The government has already established Skills England (in shadow form) whilst the Institute for Apprenticeships and Technical Education (Transfer of Functions etc) Bill passes through Parliament.

We believe that getting the skills offer right in places is critical to helping people enter and progress in work and ensuring employers in the public, private and charitable sectors have the workforce they need. Councils know what is needed to build skills pathways and are keen to see this knowledge feed into Skills England.

Apprenticeship Levy

The government announced steps to transform the Apprenticeship Levy into a more flexible Growth and Skills Levy with an investment of £40 million, which will help to deliver 23 new foundation and shorter apprenticeships in key sectors. The reformed levy will be developed in partnership with employers, providers, and learners. Skills England will take the time to consult with a wide range of partners to ensure that levy-funded training meets the needs of employers, providers, and learners, and secures good value for money.

We need to see reforms which enable a place-based approach that maximises flexibility to pool funds locally to address supply / demand issues, target sectors, widen participation and for non-Levy funding, unspent Levy and traineeships to be commissioned locally. Alongside this, as one of the largest local employers in places, local government has significant workforce challenges and we need flexibility to use the Levy to meet these needs, including to ensure we have planners of the future. We look forward to being engaged by government on this.

Megan Edwards, Public Affairs and Campaigns Adviser

Email: [email protected]