Final Local Government Finance Settlement House of Commons, 10 February 2021

• It is good that the Local Government Finance Settlement has provided extra money to meet COVID-19 costs, new funding for adult and children’s social care and for councils with responsibility for services such as homelessness, planning, recycling and refuse collection, which will help meet cost and demand pressures next year.
• There is the potential to increase council core spending power by up to 4.6 per cent in 2021/22. However, more than 85 per cent of this is dependent on councils increasing council tax by the maximum allowable amount, leaving them with difficult choices at a time where many families are experiencing financial hardship.
• 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.
• The Government support for COVID-19 outside of the Settlement has been welcomed and reflects the hard work carried out by our councils. The £4.6 billion of unringfenced funding and ringfenced grants as well as the sales fees and charges compensation scheme, Coronavirus Job Retention Scheme and pledge to cover 75 per cent of irrecoverable council tax and business rates income, has kept local services going through 2020/21.
• However, the uncertain trajectory of the pandemic means we urge the Government to keep this support under review. The LGA’s most recent estimates has suggested that a further £2.6 billion will be needed to cover the cost pressures and non-tax income losses due to COVID-19 in 2020/21. It is vital that the Government guarantees the financial challenge facing councils as a result of COVID-19 will be met in full.  
• All councils face huge financial uncertainty over the next few years and into the next decade, particularly as a result of the COVID-19 pandemic and the measures taken to combat it. It is therefore concerning there is no clarity over funding levels after March 2022.
• As we call for in our Budget submission, it is vital that the Government provides a multi-year settlement in 2022/23 to put councils on a long-term sustainable footing, and demonstrates meaningful progress towards a long-term, sustainable solution to the funding crisis in adult social care.
• It is also vital that we tackle the climate emergency as part of our post-pandemic recovery. Councils share the ambition for a green revolution and want to work with government and businesses to establish a national fiscal and policy framework for addressing the climate emergency, supported with long-term funding.

The Settlement has provided a potential increase of 4.6 per cent in council core spending power to support vital local services. However, this assumes that council tax bills will rise by maximum allowable levels, including 5 per cent for social care authorities, next year, and this will place a significant financial burden on households in a year of economic uncertainty. If councils choose to spread the increase in the adult social care precept over two years, the increase will be less than 4.6 per cent.

The LGA continues to urge the Government to put local government on a sustainable footing with a long-term funding package. 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.

The Chancellor’s pledge to compensate for 75 per cent of irrecoverable council tax and business rates income, and to extend the scheme to fund a portion of councils lost income from fees and charges during the next financial year provide some much-needed stability but will need to be reviewed and probably extended. The latest lockdown will have further impact on local government’s financial situation.

We welcome the Government’s commitment to work with local government on the lasting impact of the COVID-19 pandemic. However, the LGA’s most recent estimates has suggested that a further £2.6 billion will be needed to cover the cost pressures and non-tax income losses due to COVID-19 in 2020/21 It is vital that the Government guarantees the financial challenge facing councils as a result of COVID-19 will be met in full, including funding for cost pressures and full compensation for lost income and local tax losses.

The additional £300 million of funding for adult and children’s social care is welcome, as is that the funding will not be ringfenced, providing councils with flexibility on how their allocations are best used. However, the funding is not significant in comparison to the cost pressures that these vital services face.

Councils have increased children’s social care budgets year on year at the expense of other services, but still have been unable to keep up with increasing demand. Additional funding is urgently needed to ensure children are safe and well, and to reinvest in the important preventative services that can prevent children and families reaching crisis point.

Whilst it is good that there will be flexibility for councils to raise the adult social care precept by a further 3 per cent in 2021/22, this is not a sustainable solution to funding adult social care. The precept raises different amounts of money in different parts of the country, unrelated to need and adds an extra financial burden on households. Nearly 10 per cent of the average council tax bill is now made up of the precept.

These funding announcements are only short-term solutions. There is frustration by the lack of progress in reforming adult social care given the Prime Minister’s announcement in July 2019 that he would “fix adult social care”. COVID-19 has highlighted the long-standing challenges facing social care and the precariousness of a sector that has been under-valued and under-funded for too long. It is crucial there are no further delays to reform.

It is disappointing that the public health grant for 2021/22 has still not been announced. We are calling on the Government to provide councils with clarity on the funding available in 2021/22 as soon as possible. The current delay to the announcement is making it extremely difficult for councils to plan effectively at a time when public health services are vital to the fight against COVID-19.

Sufficient ongoing funding is needed to ensure all local authorities can continue to meet their public health responsibilities beyond COVID-19 as well. The Government should match the growth in public health grant to growth in overall NHS funding under the Long Term Plan. This means the public health grant would have to increase to at least £3.9 billion by 2024/25 and an increase of at least £130 million for 2021/22.

The £622 million for the New Homes Bonus (NHB) has been included in Core Spending Power in 2021/22 - this is a reduction of £285 million from the total in 2020/21. We have always been of the view that the NHB should be funded from outside the settlement and not by top-slicing other funding to councils.

It is important that sufficient clarity about the outcome of the review, which is expected sometime after the March Budget and will review the measures in place to incentivise councils to build new homes in their local areas, is provided to councils as soon as possible to allow them to plan their 2022/23 budgets and beyond. We are urging the Government to work closely with councils as part of its review of housing incentives in order to ensure the review results in the delivery of more homes and the revised scheme works for local government.

We are calling on the Government to resume the Fair Funding Review. This could include working with councils to review progress made to date to ensure that it is still fit for purpose, or flexible enough to deal with shifts in council service models as a result of COVID-19, and to guarantee that transitional mechanisms ensure that no councils experience a loss of income. The move to 75 per cent business rates retention should only be revisited, if appropriate, once the business rates review concludes.

Fire and Rescue Authorities will be able to raise their precept by 2 per cent in 2021/22. Fire authorities will also receive an increase in their revenue support grant in line with inflation and an increase in the compensation grant for under-indexing the business rates multiplier. Some fire and rescue authorities will receive a share of the £4 million increase in the rural services delivery grant. However, fire and rescue services need to be funded to take account of the full range of risks, demands and cost pressures they face. While we would prefer council tax referendum limits to be removed, in view of the flexibility given to Police and Crime Commissioners, an increase in the precept flexibility for Fire and Rescue Authorities would help.

The outcomes of the cases brought about discriminatory practices in the fire fighters pension scheme will have implications for the pension administrative costs and employer contributions to be made by Fire and Rescue Authorities. Unless these additional cost pressures are funded by government, they will have a significant impact on Fire and Rescue Authority budgets in 2021/22 and beyond.

Additional funding needs to be made available to the sector in 2021/22 to further enhance protection activity, respond to any further recommendations from the Grenfell Tower inquiry, and so services are better placed to work alongside the Health and Safety Executive in its new role as the Building Safety Regulator.