Press release

Local government funding at the Spending Review 2015

The Chancellor has published the results of the spending review, including funding for local government over the course of this Parliament.

This image shows money

The Spending Review and Autumn Statement delivers on the government’s priority to provide security to working people at every stage of their lives. It sets out a 4 year plan to fix the public finances, return the country to surplus and run a healthy economy that starts to pay down the debt.

By ensuring Britain’s long term economic security, the government is able to spend £4 trillion on its priorities over the next 4 years.

For local government, there is a cash terms rise from £40.3 billion to £40.5 billion in 2019 to 2020 with councils having almost £200 billion over the course of this Parliament to spend on local services. This represents a fall of just 1.7% per year in real terms over the Spending Review period.

Alongside this we are giving more powers and greater flexibility for town halls to take control of their finances while protecting vital public services and boosting adult social care through a £3.5 billion investment to help support the most vulnerable.

This comes from:

  • a social care Council Tax ‘precept’ of 2% will allow councils responsible for delivering adult social care to raise up to £2 billion a year by 2019 to 2020
  • £1.5 billion government will make available to local authorities for social care services

Local Government Funding (1)

£ billion 2015-16 2016-17 2017-18 2018-19 2019-20 Real % Average annual real growth Cash change 15-16 to 19-20
Local Government Spending 40.3 38.6 38.9 39.7 40.5 -6.7 -1.7 +0.5%
Local Government Central Grant (LGDEL) (2) 11.5 9.6 7.4 6.1 5.4 -56.3 -18.7  
Local Authority Self Financed Expenditure (3) 28.8 29 31.5 33.6 35.1 +13.1 +3.1  

(1) The Local Government Settlement will be set out next month (Dec 2015)

(2) In this table, Resource DEL excludes depreciation

(3) OBR measure of locally raised funding including Council Tax and business rates

Devolution

  • by the end of the Parliament, local government will retain 100% of business rate revenues; alongside savings announced elsewhere, this will come with additional responsibilities and empower local authorities to deliver services in a way that is right for their area
  • it is for individual authorities to determine how best to make savings in light of local circumstances and resources

Security

  • a social care Council Tax ‘precept’ of 2% will allow councils responsible for delivering adult social care to raise up to £2 billion a year by 2019 to 2020
  • this would be enough to support more than 50,000 older people in care homes or around 190,000 in their own homes, enabling people to retain independence and remain in their own home for longer
  • Council Tax will still be lower in 2019 to 2020 in real terms than it was in 2010 to 2011
  • by 2019 to 2020, the government will make £1.5 billion available to local authorities to support social care

Together, this £3.5 billion investment will help secure services for the most vulnerable.

Long term investment

  • the Uniform Business Rate will be abolished and all local authorities will gain the power to reduce rates to support business and job growth
  • the government will allow directly elected mayors to add a premium to business rates to pay for new infrastructure, provided they have the support of the local business community

Efficiencies and reform

  • although the revenue support grant is being phased out, other sources of income like Council Tax receipts and business rates are forecast to increase, meaning a real savings required of 6.7% in this SR period compared to 14% announced at SR10, lower than most other unprotected departments
  • DCLG will consult on changes to the local government finance system to pave the way for the implementation of 100% business rate retention, transferring an additional £13 billion to local government
  • overall local government spending will be higher in cash terms in 2019 to 2020 than in 2015 to 2016
  • to reform services and make them more efficient, a package of new flexibilities will be introduced to encourage local authorities to release surplus assets
  • local authorities will be able to spend 100% of their fixed asset receipts investing in making services more efficient (local authorities currently hold £225 billion in assets)
  • the government will also issue new guidance to encourage local authorities to rein in excessive salaries – currently the average pay of an upper tier council boss is higher than the Prime Minister’s

The Local Government Finance Report will be laid before Parliament in early 2016 by the Secretary of State for Communities and Local Government. Primary legislation will also be required for the 100% retention of business rates.

Secretary of State for Communities and Local Government, Greg Clark, said:

Councils have worked hard over the past 5 years to deliver a better deal for local residents, while satisfaction with public services has been maintained. Whilst councils need to continue to play their part in cutting the deficit, they will still have almost £200 billion to spend on local services over the lifetime of this parliament - a reduction of just 1.7% in real terms each year.

We have listened to calls from local government to provide more support for adult social care, with a £3.5 billion investment to help support elderly and vulnerable people. Together with our radical devolution agenda and reform of business rates, we are giving local leaders sweeping new powers and financial freedoms to boost local growth and create jobs.

Office address and general enquiries

2 Marsham Street
London

SW1P 4DF

Media enquiries

Published 25 November 2015