Clark confirms four year local government finance settlement

Communities Secretary Greg Clark has confirmed a four year finance settlement for local government, which aims to grant councils greater freedom from Whitehall.

The new deal promises that councils will be funded from locally raised revenues by the end of the decade, through 100 per cent business rate retention, instead of government grants, which the government claims will help councils to ‘transform from dependence on central government grants to greater financial autonomy’.

Addressing concerns from the Local Government Association (LGA) that some councils would need support in transitioning to this new system to avoid large funding shortfalls in the short term, Clark announced that a £300 million transitional fund will be made available to councils over the next two years.

Additionally, Clark responded to calls to make funding for adult social care a priority by confirming up to £3.5 billion of additional funds will be made available to support these services by 2019/20.

Clark said: “These are important times for local government. The devolution of power and resources from Whitehall is gathering momentum.

“Today’s settlement means every council will have, for the financial year ahead, at least the resources allocated by the provisional settlement. In addition, we will provide transitional funding for the first two years of the Spending Review period for councils as they move from dependence on central government grants to greater financial autonomy.

“The government will continue to keep bills down with Council Tax still expected to be lower in real terms in 2019 to 2020 than it was in 2009 to 2010.”

The LGA welcomed the announcement of extra funding to help the transition and smooth out funding reductions for some councils in 2016/17, but warned that reductions would still be challenging for councils over the next four years.

Lord Porter, chairman of the LGA, said: "Funding reductions will still be challenging for councils over the next four years. Any extra cost pressures, such as those arising from rising demand or policies such as the National Living Wage, will have to be funded by councils finding savings from elsewhere. Many will have to make significant reductions to local services to plug funding gaps and will be asking residents to pay more council tax while possibly offering fewer services in return as a result.

"The move to full business rate retention is the most ambitious reform to local government finance of the last few decades. While it won't solve the long-term funding challenges facing councils, it is absolutely critical to ensure any new system works effectively. We look forward to working closely with the Government on ensuring it is implemented and distributed in a way which maximises the potential it offers to our local communities and businesses."