2.8 per cent cash increase for councils

Local Government Secretary James Brokenshire has announced that local government spending power will rise to £46.4 billion next year, marking a real-terms 2.8 per cent cash increase for councils.

Recognising both the difficult financial situation facing councils and the £1 billion of extra funding for local services awarded in the recent budget, Brokenshire said that £240 million of the additional £650 million announced a few months ago for social care will be focused on winter pressures. The remainder is set to be used flexibly, on either adult or children’s services and, ‘when necessary, to relieve demands on the NHS’.

Among other stand out features of the Local Government Minister’s statement, which was delayed to this week, the government will allow core council tax to rise by up to three per cent again next year, with councils again able to draw on the adult social care precept. As before, any rises deemed excessive will have to be approved in a local referendum. The three per cent rise could £107 added to the average council tax bill next year.

Financially troubled Northamptonshire County Council is among 15 new councils who will take part in the 75 per cent business rates retention pilots, with Brokenshire ‘proposing to distribute £180 million of levy surplus to all councils based on need’.

The Treasury is also considering whether ‘further interventions’ were required to slow the commercialisation trend, with the government sharing the concerns of the Chartered Institute of Public Finance and Accountancy, who recently warned that some councils were ‘spectacularly taking too much risk’ and warned that unless that stopped then the ‘whole sector may lose its freedoms under the prudential code’.

Brokenshire also committed £20 million to maintain the new homes bonus baseline at 0.4 per cent, ‘rewarding councils for delivering the homes we need’, and a £16 million addition to the rural services grant to maintain funding at last year’s level and recognise the additional costs of providing services in rural communities.

Reaction to the announcement
Lord Porter, Chairman of the Local Government Association, said: “It is disappointing that the government has not used the Settlement to provide further desperately-needed resources for councils next year. Many councils will be forced to take tough decisions about which services have to be scaled back or stopped altogether to plug funding gaps. We must not forget that it is individuals and communities who feel the impact, whether it is through seeing their local library or leisure centre close, roads deteriorate or support for young people, families and vulnerable adults scaled back.

“It is vital that the government uses the final Settlement next month to provide the further resources needed to protect our local services in 2019/20 before ensuring next year’s Spending Review delivers a truly sustainable funding settlement for local government. As the nation continues to face huge uncertainty, it is councils who are getting on with the job of providing the services that matter to our communities. Investment in these local services, and councils’ prevention and early intervention work, is the only way councils can continue to make a positive difference to their residents’ lives. It will also help reduce pressures on the rest of the public sector, save money for the public purse and contribute to the wider prosperity and well-being of the nation.”

Andrew Gwynne, Labour’s Shadow Communities and Local Government Secretary, said: “This announcement means only two things for households – an inflation-busting increase in council tax, and no end in sight for austerity. Local government is under enormous pressure because of politically motivated Tory cuts that have hit our poorest areas hardest since 2010. Councils have lost 60p out of every £1 that the last Labour Government invested in our communities.

“The council tax precept has already proven to be an inadequate and short-term sticking plaster for a problem which needs long-term solutions. Shifting the burden on to council tax payers creates a postcode lottery in services with the most deprived authorities suffering most. This Conservative government won’t stand up for working people, and ordinary families are paying the price as councils are forced to cut services to fill the gap. It is time the Tories stepped aside for a Labour Government that will act in the interests of the many, not the few.”

Adam Lent, director of the New Local Government Network, said: “This settlement largely confirms the long list of one-off and comparatively small cash boosts that fail to address the lack of financial sustainability that is now a real and present threat to local government. With the NHS eating up nearly all of the Treasury’s projected rise in spending, austerity is most certainly not over for adult social care, children’s services and other core services and this settlement does nothing to resolve that. Councils know that the real action is in the Spending Review. There is an historic opportunity for the Chancellor to share the £20.5 billion birthday present for the NHS with local government thus helping address councils’ financial risk and move towards the more preventative system the Government claims to want.”

Paul Carter, chairman of the County Councils Network, said: “This year’s Local Government Finance Settlement comes at a hugely challenging time for councils. For the first time in many years, this settlement confirms that the government has recognised short-term pressures facing local government. We expect that the that the fair funding review consultation, to be announced later today, will continue to set out a positive direction of travel for 2020 onwards.

“The additional £650 million for social care provides us with a financial lifeline to get us over the hill and down the other side next year. Today's settlement also confirms that councils will be able to levy a basic three per cent council tax rise, with some councils still able to apply a two per cent adult social care precept. We are pleased to see more counties benefit from business rates pilots, rightly as a result of ensuring greater equity with London by reducing their pilot to 75 per cent. These announcements, alongside the cancellation of negative Revenue Support Grant, are welcome and will help councils maintain frontline services to residents and support local growth.

“Whilst today’s settlement contains vital short term support, it does not solve medium term financial pressures so tough decisions will still need to be taken and our members will have little choice but to raise council tax to meet demand-led pressures in services. Looking ahead, we should be under no illusions of the scale of the challenge facing county authorities, with the long-term future of councils dependent on whether we receive sustainable and fairer funding from 2020 onwards.”