Provisional local government finance settlement 2015 to 2016
Statement by Local Government Minister Kris Hopkins on the provisional local government finance settlement 2015 to 2016.
With permission Mr Speaker, I would like to make a statement on funding for local authorities in England next year.
This government inherited the largest deficit in post-war history. Thanks to this government’s long-term economic plan – that deficit is falling, the economy is growing and employment is at a record high. This government is putting our public finances back on track. Local government – like every part of the public sector – has made a significant contribution to this.
However, the job is not done. As my hon. friend, the Chancellor of the Exchequer has indicated to the House, in the coming years, very substantial savings must be made in public spending. The government continues to need to take difficult decisions to put the public finances on a sustainable path.
Delivering a fair settlement
In the context of this unprecedented challenge to public finance, we have yet again delivered a settlement that is fair to all parts of the country – whether north, south, urban or rural.
English local government is expected to spend over £114 billion this year – around a quarter of all public spending. This settlement therefore recognises that local authorities continue to make a vital contribution to helping pay off the deficit.
Once again the settlement leaves councils with considerable total spending power. As planned, we have kept the overall reduction to 1.8% – lower than last year and one of the lowest levels of reduction under this government. If we include the funds that government has provided to support local transformation, the overall reduction is even lower – at 1.6%.
Councils facing the highest demand for services continue to receive substantially more funding and we are continuing to ensure that no council will face a loss of more than 6.4% in their spending power in 2015 to 2016 – the lowest level in this Parliament.
I am also pleased to announce that all 9 authorities eligible for Efficiency Support Grant in 2014 to 2015 (Great Yarmouth, Burnley, Chesterfield, East Lindsey, Barrow-in-Furness, Bolsover, Hyndburn, Pendle and Hastings) will have these amounts incorporated into the settlement for 2015 to 2016.
Rural
We also continue to recognise the challenges faced by rural communities. This government has a clear commitment to rural areas, and consecutive settlements have helped to address the gap in urban-rural spending power. The gap is closing – and has already benefitted rural authorities to the tune of £208 million.
We expect the gap to continue to close. In the meantime, the settlement confirms another year of additional resources for the most rural authorities to recognise the challenges they may face in delivering services. In 2015 to 2016, this grant has increased to £15.5 million.
Growth
But it is not just about the amount that the government provides to authorities through grant anymore. We have deliberately shifted the emphasis from keeping authorities dependent on grant, to providing councils with the tools they need to grow and shape their local economies.
We have given councils a real stake in stimulating local growth. For 2014 to 2015, authorities’ own estimates show that 91% are expecting a growth in their business rates income – growth of £414 million in total.
This includes authorities such as Barnsley, who are predicting growth in their business rates income of around £900,000, and will also gain additionally from almost £400,000 of growth that they are predicting within their enterprise zone.
Through the New Homes Bonus, councils benefit directly from increasing the number of homes in their area and bringing long-term empty homes back into use. On Tuesday, my hon. friend, the Minister for Housing and Planning announced to the House that £1.2 billion of New Homes Bonus funding has been provisionally allocated to local authorities in England for 2015 to 2016. This brings the total to almost £3.4 billion since the scheme began.
Devolution
Many councils agree that these measures are having a positive impact on their ability to deliver better outcomes in their areas. National growth is the sum of local growth. For Britain to prosper, every part of the country needs to fulfil its potential. Local places know best how to support growth in their local economies. We know that many authorities recognise this. This is why we have devoted such effort to empowering our great cities and communities to drive local growth through a redistribution of power, away from Westminster and Whitehall, to councils, communities, and individuals across the nation.
For example, we established 39 local enterprise partnerships – partnerships between local authorities and business – who decide what the priorities should be for investment in roads, buildings and facilities in their local areas. Through our Growth Deals, we devolved £12 billion of local growth funding to these partnerships for them to spend on local priorities over the next 5 years.
We are committed to further devolution – to increase local democracy, bring better services and deliver more homes and jobs. We hope that Greater Manchester and Sheffield will be the first of many to take advantage of greater devolution of powers – and the government is open to discussions with other areas.
Transformation
As well as growing their economies, the best authorities are transforming the way they do business. The government is supporting them as they do so, achieving real savings and – importantly – improving outcomes for the people who use local services.
