Press release

A fair deal for councils and fair bills for taxpayers

Councils should focus on sensible savings to protect services and keep Council Tax down.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

coins

Responsible councils must stay focused on delivering sensible savings so they can modernise local services and keep Council Tax down, Local Government Secretary Eric Pickles said today (18 December 2013) as he published the provisional 2014 to 2015 local government settlement.

This year’s settlement is fair to all parts of the country - rural or urban, district or county, city or shire - meaning councils can deliver sensible savings while protecting frontline services. Opinion polling suggests that satisfaction with local government is either constant or improved compared to 2010, despite the need for councils to make savings to tackle that deficit.

Today’s fair funding deal arms councils with a significant average spending power of £2,089 per household. The Autumn Statement protected local authorities from further spending reductions for 2014 to 2015 and 2015 to 2016. Overall the average spending power reduction for councils in 2014 to 2015 is expected to be limited to just 2.9% per household.

Every bit of the public sector needs to do their bit to pay off the inherited deficit including local government which accounts for a quarter of all public spending. With English councils spending £117 billion this year ministers believe councils must continue to focus on cutting waste and making sensible savings.

There is significant scope for councils to merge back office services or do more joint working; get more for less from their £60 billion a year procurement budget; tackle the £2.4 billion of local fraud; reduce the £2 billion lost in Council Tax arrears; or use their £19 billion of reserves and £2.3 billion of surplus property assets to keep Council Tax down and modernise public services.

Keeping Council Tax down for hard-working people

Local authorities should be looking to protect their residents and give them help with the cost of living. Extra funding is on offer to councils to freeze Council Tax for a fourth year in a row. The government has provided up to £550 million for the next 2 years. A fourth year of freeze could be worth up to £718 for the average bill payer with more savings to come next year. Between 1997 and 2010 Council Tax bills more than doubled.

From April next year funding for previous 2011-12 and 2013-14 freezes will now be in the main local government settlement total for future years. Ministers have agreed that funding for the next 2 freeze years will also be built into the spending review baseline. This will give maximum possible certainty for councils that the extra funding for freezing Council Tax will remain available without a ‘cliff edge’ effect on freeze grant. With this help, councils should now play their part by helping hard-working people with the cost of living and freeze their Council Tax.

Council Tax referendum threshold principles will be published in the New Year. Ministers today indicated they are particularly open to representations suggesting that some lower threshold be applied to councils, given the strong need to protect taxpayers wherever possible from unreasonable increases in bills.

Eric Pickles said:

Every bit of the public sector needs to do their bit to pay off the budget deficit, including local government which accounts for a quarter of all public spending. This year, councils should continue to focus on cutting waste and making sensible savings to protect frontline services and keep Council Tax down. Extra funding is on offer to councils to freeze Council Tax for a fourth year in a row.

Opinion polling suggests that satisfaction with local government is either constant or improved compared to 2010, helped by the fact that Council Tax bills have been cut by 10% in real terms. This is in contrast to the last administration when Council Tax bills more than doubled and went through the roof.

The coalition government has tried to be fair to every part of the country – north and south, rural and urban, metropolitan and shire. Unlike the old funding system which encouraged councils to talk down their local areas to win more funding, the decentralisation of local government finance now puts councils in the driving seat, rewarding them for supporting local enterprise, building more homes and backing local jobs.

Delivering sensible savings and improving services

This is effectively the second year of the 2-year settlement that was published last year, and represents the second year of the new decentralised system of local government finance following the Local Government Finance Act 2012.

The coalition government has sought to deliver a fair settlement to every part of the country – north and south, rural and urban, metropolitan and shire. Councils facing the highest demand for serves continue to receive substantially more funding through the settlement. For example, Newcastle has a spending power per household of £2,406 which is nearly £900 more than the £1,518 per household in Windsor and Maidenhead.

