On 13 December the Government announced the Provisional Local Government Finance Settlement for 2019/20.
The local government finance settlement is the annual determination of funding to local government from central government. This briefing covers the consultation on the local government finance settlement for 2019/20. We expect the final 2019/20 settlement to be laid before the House of Commons, for its approval, in late January or early February 2019.
The LGA has issued a media statement responding to today’s announcement.
- The extra funding in the 2018 Budget showed that the Government is listening to the LGA’s call for desperately needed investment to ease some of the pressure facing local services next year. This included an additional £650 million for children and adults, and £420 million for roads funding.
- There is new money from central government included in the provisional settlement. Councils, however, will still face an overall funding gap of £3.2 billion in 2019/20. It is therefore disappointing that the Government has not used the settlement to provide further desperately-needed resources for councils next year.
- We are pleased that the Government has decided not to increase the New Homes Bonus (NHB) threshold further next year, and has provided up to £20 million to fund this. This makes up a considerable part of funding for some councils, particularly shire district authorities.
- Many councils will be forced to take tough decisions about which services have to be scaled back, or stopped altogether, to plug funding gaps. It is vital that the Government provides new funding for all councils in the final settlement, and uses the 2019 Spending Review to deliver truly sustainable funding for local government.
- We acknowledge that the Government has provided extra resources to some councils in 2019/20 to cancel the ‘negative RSG’ adjustment to tariffs and top-ups. The Government has also made an extra £16 million available through the Rural Services Delivery Grant.
- It is right that the £180 million surplus on the levy account is returned to local government.
- The additional one-off funding for adults and children’s services announced in the 2018 Budget is welcome. However, there is still a substantial funding gap facing children’s and adult social care in 2019/20. We have repeatedly warned of the serious consequences of the funding pressures facing these services. An injection of new money from central government is the only way to protect the vital services which care for older and disabled people, protect children and support families.
- Continued flexibility for local authorities in setting council tax levels will give some councils the option of raising extra money to offset some of the financial pressures they face next year. For shire districts with the lowest council tax levels the new limit does not provide any more spending power, as they can already increase council tax by 3 per cent or more due to the £5 flexibility. For many other district councils, the positive impact is minimal for the same reason. We call on the Government to offer further flexibility to these councils.
- No national tax is subject to referendum. The council tax referendum limit needs to be abolished so councils and their communities can decide how local services are paid for, democratically, through the ballot box. On its own, council tax flexibility is not a sustainable solution to the funding crisis. Increasing council tax raises different amounts of money in different parts of the country, unrelated to need. This also adds an extra financial burden on households.
- Further Business Rates Retention pilots will enable aspects of the 75 per cent Business Rates Retention system to be tested prior to implementation for all in 2020/21. Consultations on further Business Rates Retention and the Fair Funding Review have been published alongside the settlement. We will continue to work with the Government on these reforms, including tackling the impact of business rates appeals on local authorities.
- The four year deal runs out in March 2020. We remain concerned that there is no clarity over funding levels, nationally and locally, after that date. This hampers meaningful financial planning at a time when central government grant funding is the lowest it has been for decades and demand pressures are increasing.
Annual local government finance settlements
Each year local authorities’ core funding allocations for the forthcoming financial year are announced by Government in the provisional local government finance settlement, usually in December. Following consultation, allocations are confirmed in the final settlement, usually in February.