Final Local Government Finance Settlement 2022/23, House of Commons, 9 February 2022

The LGA has long highlighted that council tax rises – particularly the adult social care precept – have never been the solution to the long-term pressures faced by councils, particularly in social care which is facing severe financial and capacity challenges. Increasing council tax raises different amounts of money in different parts of the country, unrelated to need.


Key messages

  • We are pleased that the final Local Government Finance settlement confirms previously-announced extra grant funding and council tax raising powers in 2022/23 to help councils meet the extra cost and demand-led pressures they face to keep providing services at pre-pandemic levels. It has provided a potential increase of 7.4 per cent in council core spending power in cash terms.
  • However, these Government forecasts are based on the assumption that every local authority will raise their council tax by the maximum permitted without a referendum. This leaves councils facing the tough choice about whether to increase council tax bills to bring in desperately-needed funding at a time when they are acutely aware of the significant burden that could place on some households, especially in light of the steep increase in food and energy costs.
  • The LGA has long highlighted that council tax rises – particularly the adult social care precept – have never been the solution to the long-term pressures faced by councils, particularly in social care which is facing severe financial and capacity challenges. Increasing council tax raises different amounts of money in different parts of the country, unrelated to need.
  • Steadily growing demand has seen councils with responsibility for children’s and adult’s social care devoting nearly two-thirds of their total spending to these services. While the additional funding for these services is good, it will not go far enough in addressing the very real existing pressures these vital services face.
  • The New Homes Bonus makes up a considerable part of funding for some councils, particularly shire district authorities. Councils need clarity on the future of the New Homes Bonus to be able to plan their budgets beyond next year and into the medium term. Any changes should come with transitional funding to ensure that local authority services that residents rely on are not put at risk.
  • The publication of the public health grant for 2022/23 means that councils can now plan ahead for providing vital services such as tackling childhood obesity, treating substance misuse and recruiting more health visitors and school nurses, which have endured funding reductions in recent years amid significant rising demand. However, it is disappointing that there is no real-terms increase in public health funding. This will cause challenges for councils going forward and runs contrary to our shared ambition with government to address the stark health inequalities exposed by COVID-19 and contribute to levelling up.
  • The Government should now provide clarity on which local government funding reforms will happen and when. It needs to push ahead with the Fair Funding Review, including looking both at the data and the formulas used to distribute funding. We look forward to resuming work on the Review. The Government should ensure overall local government funding is sufficient when any funding distribution changes are introduced and that no council sees its funding reduce as a result.
  • While funding reforms make it difficult for a government to set out a multi-year settlement for local government, this is the fourth one-year settlement in a row for councils. This continues to hamper financial planning and council financial sustainability. Only with adequate long-term resources, certainty and freedoms, can councils deliver world-class local services for our communities, tackle the climate emergency, and level up all parts of the country.

Councils and their role leading communities

  • The pandemic has reinforced our shared conviction that local councils, working with their communities, partners and businesses, are best placed to lead, manage and shape their places, delivering sustainable change. As we learn to live with COVID-19 and turn our attention to recovery, the importance of the communities and places in which we live has never been clearer. But the pandemic has also exposed and heightened the disparities in our society. These need to be urgently addressed as part of our recovery. Councils want to continue to work with the Government to develop and deliver a holistic approach addressing long term inequalities, embedding prevention, tackling climate change, regenerating the economy and ultimately creating more resilient, safer and healthier places.
  • Investing in local places is in the national interest and one of the most powerful tools of the levelling up agenda. We call on the Government to ensure that councils are provided with long term certainty; powers and funding they need to address regional inequality, tackle local pockets of deprivation and make towns and communities across England attractive places to live, work and visit.

Core spending power and council tax

  • While it is good that the Settlement has provided a potential increase of 7.4 per cent in council core spending power, including new government grants, to support vital local services, this assumes that council tax bills will rise by a maximum 3 per cent next year, including 1 per cent for social care authorities next year.
  • This leaves councils facing the tough choice about whether to increase council tax bills to bring in desperately-needed funding at a time when they are acutely aware of the significant burden that could place on some households. The LGA has long highlighted that council tax rises – particularly the adult social care precept – have never been the solution to the long-term pressures faced by councils, particularly in social care which is facing severe financial and capacity challenges. Increasing council tax raises different amounts of money in different parts of the country, unrelated to need.
  • We have always maintained that the council tax referendum limit should be abolished so councils and their communities can decide how local services are paid for, with residents able to democratically hold their council to account through the ballot box.
  • We agree that shire districts should have the extra flexibility but in view of the proposed £10 threshold proposed for Police and Crime Commissioners, we call for a higher limit than £5.

Adult and children’s social care

  • Steadily growing demand has seen councils with responsibility for children’s and adult’s social care devoting nearly two-thirds of their total spending to these services. This demonstrates councils’ commitment to protecting these crucial services, but it both comes at the expense of funding for other important services and is also completely unsustainable.
  • The additional funding laid out in the Settlement is welcome and will help to tackle the most immediate budget pressures. However, it will not be sufficient to invest in the preventative and early help services or improve the quality of care in all settings that councils and their partners are committed to. It will tackle neither unmet and under-met need nor workforce challenges, including the key issue of care worker pay for adult social care, across both sectors.
  • Additional investment for here and now pressures and core services is an essential foundation for future adult social care reforms if councils are to play their part in delivering on the Government’s ambition as set out in its White Paper. We continue to call for a greater share of the new Health and Social Care Levy for the social care frontline to help secure that investment.
  • We look forward to the outcome of the Independent Review of Children’s Social Care, which we hope will make clear the investment needed to give children and families the help they need to thrive, and how local and central government can work together to achieve that goal.

