Richard Harbord: The local government settlement is a ‘fudge’ and a ‘muddle’
0The local government settlement saw changes to the New Homes Bonus and council tax to support adult social care. Richard Harbord argues it contained no new money and ‘no long-term thinking’.
Richard Harbord
This year’s local government settlement was always going to be a bit different and perhaps promised a little less excitement than usual.
After all, 97% of all local authorities have signed up to a four-year settlement and this is year two of that deal. The statement confirmed the second year of the four-year settlement.
However, the statement from the communities secretary, Sajid Javid, came in the end with some controversy. Firstly, because it failed conform to the normal protocols of the House Of Commons. No advance copy of the statement was provided to the opposition prompting the speaker of the house, John Bercow, to consider suspending the sitting because of the omission. It would be my suggestion that this was not deliberate, but one caused by the statement being agreed politically at the last moment.
This was not the only controversy: the secretary of state claimed a large amount of new money in the settlement, but that is not at all apparent.
Business rate devolution
Javid started by saying that by 2020 there would be true “localism” in local government using local money to fund local services. Even this is slightly controversial but it depends on how you define local. If local is all local authorities, then that is true but it does not mean local self-sufficiency as many authorities will not be keeping 100% of their own business rates and there will be safety nets and equalisation.
The communities secretary forged ahead, confirming that a business rates bill will be introduced in the New Year. He also confirmed the 100% business rate retention pilots in London, Greater Manchester and the Liverpool city region will commence in 2017-18. He then added the West of England, Cornwall and the West Midlands. Those of us on the business rates steering group have yet to see the detail of how this will work, or what the effect will be on the rest of the country.
New Homes Bonus
He then moved to the New Homes Bonus. A system close to the heart of district and unitary councils. There will be changes.
Javid announced there would be no bonus paid beneath 0.4% growth, and unveiled a consultation on a proposal to withhold bonus from authorities “not planning effectively, by making positive decisions on planning applications and delivering housing growth”.
There is also a proposal that no New Homes Bonus is paid on homes built on appeal. There will be consultation on that and a reduction in payment period from six to five years in 2017-18, and to four years in 2018-19. This comes at a difficult time and authorities will need to re-calculate their financial forecasts both for next year’s budget and their longer term financial plans.
Adult social care
Following intense discussions in the media, the settlement was keenly awaited for what it might say on adult social care. And the communities secretary offered a series of announcements.
The indicative allocations for the Better Care Fund were confirmed. This means that the hoped-for bringing forward of the money will not be happening.
The funds freed up by the changes to New Homes Bonus will form an adult social care grant. This is calculated at £240m for next year, distributed on relative need. Javid’s speech only gave a commitment to next year although the secretary of state did say savings in New Homes Bonus will be retained in full by local government.
He also allowed the bringing forward of the social care council tax precept to allow up to 3% next year and the year after.
The secretary of state then made the claim that this meant £900m additional funding for adult social care over the next two years.
In the House, he said this was “new money”. But it does not meet my definition of new money. The New Homes Bonus was already committed and will now be redistributed. Each authority will need to do its own calculations and it will be particularly interesting to see the overall position in unitary authorities. Clearly districts will lose and counties gain. The precept is flexible and it will still equate to 6% over 3 years. The speech says that 6% will be the limit up to 2019-20.
In other decisions the secretary of state noted the fair funding review was taking place and progress will be reported in the New Year. This is to determine the base for devolution of business rates. He also said the proposal to cap parish precepts has been deferred again for 12 months. This was originally raised when it was thought some districts were devolving services like leisure to parishes who had no constraint on their expenditure.
Muddle and fudge
Local authorities are not impressed. The extra precept is very little help, is uneven and will lead to accusations of a post code lottery in adult social care. The New Homes Bonus will be a worry for many authorities and there can be no certainty how that will finally effect them and their finances. Clearly, in total, it is recycled (not new) money. There will undoubtedly be significant losers who will not gain by way of additional funds for social care.
I also note that yet again there is no mention of children’s services, which is another major pressure point for authorities. An announcement about the direct schools grant will also adversely affect many authorities.
Another not very good day for local government. And not a very good day for central government because the settlement amounts to a fudge, a muddle and with no long-term thinking
Richard Harbord is the former chief executive of Boston Borough Council.
