The final local government finance settlement 2016-17 has been unveiled by communities secretary Greg Clark, featuring sweeteners to help those councils facing financial losses.
Mr Clark has thrown in extra funding for councils fearful of losing out due to the removal of the revenue support grant over this parliament, and the transition towards self-financing through 100% business rates retention.
Local government will benefit from a £300m fund to ease this transition across the next two years, when the reductions in revenue support grant will be steepest, as well as a large increase in grants for rural authorities.
Greg Clark
To further allay fears, Mr Clark also announced plans for ‘a 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, and [to] use it to determine the transition to 100% business rates retention’.
Lord Porter, chairman of the Local Government Association, said: 'The move to full business rate retention is the most ambitious reform to local government finance of the last few decades.
'While it won’t solve the long-term funding challenges facing councils, it is absolutely critical to ensure any new system works effectively. We look forward to working closely with the Government on ensuring it is implemented and distributed in a way which maximises the potential it offers to our local communities and businesses.'
Mr Clark highlighted that at the start of the 2010 Parliament, almost 80% of council expenditure came from central government grant, by next year the revenue support grant will account 16% and by 2019 to 2020 only 5%.
The secretary told Parliament: ‘I will make additional resources available in the form of a transitional grant, as proposed in their responses to the consultation by colleagues in local government. The grant will be worth £150m a year, paid over the first two years.’
The settlement provides cash for a range of local government transport services such as local bus networks and also provides scope for councils to invest in more long-term capital projects.
One of the key aspects to the settlement is the ability of councils to apply for a four- year budget, with Whitehall having set out indicative funding figures to allow councils to plan ahead and invest to save.
The deadline for applications for the longer settlement is 14 October 2016, ‘although many have done so positively already’ Mr Clark said.
This has been a long-standing ambition of the local infrastructure sector allowing more efficient procurement, and asset and service management.
Mr Clark also confirmed that while the core referendum threshold for council tax increases remains at 2%, any council could now raise the tax by £5 a year.
This new rule is designed to help smaller shire districts with very low council tax bases ‘so they are not punished for being economical’ Mr Clark said.
He also revealed to the House plans to increase the rural services delivery grant from £15.5m this year to £80.5m in 2016 to 2017. This grant awards extra funding to councils in the most sparsely populated areas.
Mr Clark said: ‘With an extra £32.7m available to rural councils through the transitional grant I have described, this is £93.2 million of increased funding compared to the provisional settlement available to rural areas.
‘Significantly, this proposal ensures no deterioration in government funding of rural areas compared to urban areas for the year of this statutory settlement.'
However a senior county council source told Transport Network that due to the extreme pressures on social care, councils would channel much of this additional funding away from transport services.
Mr Clark also announced proposals that could shake up the planning system.
He said he would ‘consult on allowing well-performing planning departments to increase their fees in line with inflation at the most, providing that the revenue reduces the cross subsidy that the planning function currently gets from Council Tax payers’.
The finance settlement is scheduled to go before parliament for approval tomorrow.
