JULIA LOPEZ CONTINUES TO CALL FOR REFORM OF LOCAL GOVERNMENT FUNDING

In a speech made last week in Parliament, Julia Lopez, the Member of Parliament for Hornchurch & Upminster, once again emphasised the urgent need for reform in local government funding, highlighting the significant impact of Havering's changing demographics on the Borough's financial health. 

Julia's ongoing campaign to reform the Funding Formula comes at a critical time, as local authorities such as Havering face increasing financial pressure.

Havering has experienced substantial population growth over the past decade. This demographic shift includes a rise in both the elderly population and young families, creating unprecedented demand for social care and educational services. Despite these changes, the outdated funding formula has failed to keep pace, resulting in systemic underfunding and financial strain on Havering Council.

On top of ongoing funding issues, the Government also introduced fresh financial pressures through the October Budget. One of the most significant changes is the increase in employer national insurance contributions, which has driven up the cost of social care and other essential services across Havering.

"Local authorities like Havering are struggling to provide essential services due to an outdated funding formula that does not reflect the current realities of our community," 

Said Julia.

"It is vital that we address this issue to ensure that all local authorities receive the resources they need to support their residents effectively."

Julia has been calling for reform to the Local Government Funding Formula for several years, highlighting the need for funding to keep pace with the changing demographics of Outer-London boroughs such as Havering.

Her speech highlighted her previous meetings with ministers which have helped secure short term financial support for Havering. However, Mrs Lopez highlighted that these measures would only provide short term assistance to the Council, and that the Government’s October Budget has piled on more undue financial pressure.

The latest local government finance settlement provided Havering with the smallest increase in spending power since 2021 although this has essentially been wiped out through the rise in national insurance costs.

Below is a Hansard extract of Julia speech from a Westminster Hall debate in Parliament on 26 March 2025 on local government finances:

It is a pleasure to serve under your chairmanship, Ms Lewell. I am very grateful to the hon. Member for Leyton and Wanstead (Mr Bailey) for securing this vital debate. I requested a debate on this subject myself, so I am glad that one of us got drawn in the ballot. As an outer London MP, I am extremely sympathetic to the compelling case he makes about the disparity between the centre of the city and its outskirts.

Residents in Havering pay among the highest council tax in London and in return they rightly expect robust services. They want to see their vulnerable neighbours supported, parks and streets well maintained, and essential services working effectively. However, Havering has been under significant financial pressure for years. The root cause of the issue is an outdated and flawed local government funding formula that does not adequately reflect the changing needs of our borough.

Havering’s population has undergone significant changes in the past decade. We have had one of the fastest increases in child numbers in the country, and we have a growing elderly population. Both groups come with complex, multi-layered needs. Those demographic shifts have driven up demand for expensive social care services, but the funding formula still relies on outdated data and fails to reflect those changes, which has left Havering facing growing financial strain.

Other London councils have been able to build reserves during this period, largely because they have benefited from the same outdated formula, especially given that covid grants were allocated on that basis. That has created a disparity between inner and outer London: some boroughs have received more than they need, while others such as Havering are struggling. The Department for Education uses a much more up-to-date formula, which is why Havering has received the bulk of London’s capital funding for schools to meet the rising number of children—one part of Government acknowledges the change, yet another is a decade out of date.

I have long advocated reform of the local government funding formula to reflect those demographic shifts. The previous Conservative Government initiated a fair funding review to address the imbalances, but the pandemic stalled progress. Much of the groundwork for reform has therefore been done, and I urge the Minister to accelerate the review to bring about the necessary changes.

In recent years, Havering council has received some crucial uplifts in social care funding, which have helped it continue to deliver vital services, but the fundamental structural issues in the funding formula remain. Without a long-term solution, the situation will only worsen. To address that, in January I facilitated a meeting between Havering council and the local government Minister, Baroness Taylor. I was grateful for that meeting. As a result, the Government approved further exceptional financial support, which enabled the council to set a budget for the year. That is welcome support, but it is a temporary fix, and a lasting solution is needed. Again, that requires pushing forward with the funding formula review.

On top of those ongoing funding issues, the Government have also introduced fresh financial pressures through the Budget. One of the most significant changes is the increase in employer national insurance contributions, which has driven up the cost of social care and other essential services across the borough. Those increases are directly impacting local businesses and services, from pharmacies and GPs to critical childcare providers and high street shops. Just last week, I spoke to several high street businesses: they are facing huge business rate increases, rising parking charges and the impact of the NICs increases. Those increases are pushing customers away from our high streets and threatening the vitality of our local economy. There will obviously be an ongoing knock-on impact on the local government funding issues.

The latest local government finance settlement has provided Havering with the smallest increase in spending power since 2021, an increase essentially wiped out by the additional national insurance costs. On top of that, Havering has been excluded from the national £600 million recovery grant; no non-Labour London council, apart from Tower Hamlets, will benefit from that spend in the capital. Looking forward, the council is looking at ways to get the economy growing again locally, but that is not going to deal with the fundamental issue of the funding formula. I ask the Minister to accelerate the review so that our residents can benefit.

This update is the latest in an extensive list of work done by Julia to get a better funding deal for Havering Council.

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