Impact assessment

Final local government finance settlement 2022 to 2023: policy impact statement

Published 7 February 2022

Applies to England

1. Brief outline of policy proposal

This impact statement covers the government’s Local Government Finance Settlement for 2022/23. It focuses on the impact of proposals on people who share protected characteristics.

Explanation of the measures announced in the settlement can be found in the following documents:

• Local Government Finance Report
• Council Tax Referendum Principles Report
• Provisional local government finance settlement 2022 to 2023 consultation: Government response

The explanation of the measures can also be found in the associated documentation.

In summary, the key proposals within the local government finance settlement for 2022/23 are:

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

• a uniform percentage increase in Revenue Support Grant (RSG) allocations from 2021/22, based on the change in the Consumer Price Index (CPI) between September 2020 and September 2021. We will also continue compensation to avoid so-called ‘negative RSG’ and roll in two existing New Burdens grants into RSG.
• a freeze in Baseline Funding Levels (BFLs) at 2021/22 levels, to match the freeze in the business rates multiplier.
• an increase in grant for the under-indexation of the multiplier, to compensate for the freeze in the business rates multiplier compared to growth in line with RPI.

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

• a core council tax referendum principle of up to 2% for shire counties, unitary authorities, London boroughs, the Greater London Authority (GLA) and fire and rescue authorities.
• a bespoke council tax referendum principle of up to 2% or £5, whichever is higher, for shire district councils.
• an Adult Social Care (ASC) Precept of 1% for all authorities responsible for ASC services.
• ability to add any unused parts of the 3% ASC Precept flexibility available in 2021/22.
• a referendum principle of £10 for police authorities.
• a £5 referendum principle for the 8 lowest-charging fire and rescue authorities.
• setting no council tax referendum principles for Mayoral Combined Authorities (MCAs).
• setting no council tax referendum principles for town and parish councils.
• government has also agreed to the special request from the Mayor of London for an additional £20 flexibility in London.

(c) Social Care Grant

• increasing the Social Care Grant allocations from 2022/23 by £636 million, bringing the total value of the grant to £2.35 billion. £556 million of this new funding will be allocated using our ASC Relative Needs Formula (RNF). A further £80 million will be used to equalise the variation in yield from the ASC Precept.

(d) improved Better Care Fund

• increasing the LGDEL contribution to the improved Better Care Fund (iBCF) in line with the Consumer Price Index (CPI).

(e) Market Sustainability and Fair Cost of Care Fund

• including the Department for Health and Social Care’s Market Sustainability and Fair Cost of Care Fund within Core Spending Power in 2022/23. This £162 million fund is to support Local Authorities prepare their markets for reform and move towards paying providers a fair cost of care. It will be allocated using our existing ASC RNF.

(f) 2022/23 Services Grant

• new grant worth £822 million. This will be a one-off grant for 2022/23.
• we will distribute this funding using the 2013/14 shares of the Settlement Funding Assessment.

(g) New Homes Bonus

• a new round of NHB payments in 2022/23, which will not attract new legacy payments. 2022/23 allocations of NHB will be paid for by a £556 million top-slice of RSG. no changes to the calculation process from 2021/22. The final outstanding NHB legacy payment will be honoured in 2022/23 allocations.

(h) Rural Services Delivery Grant (RSDG)

• maintain the existing quantum of the RSDG at £85 million and maintain the same approach to distribute these resources as used for 2021/22.

(i) Lower Tier Services Grant (LTSG)

• allocate £111 million to local authorities with responsibility for lower tier services. Most of the distribution will be based on assessed relative needs for lower tier services.
• alongside this, the minimum funding floor from 2021/22 will be updated to ensure that no authority sees an annual reduction in Core Spending Power (CSP).

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

The Government has considered the impact of the funding distribution on protected characteristics by assessing the distribution of Core Spending Power (CSP) between local authorities and the characteristics of the people that live in the local authorities.

Across all protected characteristics there is a nominal and real terms increase in CSP per capita from comparing the 2021/22 funding distribution to the 2022/23 funding distribution.

Councils provide various services which persons that share a protected characteristic will benefit from. Changes in the amount of flexible funding available to local authorities – whether an increase or a reduction – will affect a local authority’s ability to provide these services, and therefore impact those persons sharing protected characteristics.

