The government has today (19 December 2017) set out funding plans for councils in England so they can continue to deliver the services their residents need while also protecting Council Tax payers from excessive increases in their bills.
Confirming the local government funding arrangements for 2018 to 2019 – the third year of the £200 billion 4-year funding offer accepted by 97% of councils in 2016 - Communities Secretary Sajid Javid announced measures to give local authorities additional freedom to ensure they can protect services for some of their most vulnerable residents.
Local authorities will now see 2 years of real terms increases in resources available to local government, and from 2015 to 2020, councils in England have access to over £200 billion to deliver the high-quality services their local communities need.
Today the Communities Secretary confirmed that the referendum threshold has been set in line with inflation, and so setting the core Council Tax referendum principles at 3%.
This change, combined with the additional flexibility on the Adult Social Care precept confirmed last year, gives local authorities the independence they need to relieve pressure on local services, including adults and children’s social care, while also recognising that many households face their own pressures.
Communities Secretary Sajid Javid said:
Our historic 4-year funding settlement gave authorities the certainty to plan ahead; with over £200 billion available over the spending period.
However, I am aware of the pressures facing councils and this is why I am giving them more flexibility, so they have greater control over the money they raise to address local needs.
This strikes a balance between giving councils the ability to make decisions to meet pressures and ensure that our most vulnerable in society get the support they need while protecting residents against excessive Council Tax bill rises.
What the financial settlement includes
Additional support for adult social care
In March this year, the government announced an additional £2 billion for adult social care - in addition to more flexibility in using the social care precept - giving councils access to £9.25 billion of dedicated funding for adult social care over 3 years.
The government will continue to anticipate and respond to shifts in demographics through publication of the adult social care green paper in summer 2018.
Future of business rates retention
The Communities Secretary also confirmed the government’s aim to increase business rates retention for all local authorities in 2020 to 2021 to help meet the commitment to give local authorities more control over the money they raise locally.
The government wants local authorities to retain 75% of business rates from 2020 to 2021. This will be through incorporating existing grants into business rate retention including Revenue Support Grant and the Public Health Grant.
Councils will therefore have the levers and incentives they need to grow their local economies.
Business rates pilots
Ahead of this, to test out aspects of the system in a range of authorities across the country, the Communities Secretary announced 10 new areas that have been selected for business rates retention pilots in the 2018 to 2019 financial year.
This move builds on previous pilots originally launched in Liverpool, Greater Manchester, West Midlands, West of England, Cornwall and Greater London in April 2017, which will also continue into next year.
As announced at the Autumn Budget, the London pilot will also be able to keep 100% of its business rates growth from April 2018. The new areas selected to retain 100% of business rates ensure a good geographic spread with a strong representation of rural areas.
The pilots will provide useful information ahead of bringing in increased business rates retention for all local authorities and future reforms, with piloting confirmed to continue to 2019 to 2020. Further details will be available in due course.
Alongside the 2018 to 2019 pilots, the government will continue to work with local authorities, the Local Government Association, and others on reform options that give local authorities more control over the money they raise and are sustainable in the long term.
New Homes Bonus
The Communities Secretary confirmed that there would not be any new changes to the New Homes Bonus in the year ahead, following feedback from councils to the summer technical consultation.
This means that the 0.4% threshold for payments will remain and payments for homes approved after appeal will not be withheld.
In a bid to sharpen the incentive for councils to deliver more new homes, councils that fail to achieve housing growth above this baseline will not receive any bonus payments.
Almost £7 billion in New Home Bonus payments has already been paid, to reward the 1.4 million homes that have been built or brought back into use. Over £946 million will be allocated in 2018 to 2019, with councils free to spend those funds as they see fit to meet local priorities, rewarding them for their work in fixing the broken housing market.
Dealing with Negative Revenue Support Grant
Having considered responses to the technical consultation in the summer around the issue of ‘negative RSG’ in 2018 to 2019, following the delay in implementing full business rates retention after the election, Mr Javid confirmed that the government will be looking at fair and affordable options for dealing with this ahead of consulting on proposals before next year’s settlement.
The Communities Secretary has also confirmed an increase to the Rural Services Delivery Grant by £15 million in 2018 to 2019. This means the overall additional funding for rural authorities will remain at £65 million for the remainder of the 4-year settlement.
Review of relative needs and resources
The Communities Secretary has also published a consultation on the fair funding review today, that aims to implement a new system based on its findings in 2020 to 2021.
Alongside this, a summary of the responses to last year’s call for evidence on needs and redistribution has also been published.
Local government operates in a society that is constantly changing. To meet the challenges of the future, the Communities Secretary confirmed that the flexibility to use capital receipts to help meet the revenue costs of transformation will be extended for a further 3 years to April 2022.
This relates to England only.
See the local government finance consultation. The deadline for responses is 16 January 2018.
See the fair funding review consultation. The deadline for consultation responses is 12 March 2018.
The areas selected for the business rates pilots are:
- Kent and Medway