Local Government Finance — House of Commons, 2016-02-08
Topic: Mixed Topics
Gregory David Clark (Conservative, Centre-right): With permission, Mr Speaker, I am pleased to report to the House my response to the consultation on the provisional local government financial settlement for the next financial year. I have considered all 278 responses to the consultation, and my Ministers and I have met local government leaders of all types of authority and from all parts of the country, as well as many colleagues in this House. I have listened carefully to each of them. Colleagues who have worked with me before know that I always take the views of Members of this House seriously, and I always respond when I can to practical and sensible suggestions. I am grateful to everyone who has taken the trouble to make such suggestions The provisional settlement contained a number of important innovations. First, although the statutory settlement is for 2016-17, I set out indicative figures to allow councils to apply for a four-year budget extending to the end of the Parliament. Such a change permits councils to plan with greater certainty. That offer was widely appreciated in the consultation, which is not surprising as local government has been requesting it for years. I want to give councils time to consider this offer and to formulate ways to translate that greater certainty into efficiency savings. I will therefore give them until Friday 14 October to respond to the offer, although many have done so positively already Secondly, in the provisional settlement I responded to the clear call from all tiers of local government, and many colleagues across the House, to recognise the important priority—and growing costs—of caring for our elderly population. In advance of the spending review, the Local Government Association and the Association of Directors of Adult Social Services wrote to me requesting that an additional £2.9 billion a year be made available by 2019-20. Through a dedicated social care precept of 2% a year—equivalent to £23 per year on an average band D home— and a better care fund of £1.5 billion a year by 2019-20, we will seek to address those pressures on care. The provisional settlement made up to £3.5 billion available by 2019-20 Thirdly, recognising that council services in rural areas face extra costs, I proposed in the provisional settlement that the rural services delivery grant be increased from £15.5 million this year to £20 million in 2016-17—the year of this settlement—and provisionally to £65 million in 2019-20. Councils and colleagues who represent rural areas welcomed that, but some asked that the gap in central Government funding between rural and urban councils should not widen, especially in the year for which this statutory settlement is intended Fourthly, this year’s provisional settlement marked the turning point from our over-centralised past. At the start of the 2010 Parliament, almost 80% of local councils’ expenditure was financed by central Government grant. By next year, revenue support grant will account for only 16% of spending power, and by 2019-20 only 5%. Ultimately, revenue support grant will disappear altogether as we move to 100% business rates retention. Local finance through council tax and business rates, rather than central Government grant, has been a big objective of councils for decades. However, many authorities and many hon. Members, especially those from counties such as Dorset, Leicestershire, Hampshire, Worcestershire, Lancashire, and several London boroughs including Kingston and Havering, have argued for transitional help during the first two years when central Government grant declines most sharply. They have argued that other local resources would not have had the time by then to build up fully Much in the provisional settlement was welcomed, but specific points were raised about the sharpness of changes in Government grant in the early years of this Parliament and there were concerns about the cost of service delivery in rural areas. Another very important point was made: many colleagues and councils felt that too much time has passed since the last substantial revision of the formula that assesses a council’s needs and the cost it can expect in meeting those needs. These responses to the consultation seemed to me to be reasonable and ought to be accommodated if at all possible Everyone will appreciate that the need to reduce the budget deficit means that meeting the recommendations is extraordinarily difficult, but I am pleased to be able to meet all of the most significant of them. I can confirm that every council will have, for the financial year ahead, at least the resources allocated by the provisional settlement. I have agreed to the responses to the consultation, which recommended an ease in the pace of reductions during the most difficult first two years of the settlement for councils that experience the sharpest reductions in revenue support grant. I will make additional resources available in the form of a transitional grant, as proposed in the response to the consultation by colleagues in local government. The grant will be worth £150 million a year, paid over the first two years On the needs formula itself, it is nearly 10 years since the current formula was looked at thoroughly. There is good reason to believe that the demographic pressures affecting particular areas, such as the growth in the elderly population, have affected different areas in different ways, as has the cost of providing services. I can announce that we will conduct a thorough review of what the needs assessment formula should be in a world in which all local government spending is funded by local resources, not central grant. We will use it to determine the transition to 100% business rates retention Pending that review, and having listened to colleagues representing rural parts of the country, including Cornwall, Lincolnshire, Devon, Cumbria and Northumberland—