One-year settlement decision ‘threatens Fair Funding Review’
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The government’s decision to push ahead with a one-year spending review has prompted alarm from local government experts that it could force a delay in the implementation of the Fair Funding Review.
Chancellor Sajid Javid announced this week that the Treasury would undertake an “accelerated” spending round covering funding for 2020/21, to be completed by the end of September, instead of the usual three-year review.
He said it would give government the “time and space” to deliver on Brexit.
Former communities secretary Javid said: “We will get Brexit done by 31 October and put our country on the road to a brighter future.
“The prime minister and I have asked for a fast-tracked spending round for September to set departmental budgets for next year.
“This will clear the ground ahead of Brexit while delivering on people’s priorities.”
2nd Housing & Regeneration Finance Summit
County Hall,
October 31st, 2019
However, there was concern that the spending review could delay introduction of the Fair Funding Review, the long-awaited process of resetting the business rate retention scheme long with new baseline funding levels for each local authority.
The County Councils Network (CCN) said local government faces a £5.2bn funding gap for 2020/21 and is in need of an “emergency injection” of cash to bridge the gap.
David Williams, chair-elect of the CCN, said: “Given the one-year spending review, it is unlikely that the Fair Funding Review can be introduced next year.
“This is extremely disappointing.”
Others voiced worry that the decision fails to offer certainty over funding and comes before the Brexit outcome is known.
Rob Whiteman, chief executive of CIPFA, called on the chancellor to “reframe” his thinking around “long-term funding issues and sustainability” to relieve financial pressure on local government.
“A one-year spending round simply doesn’t provide enough certainty for good financial planning and management.
“Long-term clarity and transparency is vital to ensure financial plans at all levels of government are accurate, efficient and sustainable.”
Whiteman added that a one-year budget deal would put delivery of the NHS Long Term Plan at risk because of its integration with public health and social care funding from local government.
The Institute for Fiscal Studies (IFS) drew attention to a spending round happening before resolution of the Brexit crisis gripping Parliament.
Ben Zaranko, a research economist with the IFS, said: “The chancellor’s decision to hold a spending review covering one year, rather than the usual three, is understandable given the degree of economic uncertainty surrounding Brexit.
“It is odd, however, to be setting spending plans without knowing the Brexit outcome and without having the latest economic and fiscal forecasts.”
Zaranko added that while there were expectations that the spending round would produce increased spending for most major government departments, there would be budget uncertainty for the period beyond 2021.
Williams said he would be seeking a “cast iron commitment” that the review would be completed this year and implemented in 2021-22.
The Local Government Association (LGA) is also concerned by the funding gap, which it said could rise to £8bn by 2025.
James Jamieson, chair of the LGA, said the spending review should prioritise the “sustainability of local services”.
He said: “It needs to confirm the continuation of funding streams such as the Better Care Fund and guarantee councils will have enough money to meet growing demand pressures they face next year.”
Solace, the professional body for council chief executives, also called on government to protect the Better Care Fund, as well as the Public Health Grant.
However, Martin Swales, president of Solace, described the one-year review as a “pragmatic outcome”.
“We look forward to understanding the detailed proposals, and between now and the spending round Solace will continue to make the strongest possible case for a sustainable settlement for local government both for the next financial year and to provide planning certainty for the future.”