Public health

  • Public health services run by councils have more than proven their worth through the pandemic, helping to reduce the spread of coronavirus while supporting people to keep healthy and well.
  • Public health funding grants to councils have been reduced by around £650 million in real terms from 2015/16 to 2021/22. In the Spending Review published in October 2021, the Government said it would maintain the public health grant “in real terms” until 2024/25.
  • The publication of the public health grant for 2022/23 means that councils can now plan ahead for providing vital services such as tackling childhood obesity, treating substance misuse and recruiting more health visitors and school nurses, which have endured funding reductions in recent years amid significant rising demand.
  • However, it is disappointing that there is no real-terms increase in public health funding This will cause challenges for councils going forward and runs contrary to our shared ambition with government to address the stark health inequalities exposed by COVID-19 and contribute to levelling up. Councils now also need urgent clarity on whether much needed outbreak management funding, which has helped councils reduce the spread of coronavirus, will be extended beyond March.
  • The announcement provides immediate certainty, but we need a clear long-term plan on the future which recognises the public health challenges we face as a country, addresses the current and future pressures on the public health workforce and recognises the interconnectedness with other parts of the health and care system.

New Homes Bonus

  • The New Homes Bonus makes up a considerable part of funding for some councils, particularly shire district authorities. Core spending power includes £556 million for the New Homes Bonus (NHB) in 2022/23.
  • Councils need clarity on the future of the new homes bonus to be able to plan their budgets beyond next year and into the medium term. Any changes should come with transitional funding to ensure that local authority services that residents rely on are not put at risk.

Business Rates

  • In our response to the Call for Evidence for the Business Rates Review, we stated that although property continues to provide a good basis for a local tax on business, we cannot look to business rates to form such a substantial part of local government funding in the future and alternative means of funding councils will be needed instead or as well as a reformed business rates system. We will be replying to the current consultation on technical reforms to the business rates system and look forward to replying to the consultation on the online sales tax when it is published.
  • We welcome the fact that local government will be fully compensated for the freezing of the business rates multiplier in 2022/23. However, freezing the multiplier reduces buoyancy in the business rates system, and without alternative means of funding or compensation, council income would reduce in the medium term.

Fair Funding Review

  • The Government has stated its commitment to ensuring that funding allocations for councils are based on an up-to-date assessment of their needs and resources, and notes that the data has not been updated for a number of years. It has announced that it will work closely with the sector and other stakeholders to update this and to look at the challenges and opportunities facing the sector before consulting on any potential changes. This includes options to support local authorities through transitional protection – the one off 2022/23 Services Grant will be excluded from potential transitional protections.
  • The Government should commit to the Fair Funding Review, reviewing both the formulas and the underlying data used for the assessment of relative needs and resources. As a first step, the Government needs to review progress it made prior to the pausing of this work to ensure that it is still fit for purpose, or flexible enough to deal with shifts in available data and council service models as a result of COVID-19.
  • We welcome the Government’s intention to engage with the sector, and consult, on potential future changes to the system. This process should be as open and transparent as possible. Transitional mechanisms attached to the outcome of the review should provide sufficient funding to ensure that no council experiences a loss of income as a result of the Fair Funding Review.

Funding for Fire and Rescue Services

  • Fire and Rescue Authorities will be able to raise their precept by 2 per cent in 2022/23, with eight fire and rescue authorities with the lowest council tax level able to increase Band D council tax by up to £5.
  • Fire authorities will also receive an increase in their revenue support grant in line with inflation, an increase in the compensation grant for under-indexing the business rates multiplier and a share of the £822 million Services Delivery Grant.
  • Fire and rescue services need to be funded to take account of the full range of risks, demands and cost pressures they face. While we would prefer council tax referendum limits to be removed, in view of the £10 flexibility given to Police and Crime Commissioners, an increase in the precept flexibility for Fire and Rescue Authorities (FRAs) would help. As a first step, whilst it is welcome for the 8 lowest council tax FRAs to be able to raise their precept by £5 it is disappointing that this, or increased, flexibility has not been given to all FRAs 
  • The sector also needs to be funded properly in order to engage in meaningful reform and transformation.
  • The outcomes of the cases about discriminatory provisions in the Firefighters’ Pension Scheme following government amendment in 2015 will have implications for employer contributions to be made by FRAs. In addition to those costs and paying compensation to firefighters, there are substantial costs relating to remedy implementation including software, wider operational administration and management costs, actuarial costs and legal costs incurred as a result of inclusion in the litigation. Unless these additional cost pressures are funded by government, they will continue to have a significant impact on FRA budgets in 2022/23 and beyond.
  • We note that funding for building safety was not mentioned in the settlement, including funding for local authority building control and for fire services to increase capacity to deliver the functions of the Building Safety Regulator. This is a concern as sufficient funding will be required to enable local authorities to support the regulator in its work to deliver meaningful change to the built environment.

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