Impact assessment

Final local government finance settlement 2021 to 2022: equality statement

Published 10 February 2021

Applies to England

1. Brief outline of policy proposal

This equality statement covers the government’s local government finance settlement for 2021-22. Explanation of the measures announced in the settlement can be found in the documents:

i) Local Government Finance Report

ii) Council Tax Referendum Principles Report

iii) Alternative Notional Amounts Report

iv) Provisional local government finance settlement 2021-22 consultation: summary of responses

as well as in associated documentation, which can be found in:

v) Final local government finance settlement: England, 2021 to 2022

In summary, the key policy provisions within the final local government finance settlement for 2021-22 are:

(a) Increasing the core settlement in line with inflation, which means:

vi) holding Baseline Funding Levels flat, with grant compensating for the freezing of the business rates multiplier

vii) eliminating negative Revenue Support Grant (RSG) through foregone business rates receipts

viii) uprating RSG by CPI, so that all councils are treated on an equal basis across the core settlement and under-indexation grant

ix) holding Devolution Deal areas with increased rates of business rates retention at the same percentages as last year

(b) The following package of council tax referendum limits:

x) a core council tax referendum principle of up to 2% for counties, unitary authorities, London boroughs and fire authorities

xi) an additional 3% precept for authorities responsible for adult social care, with unused flexibility rolled over to 2022-23

xii) a principle of up to 2% or £5, whichever is higher, for shire districts

xiii) a £16.59 principle for the Greater London Authority’s general charge

xiv) £15 for police authorities

xv) no council tax referendum principles for parishes or Mayoral Combined Authorities (MCAs) in 2021-22

(c) £300 million extra Social Care Grant, funded by £150 million in new grant and £150 million of re-allocated funding, and distributed on the basis of £60 million through the existing Adult Social Care Relative Needs Formula, and £240 million for equalisation of the yields from the Adult Social Care council tax precept, which holds the level of equalisation at the same as last year.

(d) A new Lower Tier Services Grant, which will allocate £111 million to local authorities with responsibility for lower tier services. The main distribution of £86 million will be based on assessed relative needs. As part of this, there will be a £25 million one-off minimum funding floor to ensure that no authority sees an annual reduction in Core Spending Power (CSP).

(e) A new round of £622 million New Homes Bonus allocations with the same funding baseline as last year, with no new legacy payments on the new round.

(f) Maintaining iBCF funding at 2020-21 levels, with the same distribution.

(g) Increasing Rural Services Delivery Grant (RSDG) by £4 million, taking the grant from £81 million to £85 million.

2. Foreseeable impacts of policy proposal on people who share protected characteristics

Within the package of policy measures, we foresee three proposals which could have an impact on people who shared protected characteristics. These are:

1) Change in the level of Settlement Funding Assessment between 2020-21 and 2021-22

Councils provide various services which target or impact persons who share a protected characteristic, only some of which are required by statute. As a result, changes in the amount of Settlement Funding Assessment available to local authorities have the potential to impact a local authority’s ability to provide these services, and therefore impact persons sharing protected characteristics. An increase in the level of Settlement Funding Assessment might be expected to improve an authority’s ability to provide services to such persons.

Vital front-line services are protected by increasing the largest elements of core settlement funding in line with inflation. This will especially help protect the funding for non-social care services.

However, the role of the Secretary of State for Housing, Communities and Local Government is to establish the overall framework for local government funding from central government. In exercising their functions, including when making policy and spending decisions, local authorities must have due regard to the Public Sector Equality Duty (“PSED”) under section 149(1) of the Equality Act 2010. Central funding and retained business rates are not ring-fenced and councils are responsible for the distribution and allocation of these resource across local priorities. Therefore, it is not possible to foresee how the changes will affect specific groups of persons sharing a protected characteristic, as this will be dependent on decisions that are made locally.

2) Change in the Council Tax referendum principles

Under the Local Government Finance Act 1992, local authorities in England must calculate a council tax requirement for each financial year. Authorities have the discretion to set this amount and the resulting council tax charge for individual households at the level they think appropriate. However, increases in the level of average band D bills which exceed a level determined by the Secretary of State must be approved by local residents in a referendum.

For 2021-22, the government proposes to set a core principle of 2%, with additional flexibilities for shire district councils; and where councils have adult social care responsibilities, they will be able to set a further 3% increase specifically for adult social care services. This package acknowledges the mounting pressure in social care by providing additional flexibilities to social care authorities. As mentioned below, the government is using the Social Care Grant to equalise the varying yield of the Adult Social Care council tax precept. Also, in recognition of the impact of this increase on taxpayers, we are providing £670 million in Local Council Tax Support next year to support authorities in reducing council tax bills for those least able to pay.

3) Distribution of Social Care Grant

For 2021-22, the government is continuing to support the most vulnerable by increasing the Social Care Grant for 2021-22 by £300 million, on top of last year’s total of £1.41 billion. The government is also implementing a council tax precept for adult social care of 3%, enabling councils to access a further £700 million.

The government is proposing that the £300 million of additional grant will be distributed in two ways. Our proposal is to use £240 million as a component to equalise the yield of the Adult Social Care council tax precept, holding the level of equalisation at the same level as in 2020-21, and with £60 million allocated directly through the existing ASC Relative Needs Formula.

Our equalisation methodology is a balanced approach which recognises that the distribution of resources generated through the ASC precept does not match the pattern of assessed need. It is likely to benefit persons with protected characteristics. The proposed methodology means that all authorities will receive over 94% of the total RNF-based share of the resources which are available through the additional grant and the new ASC precept.