Local authorities decide on how their resources are allocated. It is not, therefore, possible to say for certain how changes in funding will affect specific groups of persons sharing a protected characteristic, as this will be dependent on decisions that are made locally.

In exercising their functions, including when making policy and spending decisions, local authorities must have due regard to Public Sector Equality Duty (“PSED”) under section 149(1) of the Equality Act 2010.

Local authorities understand the needs of their communities best and will have discretion on how to allocate this funding. In 2022/23, we estimate local government that will see real terms increase in Core Spending Power of over 4.5%. This increase in resources will support the delivery of core services across local government.

To note, the Department for Health and Social Care have separately considered the implications* of the additional £162 million Market Sustainability & Fair Cost of Care grant funding, which is within Core Spending Power for 2022/23. This grant will be distributed using the existing formula for adult social care need, as is also used for the Social Care Grant for example. After accounting for population-age, noting the funding is targeted at care users who are likely to be older, the Department for Health and Social Care did not identify any substantial equalities impact in their analysis.

*Age, ethnicity and disability were considered the most relevant protected characteristics.

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 the 148 consultation representations we received from a wide range of stakeholders. Of these responses, 52 (35%) provided further evidence or comments with regards to equalities in response to question 10. This question respondents if they had any comments on the impact of the proposals for the 2022/23 settlement outlined in the consultation on persons who share a protected characteristic, and on the draft policy impact statement we published.

The most common protected characteristic raised in the consultation was age; with 23 respondents arguing that more funding should go towards protecting the elderly and 14 respondents arguing that more funding should go towards supporting children.

Government would note this settlement means local authorities can make use of over £1 billion of additional resource specifically for social care in 2022/23. The Government is also allocating a one-off “2022/23 Services Grant” which gives local authorities an additional £822 million of funding for all services. This grant will be unringfenced in recognition of local authorities being best placed to understand local priorities. Indeed, most of the funding made available through the settlement is unringfenced. Local authorities with social care responsibilities are encouraged to consider using the 2022/23 Services Grant on Adults and Children’s Social Care.

No further review is planned for the 2022/23 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?

Government is increasing the funding available to local authorities. This settlement makes available an additional £3.7 billion to councils, including funding for adult social care reform. This is an increase in local authority funding for 2022/23 of over 4.5% in real terms, which will ensure councils across the country have the resources they need to deliver key services.

This can be used to mitigate any potential negative impacts and to assist members of the protected groups.

As part of this, and in recognition of the services delivered at every level of local government, Government is allocating a one-off “2022/23 Services Grant” which gives local authorities an additional £822 million of funding for all services. This grant will be unringfenced in recognition of local authorities being best placed to understand local priorities. Local authorities with social care responsibilities are encouraged to consider its use on Adults and Children’s Social Care.

Local authorities can make use of over £1 billion of additional resource specifically for social care in 2022/23. This includes:

• £636 million more into the Social Care Grant, including funding for equalisation against the 1% Adult Social Care precept
• £63 million into the improved Better Care Fund, providing an inflationary uplift to support integrated working with the NHS
• a 1% ASC precept and deferred flexibilities from last year’s settlement.

Furthermore, as noted above, any potential impacts would be dependent on local decisions on the allocation of funding to particular local services. Therefore, specific impacts have not been identified at local authority level. We consider the overall impact of an increase in funding available for local authorities, on persons with protected characteristics, will mitigate any negative impacts.

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?

The Government has not identified any compelling evidence that the 2022/23 settlement will have a “substantial” impact on those who share protected characteristics.

The extent of the impact will also depend on the decisions made by authorities in response to a number of central and local policies. As noted in section 2 above, each local authority has a duty to assess the equalities impacts of their service provision choices.

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

Since the Department has not identified any specific impacts of these policies on those who share protected characteristics, there are no active plans in place to review their impact. However, the Government is publishing this statement in draft alongside the provisional local government finance settlement consultation, and actively welcomes the input of interested parties. Representations and supporting evidence received as part of the consultation will be considered before the final equality statement is published.

This analysis was undertaken by: Donilia Asgill, Policy Advisor (Local Government Finance Settlement)

Directorate/Unit: Local Government Finance

Date: 31/01/2022

SCS Sign off: Patrick Flack, Deputy Director, Head of Local Government Finance Strategy and Resources Team

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