The Committee consisted of the following Members:

Chair: Martin Vickers

† Al-Hassan, Sadik (North Somerset) (Lab)

† Anderson, Stuart (South Shropshire) (Con)

† Brackenridge, Sureena (Wolverhampton North East) (Lab)

† Charalambous, Bambos (Southgate and Wood Green) (Lab)

† Cocking, Lewis (Broxbourne) (Con)

† Costigan, Deirdre (Lord Commissioner of His Majesty’s Treasury)

Farron, Tim (Westmorland and Lonsdale) (LD)

† Franklin, Zöe (Guildford) (LD)

† Jopp, Lincoln (Spelthorne) (Con)

† Khan, Naushabah (Gillingham and Rainham) (Lab)

† Law, Noah (St Austell and Newquay) (Lab)

† McGovern, Alison (Minister for Local Government and Homelessness)

† Ribeiro-Addy, Bell (Clapham and Brixton Hill) (Lab)

† Simmonds, David (Ruislip, Northwood and Pinner) (Con)

† Uppal, Harpreet (Huddersfield) (Lab)

† Wheeler, Michael (Worsley and Eccles) (Lab)

† Witherden, Steve (Montgomeryshire and Glyndŵr) (Lab)

Jim Davey, Stella-Maria Gabriel, Committee Clerks

† attended the Committee

Fifth Delegated Legislation Committee

Wednesday 24 June 2026

[Martin Vickers in the Chair]

Draft Local Government (Structural and Boundary Changes) (Control of Disposals etc.) (Amendment) Order 2026

I beg to move, That the Committee has considered the draft Local Government (Structural and Boundary Changes) (Control of Disposals etc.) (Amendment) Order 2026. It is a pleasure, as ever, to serve under your chairship, Mr Vickers. This statutory instrument was laid before the House on 14 May 2026. The order makes a small but important change to existing arrangements that govern significant financial decisions made by councils during local government reorganisation, including those on land disposals and contracts. The Government’s programme of reform, as set out in the English devolution White Paper, will move power out of Westminster and strengthen the foundations of local government. A key part of that programme is local government reorganisation, replacing two-tier councils with single-tier councils that are simpler, clearer and more accountable to the communities that they serve. The Government’s long-term aim is to create local government structures that make it easier for residents to understand what group is responsible for local services and decisions, while enabling more strategic choices that support growth and improve public services. To meet that ambition, the transition must be orderly and legally sound, and must properly protect the public interest. Existing councils must continue to discharge their functions while new councils are being established, and decisions taken during that period should not undermine the position of the successor councils. For that reason, the framework includes safeguards, which are set out in section 24 of the Local Government and Public Involvement in Health Act 2007. Those provisions allow the Secretary of State to issue directions that control certain land disposals and significant contractual commitments. Where a decision could have implications for the successor council, councils may, in certain situations, be required to secure consent before proceeding. In practice, that consent will usually come from the relevant shadow council. Those controls ensure that major financial decisions taken during the transition will not adversely affect successor councils. Specific consent will be required for larger decisions, while general consent can be used to enable day-to-day activity to continue. The order, made under section 29 of the 2007 Act, makes a targeted change to the way that those safeguards apply. As the framework currently operates, councils may need to take account of previous land disposals and contractual dealings when assessing whether the relevant financial thresholds have been reached. The starting point of that aggregation period has remained fixed at 31 December 2006, which could require authorities to examine almost 20 years of historical activity. That was not the intention of the policy. The controls were intended to focus on recent and relevant activity in the period leading up to reorganisation, rather than to create unnecessary retrospective burdens. The order updates the beginning of the aggregation period to 31 March 2025, to ensure that the framework captures relevant activity without requiring unnecessarily extensive historical analysis, while leaving the underlying safeguards on disposals of land and contractual dealings unchanged. The Committee should note that the order does not represent a change of policy, and does not alter the underlying safeguards.

