Oral statement to Parliament

Provisional local government finance settlement 2017 to 2018: statement

Secretary of State for Communities and Local Government gives his statement on the local government finance settlement.

The Rt Hon Sajid Javid MP

With permission Mr Speaker, I would like to make a statement on funding for local authorities next year.

Local government accounts for almost a quarter of public spending… [political content removed].

Councils have dealt with this admirably: public satisfaction with local services has been maintained.

There is much that other parts of the public sector can learn from councillors across the country when it comes to delivering value for money.

But no one is disguising that more can be done to improve efficiency and further transform services.

Four year offer

In last year’s Spending Review we delivered a flat cash settlement for local government,

One that gives councils more than £200 billion to spend on services over the course of this Parliament.

And in February we published an historic 4-year offer for councils, providing the certainty they need to plan ahead.

I am pleased to say that 97% of councils have taken up the offer and met our expectations of reform by publishing a long term efficiency plan.

That means almost every council in England is now working with local partners in the NHS and other areas to translate this greater certainty into improved services and efficiency savings.

Today my department has published a consultation that confirms the second year of this 4 year offer for councils.

And core spending power exemplifications have been made available in the library of both Houses.

Financial self-sufficiency

The added certainty provided by the 4-year offer will increase stability for councils as we transition to a world where they retain 100% of locally raised taxes to fund local services.

By 2020 we will see local councillors deciding how to fund local services using local money.

True localism in action.

Meanwhile, stronger incentives to support local firms and local jobs may increase business rate revenue for local government as businesses expand.

In the New Year we will introduce a Bill to provide the framework for the new system, with trials beginning later in the year.

The March Budget announced that London and the devolution deal areas of Greater Manchester and Liverpool City Region will pilot 100% business rates retention.

I can confirm today that these authorities have reached agreements to begin rate retention pilots in 2017 to 2018.

And I’m pleased to say they will be joined in this by authorities in the devolution deal areas of the West of England, Cornwall and the West Midlands.

New Homes Bonus

Mr Speaker,

The New Homes Bonus is an an important part of our commitment reward communities and authorities that embrace ambitious house building plans.

It also provides valuable income for councils seeking to grow their local economies, which they can spend it as they see fit.

Since its introduction in 2011, over £6 billion has been paid to reward housing supply and over 1.2 million homes have been delivered.

But for all its success, the system can always be improved.

A year ago we consulted on a number of possible reforms to the scheme.

Having studied the results closely, I can today confirm that, from next year, we will introduce a national baseline for housing growth of 0.4%.

Below this, the New Homes Bonus will not be paid.

This will help ensure the money is used to reward additional housing, rather than normal growth.

From 2018 to 2019 we will consider withholding New Homes Bonus payments from local authorities that are not planning effectively, by making positive decisions on planning applications and delivering housing growth.

To encourage more effective local planning we will also consider withholding payments for homes that are built following an appeal.

A consultation on this will take place in due course.

And we will also implement our preferred option in the consultation to reduce the number of years for which payments are made from 6 years to 5 years in 2017 to 2018, and to 4 years from 2018 to 2019.

This will release important funding for adult social care, recognising the demographic changes of an aging population, as well as a growing population.

Funding for adult social care

Mr Speaker, I’m sure all Members on both sides of this House agree on the need for action to meet the growing cost of caring for some of our most vulnerable citizens.

Every year councils spend more than £14 billion on adult social care.

It is by far the biggest cost pressure facing local government.

The Spending Review put in place up to £3.5 billion of additional funding for adult social care by 2019 to 2020, allowing local government to increase their spending on this service in real terms by the end of this Parliament.

But more needs to be done.

Over recent months we have listened to, heard and understood calls from across the board saying funding is needed sooner in order to meet short-term pressures.

Today I can confirm that savings from reforms to the New Homes Bonus will be retained in full by local government to contribute towards adult social care.

I can tell the House that we will use these funds to provide a new dedicated £240 million Adult Social Care Support Grant in 2017 to 2018, to be distributed fairly according to relative need.

