Government funding measures leave two thirds of councils worse off in 2017/18, LGA warns
Press release 27 January 2017
Government funding measures will force more than two thirds of councils to find millions more in savings than expected to plug funding gaps in 2017/18, the Local Government Association warns today.
The LGA is calling for government to reverse unexpected reductions in New Homes Bonus (NHB) payments to councils in 2017/18 and find genuinely new money to properly fund social care.
The provisional Local Government Finance Settlement, published in December, failed to provide any additional new government funding for councils in 2017/18.
Instead, the Government brought forward already announced council tax raising powers for social care authorities and redistributed £241 million in NHB payments through a new Adult Social Care Services Support Grant. This will be a one-off measure in 2017/18.
Early analysis by the LGA also suggests 57 social care authorities will be worse off as a result as they will lose more in NHB payments - compared to indicative NHB allocations published in February 2016 - than they gain in Adult Social Care Support Grant.
Councils will also need to achieve growth of greater than 0.4 per cent before they receive any NHB payments. The LGA said this will see 201 district councils lose out on NHB money they had planned for in 2017/18, pushing them closer to a financial tipping point. For many, this comes only a matter of months after they signed up to the Government's offer of a four-year funding settlement.
Local government leaders warn these inadequate measures fail to address the long-term funding crisis in social care and mean local government continues to face an overall funding gap of £5.8 billion by 2020.
With councils having only a matter of weeks to set budgets for 2017/18, the LGA is calling on government to use the final Local Government Finance Settlement to:
- Reverse the New Homes Bonus reductions in 2017/18 to avoid councils having to find significant savings due to this unexpected loss of this funding.
- Find genuinely new government money to pay for the £241 million Adult Social Care Support Grant. Even with this some short-term support – and the ability to raise a council tax social care precept of up to 3 per cent in 2017/18 – social care still faces a £2.6 billion funding gap by 2020.
- Commit to allow local government to use the extra business rates income it will keep by the end of the Parliament to plug the £5.8 billion funding gap it faces by 2020. This is desperately needed to avoid communities from suffering further damaging cuts to the local services they rely on.
Lord Porter, LGA Chairman, said:
"No new money from central government is being provided to councils in 2017/18. In fact, more than two thirds of councils will actually be worse off next year than they were expecting.
"Councils need government to reverse New Homes Bonus cuts next year and fund the Adult Social Care Services Grant with new money. This would avoid councils from having to make deeper than expected cutbacks to local services in 2017/18 and would provide some short-term support to councils providing social care.
"None of this changes the fact that all councils face an overall £5.8 billion funding gap by 2020. If councils stopped filling in potholes, maintaining parks and open spaces, closed all children's centres, libraries, museums, leisure centres, turned off every street light and shut all discretionary bus routes they would not have saved enough money to plug this gap by the end of the decade.
"The Government must allow local government to use the extra business rates income it will keep to plug this growing funding gap if local services are to stand any chance of surviving the sheer scale of funding cuts and pressures facing them both now and over the next few years.
"Genuinely new government money is also now the only way to protect the services caring for our elderly and disabled people and ensure they can enjoy dignified, healthy and independent lives, live in their own community and stay out of hospital for longer, and reduce the pressures on the NHS."
The provisional Local Government Finance Settlement, published before Christmas, announced that:
- In total councils will receive £2.2 billion (30.6 per cent) less Revenue Support Grant to run local services in 2017/18 than last year.
- England's 152 social care authorities will be able to increase council tax by up to a further 3 per cent in total in 2017/18 in addition to the standard increase of 1.99 per cent permitted for all councils. Income from this extra precept must be spent on social care. The total social care precept increase allowed across the next three years remains unchanged at 6 per cent.
- New Homes Bonus payments, both past and present, would be reduced from six years to five years in 2017/18 and to four years in 2018/19. Councils would also need to achieve growth of greater than 0.4 per cent before they receive any NHB payments. These reforms would reduce the amount of NHB received by councils from 2017/18 by £241 million. This will be redistributed to social care authorities through a new Adult Social Care Support Grant for 2017/18 only.
You can read the LGA's full response to the consultation on the provisional Local Government Finance Settlement here.
020 7664 3184
26 January 2017