Rural councils with more dispersed populations often find service delivery to be more expensive and difficult so this year they will receive an increased grant worth £9.5million to help drive efficiency.

This government’s carefully considered reforms are helping councils achieve greater financial independence and deliver sensible savings and help modernise public services.

Last year the government published a practical guide of sensible savings, called 50 Ways To Save, that local government can make to save more of taxpayers’ money.

Decentralised system that rewards growth

This government rewards those councils that aim for growth. Councils now generate more than 70% of their income locally compared to just 56% under the old “begging bowl” system.

Unlike the old system which encouraged councils to talk down their local areas to win more funding, the decentralisation of local government finance puts councils in the driving seat: by supporting local enterprise, more homes and local jobs. This means they will receive more funding as a direct consequence of their actions, which could potentially add £10 billion to the economy by 2020.

For the second year, councils who have attracted more businesses to their area will be rewarded by retaining the extra business rates they’ve generated. Similarly the New Homes Bonus rewards those councils who build more homes or bring empty homes back into use and in 2014 to 2015 the New Homes Bonus is worth £916 million to councils.

Further information

2014 to 2015 provisional settlement

Spending power calculation, excluding GLA, includes:

  • £22.6 billion settlement funding assessment (which includes £10.1 billion of locally retained business rates)
  • £20.2 billion in Council Tax
  • £1.1 million for NHS funding to support social care
  • £916 million via New Homes Bonus
  • £235 million for 2014-15 Council Tax freeze grant

This settlement marks the second year of business rates retention, and leaves councils with considerable total spending power, with an overall reduction, excluding the Greater London Authority, for next year of just 2.9%. Alongside this we have increased the protection that the safety net will offer, so that no council will face a loss of more than 6.9% in their spending power in 2014 to 2015, a higher level of protection than we offered both last year and the year before.

The ‘per household’ figures are calculated using total spending power: a combination of the settlement funding assessment and Council Tax, and the number of dwellings by Council Tax band for each administrative area in England. The counts are calculated from data for England extracted from the Valuation Office Agency’s database on 12 September 2011.

  1. Spending power data by local authority for 2014 to 2015
  2. A heatmap showing spending power around the country
  3. A plain English guide to cut through Whitehall jargon and explain the new settlement system is also available.
  4. Technical data for the 2014-15 Local Government Finance Settlement.

The consultation closes on 15 January 2014.

2015 to 2016 illustrative settlement

In order to further facilitate effective budget planning, we are also making available illustrative figures for 2015 to 2016 that show the overall spending power decrease in England would be 1.8%.

In the Spending Round announced earlier this year the government confirmed funding for 2 further years of Council Tax freeze and announced that a Better Care Fund will provide £3.8 billion to local services to give elderly and vulnerable improved health and social care run jointly by local authorities and the NHS.

There will also be extra support so councils can to go further and faster modernising services through new finance flexibilities on the use of £200 million capital receipts from the sale of property assets in 2015 to 2016 and 2016 to 2017.

There will now be a period of statutory consultation on the settlement which runs to 15 January 2014. Ministers will then finalise their proposals and the settlement for 2014 to 2015 will be debated in Parliament in February in time for councils to set their budgets for next year.

Additional information

There is £3.3 billion in the settlement this year for Council Tax support schemes. There is an element within this national pot specifically to reflect reductions in the parish tax base. We have not separately identified the money because it is not ring-fenced and as caseloads change and schemes evolve, the amount that different parishes need will change. It would be wrong to try to manage that centrally but we have been clear that we expect billing authorities to carry on passing on support to town councils and parishes to help mitigate any reduction in their taxbase due to the local Council Tax support scheme.

The 50 ways to save document contains practical tips and guidance on making sensible savings, highlighting ways that councillors can challenge officers to deliver savings, and ways that taxpayers can challenge councillors. Some savings are small and easy to deliver, some are very big and take slightly longer to introduce.

Media enquiries

Published 18 December 2013