LGA submission to the 2023/24 Provisional Local Government Finance Settlement

The Local Government Association (LGA) is here to support, promote and improve local government. We will fight local government's corner and support councils through challenging times by making the case for greater devolution, helping councils tackle their challenges and assisting them to deliver better value for money services.

This response has been agreed by the Chairman, Group Leaders, and Lead Members of Resources Board.

• The increase in local government core spending power will help councils deal with inflationary and other cost pressures next year. However, we continue to have concerns that the increase in spending power has been achieved through a combination of measures that still do not address many of the underlying financial pressures local authorities face in funding and protecting vital local services.
• While the Local Government Association welcomes an overall increase in baseline funding for local authorities, we express concern that a significant proportion of the increase in core spending power for 2023/24 has been achieved through a combination of potentially one-off grants, ring-fenced funding, re-allocation of existing funding, and the assumption that local authorities will implement council tax increases. We continue to make the case for multi-year settlements and for more long-term certainty around funding and budgets.
• Shire districts, which provide vital services like planning and waste and recycling collection, and some unitary authorities, will see a lower core spending power increase next year, due to a number of factors including the discontinuation of the Lower Tier Services Grant. This is something the Government should address in the final settlement.
• Government Core Spending Power figures are based on the assumption that councils will raise their council tax by the maximum permitted without a referendum. This leaves councils facing the tough choice whether to increase council tax bills to bring in desperately-needed funding at a time when they are acutely aware of the significant burden this could place on households during a cost of living crisis.
• The LGA has long highlighted that council tax rises – particularly the adult social care precept – are not the solution to the long-term pressures faced by councils, particularly in social care. Increasing council tax raises different amounts of money in different parts of the country, unrelated to need.
• We are pleased that Government will provide extra funding for adult social care and accepted our ask for funding allocated for the reforms to still be available to address inflationary pressures for both councils and social care providers. Councils have always supported the principle of adult social care reforms and want to deliver them effectively but had warned that underfunded reforms would have exacerbated significant ongoing financial and workforce pressures.
• The additional funding helps to tackle the most immediate budget pressures in children’s social care; however, it will not be sufficient to invest in the preventative and early help services that children and families need, nor to invest in the children’s workforce or the additional homes needed for children in care. The Government’s forthcoming response to the Independent Review of Children’s Social Care will need to provide clarity over how children’s social care services will be sufficiently funded going forward to enable all children to receive the care and support they need, when they need it.
• The Government must urgently publish the response to the SEND Green paper, setting out policy reforms that will reduce pressure on high needs budgets, ensure councils can eliminate their High Needs Budget deficits, before the end of March 2026, and include a focus on increasing levels of mainstream inclusion.
• The New Homes Bonus makes up a considerable part of funding for some councils, particularly shire district authorities and we welcome the confirmation of the provisional amount for 2023/24. 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 public health grant also needs to be published as soon as possible, so councils know how much they can budget for essential services to help keep people healthy throughout their lives, including for treating drug misuse and tackling obesity.
• The Government has clarified that the Review of Relative Needs and Resources and a reset of accumulated business growth will not be implemented in the current Parliament. When the Review does happen, it needs to consider both the data and the formulas used to distribute funding and the Government needs to ensure that overall local government funding is sufficient, when new needs formulae are introduced, to ensure that no council sees its funding reduce as a result and that there are transitional arrangements for any business rates reset.
• Councils want to work with Government on a long-term plan to fund local services and a turbocharging of wider devolution where local leaders have sustainable funding and greater freedom to take decisions on how to provide vital services in their communities.
• This is the fifth one-year settlement in a row for councils which continues to hamper financial planning and their 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.

Question 1: Do you agree with the Government’s proposed methodology for the distribution of Revenue Support Grant in 2023/24? 16. We note that the methodology for allocating Revenue Support Grant (RSG) in 2023/24 is unchanged from previous years. The LGA does not take a formal view on distribution, pointing to arguments on both sides.

We note that the methodology for allocating Revenue Support Grant (RSG) in 2023/24 is unchanged from previous years. The LGA does not take a formal view on distribution, pointing to arguments on both sides.

We further note that the Government has again decided not to proceed with the negative adjustment to top-ups and tariffs known as ‘negative RSG’ in 2023/24. The affected authorities will welcome the Government proposal to again cancel the adjustment in the 2023/24 settlement.

We welcome the fact that local government will be compensated for the freezing of the business rates multiplier in 2023/24. 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.

