Impact assessment

Provisional local government finance settlement 2023 to 2024: draft policy impact statement

Published 19 December 2022

Applies to England

1. Brief outline of policy proposal

This draft policy impact statement covers the government’s proposals for the provisional local government finance settlement for 2023/24. 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 documents:

• Provisional local government finance settlement consultation document
• Draft Council Tax Referendum Principles Report

The explanation of the measures can also be found in the associated documentation, all of which can be found on the provisional local government finance settlement page.

In summary, the key policy proposals within the provisional local government finance settlement for 2023-24 are:

a) For the Core Settlement:

• The Autumn Statement announced the freezing of the Business Rates Multiplier for 2023-24 at 49.9p. We will compensate local authorities for the reduction in income as a consequence of this decision. From 2023-24 we will align this level of compensation, including the increase in baseline funding levels, with the default link, established by government policy in 2018-19, between the Business Rates Multiplier and the standard Consumer Price Index (CPI) measure rather than the Retail Price Index (RPI).
• We will increase Revenue Support Grant (RSG) in line with CPI.
• We will continue to eliminate so-called ‘negative Revenue Support Grant’.

b) For council tax, the government is giving local authorities in England additional flexibility in setting council tax by:

• Protecting local taxpayers from excessive increases in council tax, by setting the referendum threshold at 3% per year from April 2023 for shire counties, unitary authorities, London boroughs, and the Greater London Authority, without a local referendum. Councils can set higher increases if they wish, via consent of a local referendum.
• In addition, local authorities with social care responsibilities will be able to set an adult social care precept of up to 2% per year, without a referendum.
• A bespoke council tax referendum principle of up to 3% or £5, whichever is higher, for shire districts.
• A bespoke additional council tax flexibility of up to £20 on Band D bills for the Greater London Authority.
• Setting no council tax referendum principles for Mayoral Combined Authorities (MCAs).
• Setting no council tax referendum principles for town and parish councils.
• A £5 referendum principle on Band D bills for all fire and rescue authorities. A £15 referendum principle on Band D bills for police and crime commissioners.

c) For Social Care:

• The Autumn Statement announced additional funding of up to £2.8 billion in 2023-2024 in England and £4.7 billion in 2024-2025 for social care and discharge. This includes £1 billion of new grant funding in 2023-24 and £1.7 billion in 2024-25, further flexibility for local authorities on council tax and delaying the rollout of adult social care charging reform from October 2023 to October 2025.
• Repurposed money from delaying charging reform:
  • £1.265 billion in 2023-24 and £1.877 billion in 2024-25 will be distributed to local authorities through the Social Care Grant for adult and children’s social care. This is in addition to the existing Social Care Grant. We will continue to equalise against the adult social care precept.
• New grant funding:
  • £600 million will be distributed in 2023-24 and £1 billion in 2024-25 through the Better Care Fund to get people out of hospital on time into care settings, freeing up NHS beds for those who need them. The funding will be split 50:50 between the Department for Levelling Up Housing and Communities’ Local Government DEL and the Department for Health and Social Care DEL, meaning Local Government DEL will allocate and distribute £300 million in 2023-24 and £500 million in 2024-25. This will be in addition to the existing improved Better Care Fund, for which the current distribution will remain.
  • £400 million in 2023-24 and £683 million in 2024-25 will be distributed through a grant ringfenced for adult social care which will also help to support capacity and discharge. Alongside this, the funding package for adult social care retains £162 million per year of Fair Cost of Care funding and its distribution to reflect the progress councils and providers have made this year on fees and cost of care exercises.
• The government expects this new grant funding to enable local authorities to make tangible improvements to adult social care in particular to address discharge delays, social care waiting times, low fee rates and workforce pressures in the adult social care sector. There will be reporting requirements placed on the new Adult Social Care Grant and the Better Care Fund regarding performance and use of funding to support improvement against these objectives. The government will provide further details on reporting in due course.

d) Remaining Settlement Grants

• The Rural Services Delivery Grant will remain unchanged.
• The Services Grant will reduce in 2023-24. This is in part because there will no longer be an increase in National Insurance Contributions, therefore the government will not be compensating local government for these contributions from 2023-24. In addition, some funding will go to increase the funding for the Supporting Families programme. The same as last year, the remainder of the Services Grant will be distributed by the Settlement Funding Assessment.
• In recognition of the inflationary pressures across the sector, we will repurpose the Lower Tier Services Grant and a proportion of the expired New Homes Bonus legacy payments to create a new one-off, funding guarantee. This will ensure that all authorities will see at least a 3% increase in their Core Spending Power before any decision they make about organisational efficiencies, use of reserves, and council tax levels.
• There will be new rounds of New Homes Bonus (NHB) payments in 2023-24. Although, as with last year, these will not attract new legacy payments. NHB allocations for 2023-24 will continue to be paid for in the usual way. There will be no changes to the calculation process from 2022-23 except the expiration of legacy payments.
• The government will be extending the Statutory Override for the Dedicated Schools Grant for the next three years from 2023-24 to 2025-26.

e) Other areas of the Settlement

• We will be consolidating four grants totalling £239 million into the Local Government Finance Settlement. All of the four grants will keep their existing distribution. These are the Independent Living Fund; Council Tax Discounts – Family Annexe; Local Council Tax Support Administration Subsidy; and Natasha’s Law.
• All current 100% business rates retention areas will continue for 2023-24. During this time the government will review the role of such arrangements as a source of income for areas and its impact on local economic growth, and as part of deeper devolution commitments as set out in the Levelling Up White Paper.
• Where requested, we will proceed with Business Rates Pooling for 2023-24.

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 2022/23 funding distribution to the 2023/24 proposed funding distribution.

Councils provide various services which people 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. We do know, however, that pressures on social care tend to be greatest and that these disproportionately impact those of age 65+.

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 2023/24, we estimate local government will see real terms increase in total Core Spending Power of over 9% on average. This increase in resources will support the delivery of core services across local government.

3. Do you need any more information to assess the above? If so, how will you obtain it?

At this stage, the government is consulting on the provisional local government finance settlement and 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 above?

As part of the provisional local government finance settlement, the government is proposing an increase in the funding available to local authorities. We will be providing local authorities with a funding guarantee that will ensure all councils will see at least a 3% increase in their Core Spending Power before any decision they make about organisational efficiencies, use of reserves, and council tax. This can be used to help mitigate any potential impacts on members of protected groups by ensuring there is an increase in funding for local authorities to assist members of protected groups.

We will also be placing additional funding towards social care, where pressures are greatest. This will likely mitigate some negative impacts for individuals with the protected characteristics of age 65+, who account for a large proportion of the need for ASC services. As much of this additional funding will be distributed through the Social Care Grant, which is unringfenced and we have been clear that the funding is for both adult and children’s services, we also expect to mitigate negative impacts for both the elderly and children services as well.

We are also providing £100 million of funding for local authorities to support the most vulnerable households in England. Councils will be given the resources to deliver a reduction in council tax bills by up to £25 for households in receipt of local council tax support in 2023-24 and flexibility to determine their local approaches to support other vulnerable households in their area. This will provide support for the most vulnerable households, many of whom will be members of protected groups.

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. 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 2023/24 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 at this stage 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:

Name/Title: Mehr Panjwani, Policy Advisor (Local Government Funding Strategy)

Directorate/Unit: Local Government Finance

Date: 20/12/2022

SCS Sign off: Evi Bell, Deputy Director, Head of Local Government Funding Strategy

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