Local government set for yet another one-year finance deal
The local government finance settlement is the annual determination of funding to local government from central government.
The Government listened to the LGA’s calls to publish England’s provisional settlement for 2022/23 before Christmas, and we expect the final version to be laid before the House of Commons for approval in late January or early February.
The settlement provides a potential increase of 6.9 per cent in council core spending power in cash terms, including new government grants. The potential increase will help councils meet extra cost and demand-led pressures next year, to keep providing services at pre-pandemic levels. However, these government forecasts assume that every local authority 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 when they are acutely aware of the significant burden that could place on some households.
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.
Increasing council tax raises different amounts of money in different parts of the country, unrelated to need.
Steadily growing demand has seen councils with responsibility for children’s and adult’s social care devoting nearly two-thirds of their total spending to these services. While the additional funding for these vital services is good, it will not go far enough in addressing the very real existing pressures they face.
The new homes bonus (NHB) makes up a considerable part of funding for some councils, particularly shire district authorities. Councils need clarity on the NHB’s future to plan their budgets beyond the next financial 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.
The public health grant also needs to be published as soon as possible, so councils know how much they can budget for essential services to help keep people healthy, including for treating drug misuse and tackling obesity.
The Government should now provide clarity on which local government funding reforms will happen and when. It needs to push ahead with the Fair Funding Review, including looking at the data and the formulas used to distribute funding. No council should see its funding reduced as a result.
While funding reforms make it difficult for a government to set out a multi-year settlement for local government, this is the fourth one-year settlement in a row, which continues to hamper councils’ financial planning and 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.
We will continue to promote the role all councils play in making a huge difference to the lives of our residents and communities, and to campaign for local services to be provided with a long-term, sustainable future that gives councils clarity and certainty over their funding.
This will allow local government to play our full part as we improve outcomes and value for money in public services, rebuild our economy, get people back to work, level up inequalities, and create new hope in our communities.