Council finance settlement timing “up to new government”

The government has confirmed that the timing of the 2020/21 local government finance settlement will be a matter for the incoming government following December’s general election.

Last year, the government agreed to publish the provisional settlement earlier than usual – around 5 December, following criticism of the normal timetable in a review published by HM Treasury director general Andrew Hudson.

SAVE THE DATE – LATIF NORTH
March 25th, 2020, Manchester
Council treasury investment & borrowing

However, these plans have been thrown off track by Parliament’s decision last month to hold a general election on 12 December.

A statement from the Ministry of Housing, Communities and Local Government, said: “The Government set out its proposals for the 2020-21 local government finance settlement in the technical consultation published on 3 October 2019. 

“The department anticipates that the provisional settlement will be a priority for ministers to consider after the general election.”

The department said it would take “all possible steps” to ensure that the final settlement aligns with local authority budget setting timetables.
A consultation on the government’s approach to the settlement closed last week.

However, one sector source said: “It seems unlikely now that there will be enough time for the incoming government to depart very far from the consultation proposals.”

Another source said that a hung parliament followed by lengthy negotiations between political parties could mean the provisional settlement is not announced until the New Year.

Richard Harbord, former chief executive of Boston District Council, said the situation was “almost unprecedented”.

He said: “For years authorities have been urged to carry out medium term financial planning “That is now impossible but the point is that many unitaries and counties will be looking to the need to make very large savings next year.

“Savings have considerable lead ins and take time to complete. Budgeting in the current situation means these programmes cannot be fina!ised – no elected member would agree to savings if it could not be proved to be essential.”

Harbord added that a lot of authorities no longer have adequate balances and therefore cannot use them to meet sudden gaps that appear in their budgets.

He said: “I imagine even if there is a clear majority it will be the New Year before the final figures are despatched.

“If there is no majority it may be more difficult to resolve and make the final announcement.”

Hudson’s review criticised the fact that the date of the local government settlement has gradually got later each year since the 2000s, when the provisional settlement was announced in late November or early December.

The review said: “Generally local authorities are frustrated both by the late announcement of the figures, and also by the fact that they often get no notice of when that announcement is coming.

Martin Swales, Solace UK president and chief executive of South Tyneside MBC, said: “We look forward to the next government publishing the local government finance settlement as soon as practically possible and providing the sector with the financial clarity it needs.”

The Room151 Weekly Newsletter covers local government treasury and pension investment, funding, development, resources and technical finance. Register here. 

The LGPS Quarterly Briefing focuses purely on pension fund investment. Register here.