I am a little unclear on the implications of what the Minister just said. If, for example, Barratt Redrow and the Jockey Club submitted a planning application, under the new national planning policy framework, to flatten Kempton Park racecourse to build 2,000 homes on that land, would no one be able to consider what had happened in retrospect? Would they be allowed to consider only what happened under this Government’s current NPPF?

The hon. Gentleman asked about a specific example, which sounds like it relates to a specific concern.

indicated assent.

He is nodding, which is helpful. In that case, I will write directly to him about that important local issue. I am not overly concerned that the example the hon. Gentleman raised is engaged by this change, but I will write to him to confirm that, because it sounds like an important issue in his constituency. The clarification in the order is designed to make sure that the existing safeguards operate as intended and can be applied with greater consistency across councils. The order preserves the balance between enabling councils that are due to be abolished to continue to operate effectively, and protecting successor councils, residents and taxpayers’ money. Although the amendment in the order was first identified through engagement with Surrey, it has been tested more widely with local government representatives, including engagement with the Chartered Institute of Public Finance and Accountancy and the Department’s local government reorganisation advisory group, which brings together senior officers and experts from across local government. It is therefore not a measure designed only for Surrey, but an update that will apply across the local government reorganisation programme. This statutory instrument supports a legally robust transition by reducing uncertainty in the operation of the framework and promoting consistent application across the reorganisation programme. It makes a small but necessary technical change to ensure that the safeguards that govern significant financial decisions during transition work as intended, thereby supporting the whole local government reorganisation programme.

Will the Minister give way?

I am afraid I am finishing. The SI reflects engagement with councils and wider consideration with local government representatives, and will help to support the safe, orderly and effective delivery of our programme of reorganisation. I commend the draft order to the Committee.

Before I call the shadow Minister, may I suggest that Members should not be tempted into a wider debate about the merits of any particular boundary changes or council abolitions?

It is a pleasure to serve under your chairmanship, Mr Vickers. As the Minister set out, the order makes a relatively straightforward technical change, but I have a couple of questions arising from it that relate to the specific circumstances in which the legislation is coming forward. Historically, the policy has been that local government reorganisation would take place where there was unambiguous local consent for that to happen. We are all conscious that, as part of the devolution priority programme, some disputes are already arising—which I think the legislation is designed to address—between the new authorities that are coming into being and the prior authorities that are being abolished. Local authorities operate to a specific financial process that is quite tightly controlled in legislation, and that is where my questions for the Minister arise from. First, the provisions in this legislation set out that the Secretary of State will designate a person who will be required to give consent, or will have the opportunity to give or withhold consent, when transactions covered by the legislation are envisaged. It would be helpful to understand what process will be followed when there is a dispute. My hon. Friend the Member for Spelthorne gave an example of where the disposal of an asset might be seen by one authority as hugely beneficial because of a capital receipt, and by another as hugely controversial because it pledged to protect it from excessive development. We need, then, clarity about how disputes of that nature will be resolved. The process is significant because many of the capital sales that will be caught by the provisions are also determined by other processes. Will the Minister set it out for the Committee, in particular regrading authorities that are subject to exceptional financial support rules? If a local authority in Surrey—such as Spelthorne or Woking, which have very significant capital debts—has entered into an agreement with the Government to undertake a programme of disposal of assets, and the disposal of those assets is opposed by the successor authority, how will a decision come to be made, given that the outgoing authority is effectively obliged to undertake those asset sales but the new authority may not wish to do that? A good example of where the nature of the assets may be material to the dispute is car parks, which are an asset to the parking-revenue account of a local authority, so are ringfenced from its general fund. One authority may see a car park as an opportunity to raise revenue, whereas another authority may see it as a capital asset to be disposed of to secure a capital receipt. Especially where there is a capital programme over many years with, in some cases, the capital expenditure having already taken place, to be funded from future asset disposals, there will need to be a process to ensure that the budgets can be balanced. We will all be aware of local authorities in our own areas that have borrowed to build new leisure centres or new schools, or to invest in public transport hubs, parking or whatever it may be—important public assets to be funded from the future sale of those sites for disposal. We therefore need that sense of clarity. Can the Minister tell the Committee how the provisions will be dealt with when the assets in question arise within an arm’s length management organisation for housing that is owned by a local authority trading company—such as Brick by Brick, the housing development company in Croydon, of which there are a number of alike organisations across the country—to which assets have been transferred for development or disposal? There is no explicit clarity, certainly not within this legislation, about how that will be managed. What about asset disposals within a programme relevant to the Department for Education? These may be school sites or non-school sites whose asset value is designed to support the development of school sites and which sit within the dedicated schools grant. Would the decision to determine who gives consent to that process be a matter for the Department for Education, rather than the Ministry of Housing, Communities and Local Government? I think especially of situations in which a school has been transferred under the standard 99-year academy lease. Who will be the decision maker if the academy trust wishes to dispose of all or part of that site? I would like to put the question about how overage clauses, which will exist in many of these agreements, will be treated. Clearly, the upside of some of these disposals, which are often controlled both through the planning process and through the original transaction, will say that, in the event that the acquirer of the site returns to gain planning permission for a higher-density development, or something that yields a higher amount, they have to pay a proportion of the increase in the value of the site to the local authority that disposed of it. That is designed to avoid a situation in which a site is sold for 20 houses and ends up with 150 flats on it, and the developer basically cleans up. That is a common clause contained within site disposals by local authorities. To whom would the benefit of that overage clause accrue? Especially in circumstances where the benefit was intended to be taken into account as part of that prior capital programme, what provisions will there be to resolve those disputes in the event that they arise?