The Social Care Grant will not be ring-fenced, and there will be no conditions, reporting requirements or expectations of how much should be spent on adult and children’s social care respectively. Local authorities understand the needs of their communities best and will have discretion on how to allocate this funding. As a result, for the reasons set out above it is difficult to measure how the increase in social care funding will impact upon those sharing protected characteristics, though it might be expected to improve authorities’ abilities to provide services to such persons.

3. Do you need any more information to assess Q2 above? If so, how will you obtain it?

At this stage, the government has considered and taken into account the 155 consultation representations we received from a wide range of stakeholders. Of those who responded to the provisional consultation, 68% did not express a view on the equalities impacts of this settlement. However, 8% of respondents stated that the settlement should provide extra funding, beyond the level previously agreed in Spending Review 2020, to protect the elderly. No further review is planned for the 2021-22 settlement on the potential effects of these policies on those who share a protected characteristic.

4. In light of the overall policy objectives, are there ways to avoid or mitigate any negative impacts you have noted in Q2 above?

As part of the final local government finance settlement, the government is providing a number of funding streams that will be made available to local authorities to help alleviate any pressures in the upcoming year. They can be used to mitigate any potential negative impacts and to assist members of the protected groups. As mentioned above, £240 million of the increase in Social Care Grant, for example, is used as an equalisation component to ensure additional resources for social care generated through the Adult Social Care precept are targeted to where there is greatest need. Additional funding streams include:

• The government has announced that it will maintain the level of the improved Better Care Fund at the same level that it was in 2020-21 using the same distribution methodology, at £2.1 billion. The grant will support local authorities by helping to manage the pressures on adult social care over the winter months, reducing pressure on the NHS.

• The government recognises additional cost pressures in rural areas. We are proposing to increase the Rural Services Delivery Grant (RSDG) by £4 million, taking the total to £85 million - the highest ever. This grant will support local authorities that incur additional costs as a result of rurality. It will be un-ringfenced and is paid to the upper quartile of authorities based on the super-sparsity indicator, which is the best available proxy for rurality.

• The government is proposing a new round of NHB payments (year 11 payments) in 2021-22. The government intends to honour previously announced legacy payments in the 2021-22 allocations. This means paying legacy payments associated with year 8 (2018-19) and year 9 (2019-20).

• The government plans to continue the elimination of so-called ‘negative RSG’ in 2021-22. This is consistent with the government’s previous commitment, made during the implementation of the business rate retention scheme in 2013-14, that authorities’ retained business rates baselines would be fixed in real terms until the business rates system was reset.

• The government is proposing a new un-ringfenced Lower Tier Services Grant in 2021-22, which will allocate £111 million to local authorities with responsibility for lower tier services (for example, homelessness, planning, recycling and refuse collection, and leisure services). The proposed grant methodology is two-fold. £86 million of the grant will be allocated according to the 2013-14 Settlement Funding Assessment (SFA). This represents the best available relative needs assessment for the authorities concerned. Alongside this, the government is proposing a minimum funding floor, at a cost of £25 million, so that no authority - either upper or lower tier - will see a reduction in CSP in 2021-22. The government is clear that this floor funding is in response to the current exceptional circumstances and is a one-off. No local authority should take this funding floor as guaranteeing similar funding floors in future years, including in future finance reforms.

We consider the overall impact of substantial extra resources for local authorities, on persons with protected characteristics, will be positive. It supports local government in addressing rising demand for public services and responds to pressures councils are facing.

We have also provided over £8 billion of additional funding for local authorities in 2020-21, the majority of which is in un-ringfenced grant, which is available to respond to local COVID-19 expenditure pressures and priorities. In addition, we have ensured councils receive further support with COVID-related loss of income, including from sales, fees and charges and local taxes. In parallel to this year’s final local government finance settlement, we will confirm further details of a package of measures for 2021-22 which will help mitigate any potential adverse equalities impacts of service pressures or reduced income on local authorities, as a result of the coronavirus pandemic. As set out at the provisional settlement, this package includes:

• £1.55 billion of un-ringfenced grant to manage the immediate and long-term impacts of the pandemic,
• £670 million to enable councils to continue reducing council tax bills for those least able to pay, including households financially hard-hit by the pandemic,
• an extension of the Sales, Fees and Charges income support scheme to June 2021, and
• a new guarantee scheme for 75% of 2020-21 irrecoverable local tax losses, at an estimated cost of just under £800 million,

As noted above, local government funding is largely un-ringfenced and councils are responsible for the distribution and allocation of resources to meet local priorities. As a result, it is not possible to accurately predict how the changes in funding will impact on specific groups of persons sharing a protected characteristic. This will be dependent on the decisions made at a local level. The government is committed to designing new policies in a way that gives local government more control over their own funding and reduces their reliance on central government funding. This funding could be used to meet the needs of persons who share one or more of the protected characteristics set out in the PSED.

5. In light of this analysis, what is recommended and why?

In light of the above, the government has not identified any compelling evidence that the 2021-22 settlement will have a “substantial” equalities impact. The extent of equalities impact will also depend on the decisions made by authorities in response to a number of central and local policies.

6. Where impacts are or could be significant, when and how will they be reviewed?

Since the department has not at this stage identified any specific impacts of these policies on those who share protected characteristics, there are no active plans in place to review their impact. The government is publishing this equality statement alongside a summary of responses to the provisional local government finance settlement consultation.

This analysis was undertaken by: Lewis Walker

Directorate/Unit: Local Government Finance

Date: 4 February 2021

SCS Sign off: Stuart Hoggan (Deputy Director, Local Government Finance Settlement)

I have read the available evidence and I am satisfied with the above analysis.