The 2018-19 Provisional Local Government Finance Settlement - response

The Local Government Association (LGA) is here to support, promote and improve local government. We will fight local government's corner and support councils through challenging times by making the case for greater devolution, helping councils tackle their challenges and assisting them to deliver better value for money services. This response has been agreed by the LGA Political Group Leaders and LGA Resources Board Lead Members.


 

Key points

  • Almost no new money from central government has been included in the settlement, although the Government has increased the general council tax referendum limit from 1.99 per cent to 2.99 per cent for 2018/19 and 2019/20.  It is extremely disappointing that the Government has again chosen not to address the continuing funding gap for children’s and adult social care. We have repeatedly warned of the serious consequences of funding pressures facing these services, for both the people that rely on them and the financial sustainability of other services councils provide. An injection of new money from central government is the only way to protect the vital services which protect children and support families and care for older and disabled people.
  • Local services are facing a £5.8 billion funding gap in 2019/20, as well as a £1.3 billion pressure to stabilise the adult social care provider market today. Whilst we estimate the welcome additional council tax flexibility to be worth up to £540 million in 2019/20 if all councils use it in both 2018/19 and 2019/20, it is nowhere near enough to meet the funding gap. The Government needs to provide new funding for all councils over the next few years so they can protect vital local services from further cutbacks.  Further business rates retention income could be used to meet the funding gap facing local government. In particular, we call on the Government to use the final settlement to provide additional resources for children’s services.
  • Further flexibility for local authorities in setting council tax levels will give some councils the option of raising extra money to offset some of the financial pressures they face next year. For 88 shire districts with the lowest council tax levels the new limit does not provide any more spending power, as they can already increase council tax by 3 per cent or more due to the £5 flexibility. For many other district councils, the positive impact is minimal for the same reason, with only 12 district councils able to benefit from the change in full. We call on the Government to offer further flexibility to shire district councils.
  • No other national tax is subject to referenda. The council tax referendum limit needs to be abolished so councils and their communities can decide how under-pressure local services are paid for, with residents able to democratically hold their council to account through the ballot box. However, this is not a sustainable solution as increasing council tax raises different amounts of money in different parts of the country, unrelated to need. This also adds an extra financial burden on already struggling households.
  • The New Homes Bonus makes up a considerable part of funding for some councils, particularly shire district authorities. It is good news that the Government has accepted our call to avoid further increases to the threshold and no holdback for decisions on new homes approved by the Planning Inspectorate. We call on the Government to make it clear that they will not increase the housing growth threshold for any local authority in 2019/20 either and, if needed, provide additional resources for this to happen.
  • Ten further business rates retention pilots will enable aspects of the business rates retention system to be tested. At the same time, discussions will continue between Government officials, the LGA and councils on the introduction of further business rates retention for all in 2020/21. The Government has also confirmed that the Fair Funding Review will be completed in time for implementation in April 2020. We will continue to work with the Government on further business rates retention and the Fair Funding Review, including tackling the impact of business rates appeals on local authorities in time for the implementation of further business rates retention in 2020/21.
  • Councils will see their Revenue Support Grant cut in half over the next two years and almost phased out completely by the end of the decade. We acknowledge that the Government has recognised the need to find a way to help councils who will move into a negative Revenue Support Grant position in 2019/20. As stated above, we consider that the Government should use the final Settlement to provide funding to all councils over the next two years.
  • The four year deal runs out in March 2020. We remain concerned that there is no clarity over funding levels, for both the national pot and local allocations, and any council tax referendum limits, after that date. This hampers meaningful financial planning at a time when central government grant funding is the lowest it has been for decades and demand pressures are increasing.
  • We consider that Autumn Budgets need to happen earlier in the year so that the provisional Local Government Finance Settlement can be brought forward. We would recommend the process takes places at least two months earlier than the current timescales. This would allow councils to make robust and efficient medium term plans.