It is a pleasure to serve under your chairship, Mr Vickers. I support this technical but important correction. Section 27’s anti-avoidance provisions exist to prevent authorities facing dissolution from disposing of assets to avoid scrutiny, but their value depends on the reference date staying current. My constituency of North Somerset is a useful illustration of why this matters in the long term. It has been a unitary authority since 1996 and, even 30 years on, legacy questions around assets, contracts and historical boundary decisions can resurface. Updating the baseline in section 27 from December 2006 to 31 March 2025 is sensible housekeeping, which ensures that the consent regime keeps pace with present-day restructuring, rather than the baseline being tied to the 2008-09 wave of unitarisation. It is the kind of provision that must be kept under continual review so that it does not drift out of date in the same way a second time.

It is a pleasure to serve under your chairmanship, Mr Vickers. The Government are bringing forward logical proposals to deal with new councils, but my concern is that I am not sure that this measure goes far enough. It talks about protecting new councils from existing councils’ decisions about their finances, but what we do not talk about in this—and what I think the Government need to consider—are existing councils that are going to be forced to merge. That is important because, if we look at my constituency, I have a council with money in the bank and a council without money in the bank. This legislation talks about protecting the new authority from financial decisions that the existing authorities have made—I completely support that, and I think the Government are taking a logical approach—but we need to explore whether it is fair for all the money to go into the same pot. Is it fair for people who have had good councils, with money in the bank, to see their taxpayers’ money spent elsewhere in the authority, where they will not see a benefit? We should explore what financial information, constraints or regulations we can give to new councils when they are created, rather than just putting all the money into the pot. The councils to be merged will not have the same financial footing. They will not have the same services or the same money in the bank. If we think that it is important to protect the new council from decisions that the existing authority has made, it is right that we look at protecting specific areas within new councils that have had good financial management over the short to medium term. As I said, there is an example in my constituency: Broxbourne council has about £50 million in the bank but East Herts council has none. What I do not want to see if we have to go through local government reorganisation is all that money going into the pot and then being spent on paying someone else’s debt. It is right for constituents that I represent in the borough of Broxbourne to say that there should be some guidance outlining that that money should at least be spent within the existing boundaries of that authority, even if it is under the new council.

