Local Government Funding Settlement — House of Commons, 2018-12-13
Topic: Government Operations
James Peter Brokenshire (Conservative, Centre-right): With permission, I will make a statement on funding for local authorities in England next year. Every day, councils and the many hard-working, dedicated people who work for them do their communities proud, delivering the essential services on which we all depend and making a difference to every life they touch. It is a privilege to be working with and representing those communities. In doing so, I am determined to ensure that they get the resources and support they need to rise to new opportunities and challenges, to grow their economies and to ensure that there is opportunity for all and that no one is left behind. The draft local government finance settlement being published today is an important step towards that. The provisional local authority funding allocations will be subject to further review before final settlements are made in line with my Department’s usual processes. This provisional settlement confirms that core spending power is forecast to increase from £45.1 billion in 2018-19 to £46.4 billion in 2019-20—a cash increase of 2.8% and a real-terms increase in the resources available to local authorities It has been challenging for councils to drive efficiencies as they have contributed to rebuilding our economy and tackling the deficit that we inherited from Labour. That is why I am delighted that the Budget committed around £1 billion of extra funding for local services, with a strong focus on supporting some of our most vulnerable groups. That includes £650 million for adult and children’s social care in 2019-20. Of that, £240 million will go towards easing winter pressures, with the flexibility to use the remaining £410 million for either adult or children’s services and, where necessary, to relieve demands on the NHS. That is on top of the £240 million announced in October to address winter pressures this year In addition, the Budget pledged an extra £84 million over the next five years to expand our children’s social care programmes to support more councils with high or rising numbers of children in care. That builds on the good work my Department is already doing through the troubled families programme to improve all services for families with complex programmes. The Budget also provided a boost for our high streets via a £1.5 billion package of support, including a business rates discount worth almost £900 million and a £675 million future high streets fund to help them adapt and thrive in changing times. In addition, a further £420 million will go towards repairing and improving our roads this year I recognise some of the pressures within social care. I have been working with the Secretary of State for Health and Social Care to address those pressures, and the Government will soon publish a Green Paper on the future of social care. It is a complex issue, and we are working with local authorities to ensure that we get things right. We have taken that approach across the board, listening carefully to councils of all shapes and sizes across the country and responding. My thanks go to my Ministers, especially the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for Richmond (Yorks) (Rishi Sunak), for all their work. As a result, I can confirm that I will increase the rural services delivery grant by £16 million in 2019-20 to maintain it at last year’s level, recognising the extra costs of providing services in rural communities In addition, I am committing up to £20 million to maintain the new homes bonus baseline at 0.4% in 2019-20, to ensure that we continue to reward councils for delivering the homes we need. There will also be no change to the council tax referendum limits set for local authorities in 2018-19, aside from further flexibility offered on the police precept level. Authorities will have the flexibility to increase their core council tax requirement by up to 3% and can draw as needed on the adult social care precept to meet demand for services, but local residents will continue to be protected and be able to approve or veto any excessive rise in a referendum. Measures that I have agreed with the Home Secretary to allow police and crime commissioners to increase the police precept to £24 will help PCCs tackle the changing demands they face I am also conscious that so-called negative revenue support grant remains an issue in certain areas. Having consulted on options for addressing it, I am pleased to announce that we intend to directly eliminate the £152.9 million negative RSG in 2019-20 using forgone business rates. That will prevent any local authority from being subject to a downward adjustment to its business rates tariffs and top-ups, which could act as a disincentive to growth We have been listening, and we have been acting on what we hear. Nowhere is that more true than when it comes to answering calls from councils, over many years, for more control over the money they raise. Our plan to increase business rates retention to 75% from 2020 provides that and more, giving local authorities powerful incentives to grow their local economy. Under the current scheme, councils estimate that they will receive around £2.4 billion in business rates growth in 2018-19, a significant revenue stream on top of the core settlement funding I am unveiling today. It is therefore no wonder that councils are queuing up to get involved in the pilots we have been running to test the new approach I am delighted to announce that, in 2019-20, 15 new pilots will get under way in Berkshire, Buckinghamshire, East Sussex, Hertfordshire, Lancashire, Leicestershire, Norfolk, Northamptonshire, North and West Yorkshire, North of Tyne, Solent combined authority, Somerset, Staffordshire and Stoke, West Sussex and Worcestershire. We will also be piloting 75% rates retention in London and continuing the existing pilots in devolution deal areas I am also pleased to announce that every authority in England stands to reap the rewards of increased growth in business rates income, which has generated a surplus in the business rates levy account in 2018-19. We propose to distribute £180 million of levy surplus to all councils, based on need I am aware that a few authorities continue to undertake significant borrowing for commercial purposes. I share the concerns of the Chartered Institute of Public Finance and Accountancy and others about the risks to which those local authorities are exposing themselves and local taxpayers. We are considering with Her Majesty’s Treasury what further interventions may be required. We are also launching two further consultations today, on reforms to the business rates retention system and on the new approach to distributing funding through the review of relative needs and resources. There is little doubt that the current funding formula needs fixing and replacing with a robust, straightforward approach in which the link between local circumstances and the allocation of resources is clear. With those consultations, we are making important progress towards that and towards a stronger, more sustainable system of local government So 2019 is shaping up to be a big moment for local government, drawing together our plans for a new approach to distributing funding and increasing business rates retention, as well as the upcoming spending review. No one knows their local area like councils, which are at the heart of their communities, and we are supporting them to harness their vast local knowledge and networks—yes, to make the best of available resources and to increase efficiency, but also to innovate and improve the way we deliver services. We are working with local authorities to promote efficiency, and we will use that work to develop a package of support to help councils become more efficient and get better service outcomes. We will launch a continuous improvement tool in spring 2019, and we are championing authorities that are putting communities at the heart of service delivery The smarter use of technology is clearly pivotal to this work, and it has the potential to be genuinely transformative, which is why the digital declaration launched by the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for Richmond (Yorks), to share and spread best practice is so important. The declaration is backed by a £7.5 million local digital innovation fund, and I am delighted to say that the first successful bids were announced last week to kick-start projects led by councils to promote service transformation There is so much excellent, inspiring work under way in our local communities, and it is right that we get behind it and have faith in the authorities that, day in and day out, always deliver. This settlement and the extra funding announced in the Budget reaffirm that faith, delivering a cash-terms increase of 2.8% and a real-terms increase in spending for local authorities in 2019-20; delivering extra support for the vulnerable, for quality public services, for our high streets and for local economic growth; and paving the way for a fairer, more self-sufficient and more resilient future for local government and a brighter future for the people and places it serves. I commend this settlement to the House.