LGA Responds to Local Government Finance Settlement

9 Feb 2016 02:22 PM

Lord Porter, Chairman of the Local Government Association responds to the final Local Government Finance Settlement announced this week.

"The LGA has been working hard with the Government on behalf of all councils - both publicly and privately – to highlight the financial challenges they face over the next few years. We are pleased it has listened to our fundamental call for new money to be found to smooth out funding reductions for some councils in 2016/17 and beyond without any other councils losing out further as a result.

"Extra funding of up to £416 million, which includes an extra £93 million for rural authorities, announced today will go towards easing the financial pressure on those local authorities who were adversely affected by the method of allocating funding and will ensure that no council will move into a negative grant funding position within the next three years. Allowing all local authorities – not just the 51 districts with the lowest council tax bases – to raise their Band D council tax by £5 will also help some councils mitigate some of the additional funding pressures they face in 2016/17 and beyond.

"Funding reductions will still be challenging for councils over the next four years. Any extra cost pressures, such as those arising from rising demand or policies such as the National Living Wage, will have to be funded by councils finding savings from elsewhere. Many will have to make significant reductions to local services to plug funding gaps and will be asking residents to pay more council tax while possibly offering fewer services in return as a result.

"The move to full business rate retention is the most ambitious reform to local government finance of the last few decades. While it won't solve the long-term funding challenges facing councils, it is absolutely critical to ensure any new system works effectively. We look forward to working closely with the Government on ensuring it is implemented and distributed in a way which maximises the potential it offers to our local communities and businesses."

Notes

Key points in final Local Government Finance Settlement announced this week:

There has been no change to the method of distributing central funding (locally retained business rates and Revenue Support Grant) compared to the provisional settlement which from 2016/17 takes into account council tax.
Additional funding in the form of transitional grant of £150 million in both 2016/17 and 2017/18 for the councils adversely affected by the change in distribution of central funding.
The LGA called for the removal of additional tariff/top-up adjustment (no negative RSG). The Government has made available £2.3 million in 2017/18 and £22.8 million in 2018/19 to remove this adjustment.
Compared to the provisional settlement an extra £60.5 million has been added to the Rural Services Delivery Grant in 2016/17 and £30 million in 2017/18.
The additional funding available over the four year period amounts to £415.6 million.
As requested by the LGA, all Shire Districts will be given the flexibility to raise council tax by the maximum of £5 or 2 per cent. According to DCLG numbers, this is an additional £39.2 million in council tax in 2019/20 if all Shire Districts use this flexibility every year of the four year period.