We note that the Government is now compensating to the Consumer Prices Index (CPI) rather than the Retail Price Index (RPI). Whilst both are at historically high levels this year, we call on the Government to keep this decision under review when they drop again to more normal levels.

Question 2: Do you agree with the Government’s proposals to roll grants into the local government finance settlement in 2023/24?

We note the decision to consolidate three grants into Revenue Support Grant, the Family Annexe Council Tax Discount grant (£7.4 million), Local Council Tax Support Administration Subsidy grant (£69 million) and additional funding for food safety and standards enforcement (Natasha’s Law, £1.5 million), and, in addition, to roll a fourth grant, the Independent Living Fund (£161 million), into the Social Care grant. We also note that all four grants will keep their existing distribution for 2023/24, thus ensuring that there are no distributional consequences between authorities or between tiers of authorities due to this decision.

One advantage of grant consolidation will be that councils will receive funding which were previously directed through the grants earlier. For example, the LCTS administration subsidy grant for the current year was not announced until 29 March 2022. However, the grants will no longer be updated in the light of more recent data. For example, the distribution of the LCTS grant is currently by LCTS caseload adjusted by the area cost adjustment, using the most up to date available figures for the LCTS caseload; with consolidation any changes in distribution of LCTS caseload would not be taken into account in subsequent years. We would expect any predicted increase in LCTS caseload and the impact this has on administrative costs to be funded.

Question 3: Do you agree with the proposed package of council tax referendum principles for 2023/24?

An increase in council tax of up to 5 per cent will place a significant burden on households particularly during a cost of living crisis. In addition, increasing council tax raises different amounts of money in different parts of the country not related to need.

It is disappointing that the Government has continued to rely on council tax and the social care precept as part of its package to increase funding for adult social care. As we have previously stated, council tax is not the solution for meeting long-term pressures facing high-demand national services such as adult social care.

We agree that shire districts should have the extra flexibility but would propose a limit of £10 rather than £5.

We welcome the fact that Fire and Rescue Authorities (FRAs) will be able to raise their precept by up to £5 in 2023/24.

We have always maintained that the council tax referendum limit should be abolished so councils and their communities can decide, when the time is right, how local services are paid for, with residents able to democratically hold their council to account through the ballot box.

Question 4: Do you agree with the Government’s proposals for a new Funding Guarantee?

Councils receiving this funding will welcome the protection this guarantee offers although this is well below the level of CPI inflation which, in November 2022, stood at 10.7 per cent.

The majority of councils receiving the funding guarantee are shire district councils and this emphasises the need for them to have access to the additional funding which a higher of 3 per cent and £10 council tax referendum limit would bring.

Question 5: Do you agree with the Government’s proposals on funding for social care as part of the local government finance settlement in 2023/24?

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 comes at the expense of funding for other important services and is also completely unsustainable.

We are pleased that the Government will provide extra funding for adult social care and accepted our ask for funding allocated towards reforms to still be available to address inflationary pressures for both councils and social care providers. Councils have always supported the principle of adult social care reforms and want to deliver them effectively but have warned that underfunded reforms would have exacerbated significant ongoing financial and workforce pressures. The Government needs to use the delay to reforms to learn from the trailblazers to ensure that the appropriate funding and support is in place to ensure they can be implemented successfully.

We note that the repurposed reform funding is for both adults and children’s services. Both of these are under significant pressure as well as facing the impact of a high rate of inflation. The extra money can only be spent once and so councils will be forced to prioritise.

Although the additional funding to adult social care is welcome, it falls significantly short of the £13 billion we have called for to address the severity of the pressure facing the service, including rising demand, and ensure councils can meet all of their statutory duties under the Care Act. In addition, the Improved Better Care Fund allocations have been frozen at 2022/23 levels. 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. It will be also necessary to understand the conditions attached to the different streams of funding.

The additional funding helps to tackle the most immediate budget pressures in children’s social care; however it will not be sufficient to invest in the preventative and early help services that children and families need, nor to invest in the children’s workforce or the additional homes we need for children in care. The Government’s forthcoming response to the Independent Review of Children’s Social Care will need to provide clarity over how children’s social care services will be sufficiently funded going forward to enable all children to receive the care and support they need, when they need it.

The LGA does not take a formal view on distribution, pointing to arguments on both sides. We note that RNFs are a recognised way of allocating grant resources although the data was last updated in 2013/14 and the formula was developed some years previous to that. Some authorities with high pressures relating to children’s services might have preferred the Social Care grant to be allocated at least partly according to the Children’s RNF. We also note that the new discharge focus funding is being distributed differently to the current year funding for discharge making it harder to deliver continuity. We finally note that the equalisation element will go some way towards compensating for the different amounts raised through the Adult Social Care precept.

