Local Finance Settlement – Group Leader's update – 16 December 2016
On Thursday, Secretary of State Sajid Javid, announced the settlement for local government. There is no new money for local councils and it fell far short from delivering the £1.3bn increase we need to cover adult care immediately and the £2.6bn in the longer term. We have made the case clearly for the £2.6bn shortfall, yet the government's solution of an increase to council tax is insufficient.
Since council tax varies across the country and is so much smaller than income tax, a hike here raises nothing like enough to do the job. Worse, there is no correlation between where the money is raised and where it is most needed. A flat percentage on property tax means that most is raised in the South-East where properties are most expensive. The other issue is that council tax is not connected with disposable income and could destabilise households.
The New Homes Bonus is to decrease by £241 million and the length of time the bonus is paid is reducing from six to five years in 2017/18. This will be followed by a further reduction to four years in 2018/19. It's also based on a baseline of 0.4 percent, requiring authorities to achieve growth greater than this figure before NHB funding is received. The reduction is intended to provide savings that will transfer from enabling housing to providing adult care via the Better Care Fund, which in two tier authorities are the responsibility of different councils. The New Homes Bonus also depends on homes actually being built, which is not in the council's control. This money for adult care thus depends on unreachable targets often controlled by the developers, influenced by the economy. These funds rely on property markets and therefore are again least likely to be raised in areas where they are most needed.
As we know, insufficient funding on adult care leads to increased pressure on A and E services and on GP's, numbers of which are set to reduce in many Sustainability and Transformation Plans. Preventative measures in public health are also set to reduce by over £80m following two previous years of cuts to this grant. Taken together the cumulative effect is very damaging indeed, putting residents at greater risk.
Our councils have already made significant reductions and are now very "lean machines". Many cannot take much more and need a sustainable, long term solution to the funding issues we face, including a stronger focus on getting our local businesses thriving domestically and in the international market. If more tax is needed, it would have to be corporation or income tax to be fair and effective in tackling problems of this magnitude. The government is keeping more of our income tax, and we continue to ask for it to be devolved. Business rates and the Better Care Fund have helped, but the gap remains. Unfortunately, this settlement again falls short and leaves councils facing another challenging year.
9 February 2017