• Home
  • About
  • Subscribe
  • Conference
  • Events Calendar
  • Webcast151
  • MOTB
  • Log In
  • Register

Room 151

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews

Extra finance promised by the government receives a broad welcome

0
  • by Guest
  • in Blogs · Treasury
  • — 12 Jan, 2021

Photo (cropped): HM Treasury, Flickr

Sponsored article: Fraser Mackay of Barclays examines the financial pressures which continue to pose challenges for council treasurers in 2021. 

While the launch of the UK’s Covid-19 vaccination programme promises a more positive and stable future, it won’t immunise councils from the funding pains resulting from the pandemic.

On top of the financial impact of Covid-19, authorities are still coping with staff shortages, changing work patterns, and other pandemic-related operational issues, alongside increased demand for adult social care and children’s services exacerbated by the covid crisis.

At the same time, councils are under financial pressure to fund and deliver indirect, but essential, services like digital transformation, national and local objectives around sustainability and the environment, and distribute government grants to local businesses.

Last summer, the LGA estimated local authorities faced a funding gap of £7.4bn and there’s certainly been no shortage of headlines about financially struggling authorities issuing, or threatening to issue, Section 114 notices. The London Borough of Croydon is a recent example.



Core spending power

Against this backdrop, the November spending review has been broadly welcomed by local authorities, and there’s a general concensus that councils will live to fight another year, although solutions for some longer-term challenges have, given the exceptional circumstances, been deferred for now.

The government says the spending review, which included an extra £300m in grant money for social care and a further £254m to combat homelessness, delivered a potential 4.5% boost to the “core spending power” of local authorities, equivalent to £2.2bn*.

The LGA estimates that a significant proportion of that uplift will come from raising council tax by up to 5% and social care precepts by 3%.

Additionally, the devolved adminsitrations of Scotland, Wales and Northern Ireland will receive a £4.7bn increase in 2021-22, consisting of £2.4bn, £1.3bn and £900m respectively.

Investment boost

There is also the promise of a £100bn cash injection for infrastructure projects at regional level, covering housing, roads and green energy backed by the new UK Shared Prosperity Fund that will replace EU regional assistance programmes.

The £4bn “levelling up fund” for local authorities in England, plus a further £800m for Scotland, Wales and Northern Ireland, will support the development and regeneration of local economies by investing in infrastructure projects including road schemes, bus lanes, station upgrades and community facilities.

Managed by the Treasury and the MHCLG, the fund includes £600m earmarked for local schemes in England, with councils bidding for up to £20m for specific, “shovel ready” projects.

Lower cost loans

Authorities can borrow more cheaply again, thanks to the 100bps cut in the PWLB loan rate announced in November 2020—something councils and the LGA had campaigned for.

However, loans cannot be used to buy assets primarily intended to produce yield. This applies on a “whole plan” basis, covering any investments held primarily for yield anywhere in an authority’s capital plans. Consequently, councils may find it difficult to continue to borrow from the Board to support service delivery or refinance existing debt. This may lead more councils to consider funding through the bond market, possibly via the Municipal Bonds Agency.

Further support

The LGA estimates that a significant proportion of that uplift will come from raising council tax by up to 5% and social care precepts by 3%.

For our part, we recognise and appreciate the ongoing financial pressures and challenges that councils face in balancing their budgets as we head into the uncharted waters of 2021, and we are here to offer our support, advice and guidance wherever we can.

If you would like to know more about how we can help, please contact me and I will you put you in contact with one our team of specialist Relationship Directors.

Fraser MacKay is head of government, Barclays Corporate.
Email: fraser.mackay@barclays.com

*https://hansard.parliament.uk/Commons/2020-12-07/debates/20120741000010/SpendingReviewLocalGovernmentFinance

Photo (cropped): HM Treasury, Flickr

 

FREE monthly newsletters
Subscribe to Room151 Newsletters

Monthly Online Treasury Briefing
Sign up here with a .gov.uk email address

Room151 Webinars
Visit the Room151 channel

 

 

 

 

 

 

Share

You may also like...

  • Sector paves way for LVNAV funds as EU signs off new MMF regulations Sector paves way for LVNAV funds as EU signs off new MMF regulations 1 Jun, 2017
  • How safe are bank deposits? How safe are bank deposits? 7 Dec, 2011
  • Long-term treasury management Long-term treasury management 13 Jul, 2012
  • Locals increase lending to business and residents Locals increase lending to business and residents 26 Jul, 2012

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • Register to become a Room151 user

  • Latest tweets

    Room151 2 days ago

    Will new public procurement rules offer the best commercial results?: The government has issued a green paper on reforming procurement rules. Helen Randall and Rebecca Rees examine the proposals and argue they may not go far enough. The Cabinet… dlvr.it/Rqtw6T pic.twitter.com/9GiVTkL08U

    Room151 7 days ago

    The vaccine may help settle cash flows but inflation remains a risk: Sponsored article: Lauren Sewell examines the prospects for long-term borrowing as Brexit settles and vaccines are deployed against Covid-19. On the 9th October 2019 Whitehall sent… dlvr.it/RqZXCr pic.twitter.com/PzgOZOGQ0k

    Room151 7 days ago

    ESG in liquidity: Sponsored article: Gavin Haywood looks at the integration of ESG in Federated Hermes’ money market funds. Federated Hermes has over 300 public sector clients invested in our AAA rated money[...] dlvr.it/RqZX5f pic.twitter.com/E87sBXsay8

