Department for Levelling Up, Housing & Communities
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Fair and affordable funding to keep down council tax

Fair and affordable funding to keep down council tax

COMMUNITIES AND LOCAL GOVERNMENT News Release (236) issued by The Government News Network on 6 December 2007

Councils in England will receive an £8.97bn boost in funding over the next three years, including £2.7bn next year as Local Government Minister John Healey published Government grant figures for 2008/11.

The figures published today http://www.communities.gov.uk/documents/localgovernment/xls/576317 confirm 13 years of inflation busting increases in grant which by 2011 will be 45% more in real terms than in 1997.

Local authorities will receive £70.4bn in 2008-09, £73.5bn in 2009-10, and £76.7bn in 2010-11. Increases of 4.0%, 4.4% and 4.3% respectively.

The first ever three year settlement alongside a radically slimmed down performance framework mean that councils now have greater flexibility to budget and plan ahead, and make their own decisions about spending priorities.

To boost financial flexibility further, Mr Healey also announced new details of a programme to move £5.6bn worth of grants into formula grant or the new Area Based Grant by 2010-11. This includes taking the ring-fence off £3.4bn of grants, including funding for school development and mental health, freed up to local decision making.

Areas suffering from the most acute deprivation will also receive £1.5bn from the new Working Neighbourhoods Fund to give councils a greater role and freedoms to step up action to tackle worklessness and ensure that no-one is disadvantaged by where they live. A further £4.9bn for the Supporting People programme will help vulnerable live independently.

John Healey said:

"This is a tight settlement for central and local government alike, but it is fair and affordable. We are providing total annual average increases of 4.2% - that is 1.5% above inflation next year - combined with much greater financial flexibility.

"Councils must balance their books just like business, but rather than simply depending on Government grants and local tax-payers, I want them to be more ambitious and innovative using revenue raising powers such as trading, new business rate supplements and the community infrastructure levy, as well as achieving efficiency savings of three per cent per year to deliver a better deal for the people they serve.

"Keeping council tax under control remains a top priority for the Government. We expect the average council tax increase in England to be substantially below 5%. Councils must be under no illusions. We will not hesitate to use our capping powers as necessary to protect tax-payers from excessive increases. Authorities would be unwise to assume previous capping principles will be repeated.

The settlement also includes changes to the distribution of grant following a major consultation to ensure the fairest system for all.

New more up to date ONS population projections issued in September that improve the way that migrants are counted have been used as the basis for individual authority allocations. They provide the best available projections of population and, as supported by most local authorities, will be used for the next three years.

The Government is also determined to build on recent improvements. Whilst recognising that there is no single, simple or swift solution to the challenges, the Government is confirming today that Karen Durrell the National Statistician will bring together central and local government to work on ways to improve population survey data and make greater use of administrative data.

The Government will move towards full implementation of the fairer and improved social services formula through the removal of floor damping. However to provide stability to all councils and ensure no-one receives less than in previous years the grant floors will continue as a permanent part of the system.

The grant floors will be:

* For authorities with responsibilities for education and social services, 2.0% in 2008-09, 1.75% in 2009-10 and 1.5% in 2010-11;

* For police authorities, the floors will be 2.5% in each year; and

* For fire and rescue authorities, and for shire district councils, the floors will be 1.0% in 2008-09, and 0.5% in each of the remaining two years.

The Government will also make the system fairer by taking more account of the circumstances of authorities with a low council tax base, which tend to be in deprived areas.

John Healey said:

"These important changes, based on the principles of certainty, flexibility, equity and stability, will provide the fairest allocation possible to all.

"We recognise that some councils face short term population changes and migration, and we have a programme of work to help councils tackle cohesion and other issues related to that. In implementing the local government settlement, we have used improved ONS data which is the best and most accurate available. A large majority of councils recommended using this data rather than re-opening the settlement in years 2 and 3, and this will help to ensure stability for councils in budgeting ahead.

"We have struck an important balance on social services to ensure a long term fairer system of funding that takes better account of need. But we simply cannot have a roller-coaster ride with some areas receiving less than before. The grant floors will ensure increases for all authorities while allowing the fairer system of social care funding to come through.

"The current system fails to recognise the scale of need in the most deprived areas, which is why the improved formula is needed to provide the fairest allocation to all. Action to tackle deprivation and worklessness is also being stepped up through the £1.5bn Working Neighbourhoods Fund announced today."

In addition, the Government is today announcing £29bn of capital support to local authorities. This is the first time that capital allocations have been announced alongside the provisional local government settlement and brings greater certainty for authorities to plan ahead.

Notes to Editors

1. Tables showing increases in formula grant are available here: http://www.communities.gov.uk/documents/localgovernment/xls/576317

2. A consultation on the settlement will run until 8 January 2008.

The Government has also published an outline of an asset management strategy for Local Government which emphasises the importance good strategic asset management at a local authority level.

Recognising that the last few years have been untypical for the Fire and Rescue service with modernisation, pensions reform and industrial action all affecting spending patterns, the Government has decided not to proceed with updating the expenditure base of the formula for Fire and Rescue authorities. We will begin a more thorough review examining a move away from basing the formula on past expenditure early in the New Year.

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