Question 6: Do you agree with the Government’s proposals for New Homes Bonus in 2023/24?

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 NHB 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.

Question 7: Do you agree with the Government’s proposals for Rural Services Delivery Grant in 2023/24?

Councils in rural areas will welcome the continuation of this funding albeit that it is reduced in real terms.

Question 8: Do you agree with the Government’s proposals for Services Grant in 2023/24?

The unringfenced Services Grant will provide vital resources for local authority services but its level has reduced from 2022/23. There will be some concern in the sector that the fact that it has been announced for 2023/24 only makes planning for 2024/25 and beyond more difficult.

Question 9: Do you have any comments on the impact of the proposals for the 2023/24 settlement outlined in this consultation document on the aims of the Public Sector Equality Duty? Please provide evidence to support your comments.

As mentioned in our response to question 1, the LGA does not take a formal view on distribution, pointing to arguments on both sides.

We would recommend that in addition to the draft policy impact statement, the Government should review whether their distribution methodology leads to disparities on the basis of protected characteristics (for example in terms of resource going to areas with higher Black, Asian and minority ethnic (BAME) communities).

We would also note that although socioeconomic status is not a protected characteristic, it has a proven relationship with differential outcomes. It should therefore be considered, particularly given the strong evidence of health inequalities and economic impacts. This is in order to mitigate economic and financial inequality and ensure all communities are supported through economic recovery.

In addition, the LGA refers the Government to responses from individual member authorities.

We note that the Government’s Local government finance policy statement 2023/24 to 2024/25 gives councils some clarity over sources of income in 2024/25.

We look forward to future discussions on the implementation of, and distribution of, income from the Extended Producer Responsibility for Packaging scheme and its knock on impacts on the settlement. The Government should engage with the LGA and local government on this including and ensure that any funding for reform is sufficient and new burdens are properly funded.

We note that the policy statement encourages local authorities to consider how they can use their reserves to maintain services in the face of immediate inflationary pressures, taking account of the need to maintain appropriate levels of reserves to support councils’ financial sustainability and future investment and that the Government will also explore releasing a user-friendly publication of the reserves data. We look forward to further clarity on these proposals and will discuss them in detail with the Government and local government. Councils hold reserves for a reason. Earmarked reserves are held so they can plan for the future and deal with known risks; unallocated reserves so that councils can respond to immediate events and emergencies. Reserves can only be spent once and using reserves is not a solution to the long-term financial pressures that councils face.

We note that the settlement includes no information about the national total, or individual council allocations, of the public health grant for 2023/24.

We call on Government to provide councils with clarity on the funding for public health as soon as possible. The current delay to the announcement is making it extremely difficult for councils to plan effectively at a time when public health services are vital to help mitigate pressures on the NHS and social care.

Public health teams have faced an unprecedented period of funding and demand pressures and continue to face significant pressures and challenges. Sufficient ongoing funding is needed to ensure all local authorities can continue to meet their statutory public health responsibilities.

Uncertainty also remains in terms of the additional funding announced last year for locally commissioned drug treatment services and the Family Hubs and Start for Life programme. We call on Government to provide councils with certainty beyond 2022/23 as soon as possible.

The Public Health Grant allows councils to fund vital preventative services such as stop smoking and sexual and reproductive health services. At a time when NHS and social care pressures are greater than ever, a greater focus on prevention through an uplift to the Public Health grant will support the Government’s wider aims by improving health outcomes, reducing health spending and putting the NHS on a better footing for the long term.

As stated above, we welcome the fact that Fire and Rescue Authorities (FRAs) will be able to raise their precept by up to £5 in 2023/24. We also note that FRAs will receive an increase in their business rates funding baseline and revenue support grant in line with inflation, including compensation for under-indexing the business rates multiplier and will be entitled to the Funding Guarantee.

Fire and rescue services need to be funded to take account of the full range of risks, demands and cost pressures they face. The sector also needs to be funded properly in order to engage in meaningful reform and transformation.

The outcomes of the cases on discriminatory practices in the fire fighters pension scheme will have implications for the pension administrative costs and employer contributions to be made by FRAs. Unless these additional cost pressures are funded by Government, they will have a significant impact on FRA budgets in 2023/24 and beyond.

Mike Heiser, Senior Policy Adviser

Email: [email protected]