I can confirm the indicative allocations of the Improved Better Care Fund we published last year.

And that the Department of Health will shortly be confirming allocations of the Public Health Grant to councils for next year.

Last year we agreed to the request by many leaders in local government to introduce a social care Council Tax precept of 2% a year, guaranteed to be spent on adult social care.

The precept puts money-raising powers into the hands of local leaders who best understand the needs of their community and are best placed to respond.

In recognition of the immediate challenges faced in the care market, we will now allow councils to raise this funding sooner if they wish.

Councils will be granted the flexibility to raise the precept by up to 3% next year and the year after.

This will provide a further £208 million to spend on adult social care in 2017 to 2018 and £444 million in 2018 to 2019.

These measures, together with the changes we’ve made to the New Homes Bonus, will make available almost £900 million of additional funding for adult social care over the next 2 years.

Improving adult social care services

However, we do not believe that more money is the only answer.

There is variation in performance across the country that cannot be explained by different levels of spending.

Some areas have virtually no Delayed Transfers of Care from hospital.

But there is a 20-fold difference between the best and worst performing 10% of areas.

It is vital that we finish the job of integrating our health and social care systems.

We know that this can improve outcomes and make funding go further, helping people manage their own health and wellbeing, and to live independently for as long as possible.

There are already some strong examples of where this works.

For example, in Oxfordshire joined-up working has seen delayed discharges plummet by over 40% in 6 months.

Meanwhile, Northumberland has saved £5 million through joining up with their local health trust, reducing demand for residential care by 12%.

The Better Care Fund is already supporting this with £5.3 billion of funding pooled between councils and Clinical Commissioning Groups last year.

But we also want to make sure all local authorities learn from the best performers and the best providers – we will soon publish an Integration and Better Care Fund Policy Framework to support this.

And in the long term, we will need to develop reforms that will provide a sustainable market that works for everyone who needs social care.

Fair Funding Review

We also need to recognise that demographic pressures are affecting different areas in different ways, as is the changing cost of providing services.

So we are undertaking a Fair Funding Review, to thoroughly consider how to introduce a more up-to-date, more transparent and fairer needs assessment formula.

The review is looking at all the services provided by local government and will determine the starting point for local authorities under 100% business rate retention.

This is an opportunity to be bold, and an opportunity for bottom-up change.

We are working with representatives from local government on the review and I will report on our progress to the House in the New Year.

Keeping Council Tax bills down

Mr Speaker, Council Tax is a local decision.

And local councils will need to justify social care precept rises to their taxpayers.

They will need to show how the additional income is spent to support people who need care in their area, and how it improves adult social care services.

However it’s worth noting that the extra flexibility to raise funding for adult social care next year will add just £1 a month to the average Council Tax bill.

And the overall increase to the precept in the next 3 years will remain at 6%, so bills will be no higher in 2019 to 2020.

In our manifesto we made a commitment to keep Council Tax down and this exactly what has happened.

Since 2010 to 2011 Council Tax has fallen in real terms by 9%.

And by 2019 to 2020, hardworking families will be paying less Council Tax, in real terms, than they were in 2010 to 2011.

Parish councils

However, last year we saw a worrying 6.1% rise in precepts by town and parish councils.

That’s why, earlier this year, we consulted on extending Council Tax referendum principles to larger town and parish councils.

These councils play an important role in our civic life.

And I understand the practical considerations of scale.

So we will defer our proposals this year, while keeping the level of precepts set by town and parish councils under close review.

I expect all town and parish councils to clearly demonstrate restraint when setting increases that are not a direct result of taking on additional responsibilities.

I am also actively considering with the sector ways to make excessive increases more transparent to local taxpayers.


Mr Speaker,

This local government finance settlement honours our commitment to 4-year funding certainty for councils that are committed to reform.

It paves the way towards financial self-sufficiency for local government and the full devolution of business rates.

It recognises the costs of delivering adult social care and makes more funding available sooner.

And it puts local councillors in the driving seat and keeps bills down for hardworking taxpayers.

I commend it to the House.

Published 15 December 2016