LGA leader welcomes “least worst” finance settlement in 10 years

The provisional local government finance settlement for 2020/21 is the “least worst” for local government in a decade, according to the chair of the Local Government Association resources board.

Speaking at his organisation’s local government finance conference this week, Richard Watts, leader of London Borough of Islington, said that the settlement would help councils continue to provide services for the most vulnerable in society.

3rd LATIF NORTH
March 25th, 2020, Manchester
Council treasury investment & borrowing

The provisional settlement was announced shortly before Christmas, with the government saying the proposals will provide a 4.4% real-terms increase in their core spending power from £46.2bn in 2019-20 to £49.1bn in 2020-21.

Watts said: “This is the best or, to put it a different way, the least worst settlement since 2010.”

The settlement confirmed that councils will have access to £1bn of additional grant for both adult and children’s social care alongside a proposed 2% council tax precept for adult social care, worth up to £500m.

£150 million of the additional grant will be used to equalise the distributional impact of the council tax adult social care precept, the government said.

Launching the settlement, local government secretary Robert Jenrick said: “These additional resources sit on top of the existing social care package, which will continue at 2019/20 levels, and mean that local authorities will have access to over £5.5bn of dedicated funding across adult and children’s social care in 2020/21.”

Watts said the social care funding would “help councils continue to provide critical services more independently and support the most vulnerable of  young people in the country”.

“All of this is good news for councils and shows the government has listened to LGA’s campaigning and recognised the cuts of the last decade were leaving councils at breaking point.”

Watts said that if councils took full advantage of the ability to implement a 2% social care precept – on top of core 2% rise – next year, it would raise an additional £2.9bn next year.

David Williams, chairman of the County Councils Network, said: “The ability to raise council tax by 4% will help us to address growing demand for care services and meet other rising costs in the short term. We expect most counties will implement the rise ahead of this year’s Spending Review.”

But he said that even with the ability to raise extra money through council tax, counties would still face a £7.7bn shortfall in funding.

And in his speech, Watts criticised the process for accessing central government pots of cash for specific spending areas.\He said: “Where pots of money are announced, we’re having to grapple with bureaucratic bidding to get the funding we need.

“For example, between 2015 and 2017, over 300 separate grants were handed out to local councils from 14 different Whitehall departments.

“The processes to get them are often unnecessarily complex, the decisions feel arbitrary and often opaque.

“Things need to change if the government is to level up the opportunities for investment in the country and deliver on the electoral mandate they won.”

Alongside the provisional settlement, Jenrick announced that the government will consult on the future of the New Homes Bonus in the Spring.

He said: “It is not clear that the New Homes Bonus in its current form is focussed on incentivising homes where they are needed most.”

He said this would involve “moving to a new, more targeted approach that rewards local authorities where they are ambitious in delivering the homes we need, and which is aligned with other measures around planning performance”.

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.