Order. The Member is straying a little from the scope of the proposal. Will he conclude, please?

Thank you for your guidance, Mr Vickers. This is an important piece of legislation that the Government are bringing forward. I wonder whether the Minister could explore some of the points that I have raised in this debate.

I thank members of the Committee for their contributions to this debate. Before concluding, I want to address some of the points raised. The shadow Minister asked about disputes between councils. I want to be explicit that councils remain responsible for their decisions during the transition and must act in line with their legal duties. We expect councils to act transparently and have regard to their fiduciary duties and wider public responsibilities when taking such decisions as local authorities do week in, week out—and local authority officers know that. Decisions regarding ongoing service delivery and the medium-term financial strategies of existing councils should not compromise the future sustainability of new councils—I say that just for clarity. We have published an explanatory note to councils undergoing reorganisation about financial decisions before reorganisation and we continue to work with councils to support orderly and effective transitions. However, decisions on individual assets are the responsibility of local authorities. I will happily circulate the explanatory note to members of the Committee if that would aid them. The officials in my Department are in touch with councils on a regular basis. This framework tries to create safeguards to make sure that significant actions taken during transition do not adversely affect successor authorities.

Will the Minister give way on that point?

I will do so in a moment. The shadow Minister makes a very reasonable point on councils in receipt of exceptional financial support and the disposal of assets. He knows that the number of councils in EFS is a great concern of mine. We liaise with those local authorities week in, week out to do all we can to support them. It serves none of us to have exceptional financial support become normalised, and we are in touch with them.

Will the Minister give way?

I will give way to the hon. Member for Spelthorne and the hon. Lady in a moment once I finish responding to the shadow Minister. On arm’s length management organisations and academies, this depends on the specifics of the contract and the transfer that has taken place. Again, we are working actively with councils. On the value of sites and the issue that the hon. Member for Ruislip, Northwood and Pinner mentioned with developers being able to garner extra value from their sites, we have provided councils with checklists and much information about things that they should be wary of. Nevertheless, I thank him for raising it. I will double check that it is on the checklist.

I am so grateful to the Minister for giving way. I am also conscious of the Chair’s prohibition on stretching the envelope and referring only to the Minister’s own words. She said that the purpose of this whole procedure today was to make local government reorganisation easier for residents to understand and for a safe, orderly and effective transition. I pay tribute to my hon. Friend the Member for Broxbourne for his expertise in this area. The Minister and I have privately discussed the powers of shadow unitary authorities and their ability to propose name changes: in my case to the “West Surrey”, and if I had my way, “and South Middlesex”, unitary authority. Would she like to put on record the fact that, if the newly elected shadow unitary authority makes a proposal with a majority for the renaming of that unitary authority, she would be bound to accept it?

Order. That is way beyond the scope of the order before the Committee, but if the Minister wants to comment on it, I will allow her to do so.

You are very generous, Mr Vickers. The hon. Member knows that I am sympathetic; it is a matter for the authorities themselves, of course, but he makes a good case.

The Minister spoke about exceptional financial support. I was interested to hear her say that we do not wish EFS to be normalised. I suggest that we are in circumstances in which it is normalised, given that so many councils require it and so many of them expect to have to use it. A lot of councils are struggling to balance their annual budgets on that basis.

I thank the hon. Lady for raising that important point. I will happily come to this House and spend hours talking about local government finance any time anybody wants—

But not today.

I fear that it would test your patience, Mr Vickers. Let me make a final point to the hon. Member for Broxbourne. He makes a reasonable point, but the issue is that local government finances are in such a state—I am thinking particularly about the situation in Woking. All of us, up and down the country, will pay the price for that, so there is a sense in which responsibility is always collectively shared. I will say nothing further, Mr Vickers, in case you tell me off. In conclusion, the draft order will make a small but necessary technical amendment to ensure that existing safeguards on disposals operate effectively during local government reorganisation. I hope that the Committee will join me in supporting it. Question put and agreed to.

Committee rose.