December’s provisional local government finance settlement did not provide enough funding to meet the severe cost and demand pressures facing councils in England, the LGA has warned.
Government figures indicate that total core spending will rise by 6.5 per cent in 2024/25, to £64 billion.
However, this does not change the £4 billion funding gap that councils face over the next two years, according to the LGA’s on-the-day briefing on the settlement, which warns of further cuts to local services as councils struggle to balance their budgets.
LGA analysis shows that, by 2024/25, cost and demand pressures will have added £15 billion – almost 29 per cent – to the cost of delivering council services since 2021/22.
Shire district councils – which provide vital services such as planning and waste and recycling collection – will see a lower core spending power increase on average next year compared with other councils. The LGA is calling for this to be addressed in the final settlement, expected in late January or early February.
It is also concerned that financial forecasts in the provisional settlement assume that councils will raise their council tax by the maximum permitted without a referendum.
This leaves councils facing the tough choice about whether to increase council tax bills to bring in desperately needed funding, at a time when they are acutely aware of the significant burden that could place on some households in a year of economic uncertainty and increased costs.
The LGA has long highlighted that council tax rises – particularly the adult social care precept – have never been the solution to the long-term pressures faced by councils, particularly in social care, which is desperately in need of reform (see below).
Increasing council tax raises different amounts of money in different parts of the country, unrelated to need.
The LGA has called on the Government to commit to the Fair Funding Review, reviewing both the formulas and the underlying data used for the assessment of relative needs and resources.
Transitional mechanisms attached to the outcome of the review should provide sufficient funding to ensure that no council experiences a loss of income. There should also be transitional arrangements for any business rates reset.
This is the sixth one-year settlement in a row for councils, which continues to hamper financial planning and their financial sustainability. Only with adequate long-term resources, certainty and freedoms can councils deliver world-class local services for our communities, tackle the climate emergency, and level up all parts of the country.
The local government finance settlement is the annual determination of funding to local government from central government. The LGA’s full briefing on the provisional settlement, published just before Christmas, is available at www.local.gov.uk/parliament/briefings-and-responses. Consultations on it close on 15 January, visit www.gov.uk/government/consultations. The final 2024/25 settlement is expected in late January or early February 2024.
Children’s services
With record numbers of children needing support, councils – with charities and campaigners – are united on the urgent need for funding to ensure all children and their families get the support they need, as soon as they need it.
Extra funding is urgently needed to stabilise the children’s social care system before it is pushed to the brink. The lack of investment in the 2023 Autumn Statement and the 2024/25 provisional local finance settlement risks councils’ ability to provide the critical care and support that children rely on every day, and risks diverting essential funding from other council services.
Funding guarantee
As in 2023/24, the Government will pay a funding guarantee to ensure that all councils will see at least a 3 per cent increase in their Core Spending Power before any decisions about organisational efficiencies, use of reserves or council tax levels.
Councils receiving this funding will welcome the protection the guarantee offers, although this remains below high levels of consumer price inflation, which have only recently reduced to 3.9 per cent. The majority of councils receiving the funding guarantee are shire district councils and this emphasises the need for them to have access to the additional funding that a higher rate of 3 per cent and £10 council tax referendum limit would bring.
New Homes Bonus
The New Homes Bonus (NHB) makes up a considerable part of funding for some councils, particularly shire district authorities, and the LGA welcomed the confirmation of the provisional £291.4 million for 2024/25.
Councils need clarity on the future of the NHB, following a consultation in 2021, to be able to plan their budgets beyond next year and into the medium term. Any changes should come with transitional funding to ensure that local authority services on which residents rely are not put at risk.
Rural services
The Government proposes to roll-forward the 2023/24 allocations of the £95 million Rural Service Delivery Grant for 2024/25. Councils in rural areas will support the continuation of this funding, even though it is a real-terms reduction.
Reserves
The provisional finance settlement notes that while local authority reserves are falling, they remain significantly higher than before the pandemic. The Government continues to encourage local authorities to consider, where possible, the use of their reserves to maintain services in the face of pressures.
The LGA’s position is that reserves can only be spent once and using reserves is not a solution to the long-term financial pressures that councils face.
However, the extension of the flexible use of capital receipts to fund the revenue costs of reducing costs and improving efficiency to March 2030 is positive. We continue to call on the Government to make the arrangement permanent.
Education and early years
The previously announced additional £440 million, or 4.3 per cent increase, in council ‘high needs’ funding for 2024/25 is positive. But it does not go far enough in helping support all children and young people with special educational needs and disabilities (SEND), when demand for education, health and care plans continues to rise year on year.
The LGA continues to call on the Government to write off all high-needs deficits as a matter of urgency, to provide certainty and ensure that councils are not faced with having to cut other services to balance budgets.
We are also concerned that the 1.9 per cent increase in per pupil funding for 2024/25 is not sufficient to address the funding challenges that schools are currently facing, including: increased costs from fuel, energy and food for school meals; staff pay rises; and a growing number of pupils experiencing disadvantage.
Education starts long before school, and a strong early years sector can maximise the life chances of all children as part of our shared ambition with government to level up communities and reduce inequalities across the country.
Recent funding announcements are welcomed, but these are based on a historic underfunding of early years entitlements leading to a volatile early years system, with providers leaving the market and parents without access to provision. It is not yet clear if the funding rates announced will be sufficient to reverse this.
Adult social care
The LGA is concerned and disappointed that the 2024/25 finance settlement provides no new investment for adult social care beyond the investment made in the 2022 Autumn Statement.
People who draw on care and support will be understandably worried about the continuing impact of significant pressures on the service.
The LGA continues to call for a long-term workforce plan for adult social care, equivalent to that for the NHS. Pressures on the frontline care workforce are acute, and challenges around recruitment and retention are well known.
Increases in the National Living Wage are therefore welcome, but providers will probably expect to see their increased wage costs reflected in the fees councils pay. This will pose a significant additional pressure on adult social care budgets, which are already considered by many directors to be insufficient to meet all statutory duties.