Roundtable: The Local Government Finance Settlement
In December, Greg Clark announced a Local Government Finance Settlement that will pave the way for Britain to become "one of the most decentralised countries in the world" ahead of councils being 100 per cent funded by council tax, business rates and other local revenues by 2020. The settlement includes the offer of four-year fixed budgets and an extra £1.5bn to support social care on top of £2bn from the new two per cent council tax precept. Core spending will be fall from £44.5bn in 2015-16 to £44.3bn in 2019-20 with real terms savings of 6.7 per cent needed by the end of the decade. Clark confirmed the settlement on 8 February.
Lord Porter, chairman, Local Government Association
Giving councils the option to fix long-term funding settlements is hugely significant. The LGA has long-argued that it is crucial for councils to be able to plan ahead for more than 12 months at a time. This is an important step towards the financial certainty councils need to run important local services to the high standard our residents deserve and will allow councils to review the level of financial reserves they need to hold.
Despite receiving a flat-cash settlement over the next four years, there are still significant challenges ahead for councils, who will have to make efficiency and other savings sufficient enough to compensate for any additional cost pressures they face. These include those arising from general inflation, cost pressures in the care sector, increases in the number of adults and children needing support and rising levels of need, increases in demand for everyday services as the population grows, pressure on homelessness budgets and increases in core costs such as national insurance, the National Living Wage and pension contributions.
Our spotlight on social care funding pressures has been acknowledged, but councils remain concerned that they won't see the benefit of the £1.5bn extra investment in social care until the end of the decade. Services caring for our elderly and vulnerable people are under pressure now.
Having increased certainty over resources for more than one year will enable longer term planning, especially as 2016-17 looks set to be the toughest year of this four year Spending Review period for local services. While councils will strive to limit the impact on local communities they will face tough decisions about how to keep providing the hundreds of vital services which communities value and rely on to go about their daily lives, from keeping streets lit and clean to caring for our vulnerable children and adults.
Simon Parker, director, New Local Government Network
This settlement offers local government jam tomorrow, when the crisis is today. The pain is spelled out in black and white, while the gains are based on long-term estimates and heroic assumptions.
Greg Clark's devolution agenda is genuinely radical and the offer of four-year budgets is very welcome. But if devolution is going to work then we need genuine fiscal devolution that gives councils full control of their local taxes, rather than ring-fenced and regulated pots of money.
Ministers must do more to address the social care crisis. An additional £3.5bn in funding is a good start but the full amount will not be available for years and will only ever be realised if councils are prepared to raise taxes at a level far higher than in the recent past.
Mark Rogers, president, Society of Local Authority Chief Executives & Senior Managers
Solace is supportive of the confirmation in the settlement that there will be full business rate localisation by the end of this parliament as this potentially provides a means towards achieving local government financial self-sufficiency. We likewise welcome the fact local government has been offered an indicative budget for the next four years, enabling councils to better plan ahead. This is something we have long been advocating for.
However, the devil will most definitely lie in the detail and we remain concerned to ensure that there is fairness and equity for all councils, along with a commitment from Government to review seriously the expectations placed on local government. Solace is particularly concerned to avoid the introduction of new burdens at a time when councils are struggling to deliver existing responsibilities. A thorough rethink of funding, including the devolution of complementary tax-raising powers and the rapid rollout of place-based budgets, needs to be accompanied by a realistic review of councils' functions.
There is a danger that the differential ability of local authorities up and down the country to stimulate economic growth will mean that some will struggle to maintain even the most essential statutory services, despite high levels of need, such as for social care. This needs to be addressed if we are to achieve the sustainability of income and, therefore, services that our residents expect and deserve.
Jonathan House, local government leader, PwC
The four-year funding package is a tangible commitment by Westminster to devolve decision-making and budgetary powers out of London, making local councils fully responsible to local people for their financing - something they have been campaigning for over a number of decades.
The settlement will provide councils with financial certainty for the next four years as they move towards 100 per cent devolution of business rates by 2020. The transition to business rates is a fundamental change to a complex system and for councils in small towns and rural areas previously benefitting from the Government's redistribution of the proceeds, challenges remain as many of their businesses are rates-exempt.
The run-up to 2020 will be a period of profound transformation for local government. Another round of cuts is needed on a similar scale to the previous parliament and councils know that few quick wins remain. Devolution will play its part for some places, as greater local flexibilities allow councils to take a tailored approach. But for all places, the focus needs to be on the pace of delivering transformation and integrated public services.
Rob Whiteman, chief executive, the Chartered Institute of Public Finance & Accountancy
There will be winners and losers in this settlement. Top-tier local authorities are set to benefit as high demand critical services, such as social care, receive welcome direct support. However, it is likely that district councils will find a greater squeeze on their budgets as the New Homes Bonus is reduced by around £800m between now and 2019-20.
We welcome the move to localised funding, which will give local people more power to set priorities for their communities, but there is still a long way to go.
However, replacing central government funding with fully retained business rate revenues introduces real risk to council finances. It is something of a gamble for many vital public services - as the assumptions underpinning greater localisation are that the economy continues to grow and a much greater number of new homes are built, which recent experience shows is anything but certain.
Cllr Paul Carter, chairman, County Councils Network
Our evidence shows that counties see the biggest reduction in funding due to the changes being made in the distribution of local grants.
We are committed to making further efficiency savings to help the Government's deficit reduction plan, but these changes go too far and disproportionately impact our areas.
We have made our concerns clear to Government and have put forward practical solutions. I know Government is in listening mode.
This proposed settlement will potentially have severe consequences to the delivery of local services and to our NHS partners unless Government listens to our concerns and those of our MPs.