    Room151 1 week ago

    New realities of investing cash and liquidity: “What to do now?”: Sponsored article: Brian Buck looks at the “unique challenge” for cash management strategies. As investors assess the ongoing impact of the pandemic on their business, levels of cash and… dlvr.it/RqVbk9 pic.twitter.com/ZElVASmEUV

    Room151 1 week ago

    Extra finance promised by the government receives a broad welcome: Sponsored article: The financial pressures facing local authorities this year continue to pose challenges for council treasurers. While the launch of the UK’s Covid-19 vaccination… dlvr.it/RqTzTF pic.twitter.com/HCjH0pyHR5

    Room151 1 week ago

    A savvy approach to managing your cash: Sponsored article: Caroline Hedges examines the need for active cash management to achieve a higher than average return. Last year saw the already mountainous pile of negative-yielding debt around the[...] dlvr.it/RqTzMK pic.twitter.com/uP0RQYTJLt

    Room151 1 week ago

    Putting alternatives at the heart of multi-asset portfolios: Sponsored article: Nick Edwardson looks at the assets that provide the “most attractive opportunities”. We believe that asset allocation is the primary driver of investment returns and that the… dlvr.it/RqQ2Qt pic.twitter.com/WLBzvRRRUQ

    Room151 1 week ago

    Thriving in the pandemic: Avoiding the stragglers: Sponsored article: George Crowdy looks at the sectors providing opportunities for sustainable investment. Throughout much of 2020, we talked about why sustainable investing has thrived in the pandemic,… dlvr.it/RqQ2NQ pic.twitter.com/dxiPWKFsPl

    Room151 1 week ago

    The development of CCLA’s mental health benchmark: Sponsored article: Amy Browne examines the importance of investing in mental health in the workplace. We are living through a public health emergency in more ways than one. Physical health[...] dlvr.it/RqQ2Jx pic.twitter.com/o6yRSCX3oF

    Room151 1 week ago

    Brexit: What the EU trade deal means for the UK economy: Sponsored article: Hetal Mehta looks at the impact of Brexit on economic prospects. Four and a half years after voting to leave the EU, on Christmas Eve the UK finally[...] dlvr.it/RqLBDt pic.twitter.com/No62srfE8h

    Room151 1 week ago

    Cash dethroned: The quest for liquid yield: Sponsored article: Peter Hunt and George Carne ask how treasury departments can balance the need for yield and liquidity. The massive stimulus and waves of liquidity provided by central banks[...] dlvr.it/RqLBDj pic.twitter.com/05g6Zhu1kU

    Room151 1 week ago

    Richard Harbord: Delayed “capital determinations” make section 25 opinions a new crunch point: The severe pressure on local government budgets now means section 151 officers confront a tricky call on  whether they can make a judgement on the robustness… dlvr.it/RqLBDV pic.twitter.com/vTAbDKFzkI

    Room151 1 month ago

    PWLB Consultation: Analysis straight from Dickens: Helen Radall and Paul McDermott present a legal examination of the new PWLB borrowing rules as Charles Dickens might have imagined it. Free and easy PWLB (“Marley” to his friends)[...] dlvr.it/RnmwLq pic.twitter.com/yFxcPrQqEG

    Room151 1 month ago

    Room151’s top stories from a momentous year: 2020 was the year in which local government grappled with Covid-19, funding strains, controversy over borrowing rules and the threat of financial collapse. It has been an exhausting and historic[...] dlvr.it/RnlpZg pic.twitter.com/g3myNyox6J

    Room151 1 month ago

    Tracy Bingham: 2020, a year best forgotten but also one of learning: Many will rush to erase 2020 from their memories but, writes Tracy Bingham, there were also many lessons about finance teams, strategic planning and leadership. 2020: A year we’d… dlvr.it/RnlpY2 pic.twitter.com/m7G1krrtCu

    Room151 1 month ago

    Settlement must address ‘precarious’ local government finances: Dan Bates crosses his fingers for “no nasty surprises” in this week’s funding settlement but argues the “bigger prize” is post-Covid financial certainty. Thursday (17 December) should be the… dlvr.it/Rnj9dG pic.twitter.com/KLKjjuBqJE

    Room151 1 month ago

    PWLB consultation: Big change on the way but there are ‘grey areas’ and opportunities: The consultation on PWLB borrowing has concluded creating a new landscape for funding property acquisition. Our experts look at the implications. Tracie Langley The… dlvr.it/RndRvJ pic.twitter.com/KEqXEBmEfq

  • Categories

    • 151 News
    • Agent 151
    • Blogs
    • Chris Buss
    • Cllr John Clancy
    • Dan Bates
    • David Crum
    • David Green
    • Development
    • Forum
    • Funding
    • Graham Liddell
    • Ian O'Donnell
    • Interviews
    • Jackie Shute
    • James Bevan
    • Jobs
    • LGPSi
    • Mark Finnegan
    • Recent Posts
    • Resources
    • Richard Harbord
    • Stephen Fitzgerald
    • Stephen Sheen
    • Steve Bishop
    • Technical
    • Treasury
    • Uncategorized
  • Archives

    • 2021
    • 2020
    • 2019
    • 2018
    • 2017
    • 2016
    • 2015
    • 2014
    • 2013
    • 2012
    • 2011
  • Previous story A savvy approach to managing your cash
  • Next story New realities of investing cash and liquidity: “What to do now?”

© Copyright 2021 Room 151. Typegrid Theme by WPBandit.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we'll assume that you are happy to receive all cookies from this website.OK