Last month, I announced the latest round of successful bids to the Transformation Challenge Award. We will provide around £90 million support for 73 projects that will improve services and ultimately will save the public sector over £900 million. In total, the latest successful Transformation Challenge Award bids involve 287 partners including 122 local authorities and 165 other organisations across the public, private and voluntary sectors.
Increasingly, local authorities are recognising that transformation and further integration has the potential to deliver improved outcomes. Nowhere is this more evident that in relation to health and social care. We are supporting the integration of health and social care services through the Better Care Fund – 97% of local plans have been approved and the £3.8 billion initial contribution from government has been boosted by local areas to more than £5 billion. This will help achieve significant change in services that will benefit some of the most vulnerable in our society.
Councils have been rising to challenge
Like all parts of government, councils need to prioritise spending so it gets to those that need it most. Councils are rising to the challenge. Every council issued a balanced budget for 2014 to 2015. The majority of residents remain satisfied with the way their council runs things. It bears testament to the great skill that authorities have shown in prioritising and promoting efficiencies.
Local authorities up and down the country are demonstrating real innovation. I have seen for myself the work underway in Kirklees to support young people so they can make a good start in life. Our investment of £400,000 transformation funds will bolster the Kirklees Cares project where children in care are receiving peer support to prepare them for leaving care.
In Durham, a partnership of the police and fire services is using a £500,000 award to bring Community Volunteers and Neighbourhood Watch services together. This will speed-up the assessment and fitting process for fixed and mobile safety and security equipment, such as home fire sprinklers, which can save lives.
And I was recently in Sunderland, 1 of 5 areas that had its Better Care Fund plan approved early because it was making such good progress. I met staff from both the health and social care sectors working together in the same room, with the same patients, in a brilliant new community facility that is keeping elderly people out of hospital. Sunderland projects that it can start to cut local Accident and Emergency admissions by up to 15% in the years ahead with this approach. That will save a huge amount of money, and provide people with dignity and respect in retirement.
Bellwin thresholds
Last winter, to help local authorities deal with the immediate costs of the severe weather, the government activated the Bellwin scheme of emergency financial assistance to local authorities. In recognition of the unique scale of the flooding, the terms of the scheme were made more generous. The changes included a reduction in thresholds above which the government would compensate, and reimbursement at a rate of 100%. This reduction was the first time in the scheme’s 30 year history that thresholds had been reduced in this way.
Last month, the Secretary of State for Communities announced a consultation on improvements to the scheme including permanent lower thresholds and 100% grant rate. Although the consultation does not end until the start of the New Year, today we have published illustrative Bellwin thresholds for 2015 to 2016. This will give local authorities a greater degree of financial certainty in planning for emergencies in the case of severe weather.
Local welfare provision
With colleagues in Treasury and the Department for Work and Pensions, we have been analysing responses to the government consultation on how local welfare assistance should be funded in 2015 to 2016. We have been looking at these alongside the Department of Work and Pensions review.
Local authorities will continue to be able to offer local welfare assistance from within existing budgets, alongside a range of other services for 2015 to 2016 if they judge it a priority in their area. It would be helpful to many areas to see how much of their existing funding relates to this. So today I can confirm that we have separately identified an amount relating to local welfare provision in each upper-tier authority’s general grant, totalling £129.6 million nationally.
The government has always been clear councils should choose how best to support local welfare needs – because what is right for Croydon will not be for Cumbria. Therefore this allocation will not be ring-fenced and we will not be placing any new duties, expectations or monitoring requirements on its use.
The government will carefully consider all responses to the consultation on this settlement, including those which relate to provision for local welfare over and above existing budgets, and will take these into consideration when announcing the final settlement in February.
Over the last year, councils have increased their reserves by £2.2 billion so they now stand at a total of £21.4 billion. Authorities should of course maintain a healthy cushion when balancing the books. However, local taxpayers would be right in asking whether such substantial reserves are necessary.
Council Tax
All councils should be freezing their Council Tax in 2015 to 2016 and helping people with their cost of living. We are providing additional funding equivalent to a 1% Council Tax increase, to help councils freeze.
This is the fifth successive year of freeze funding provided by government. This brings the total package to £5 billion, which will save up to £1,075 for an average household over the course of this Parliament.
All councils should be taking advantage of this extra government funding and freezing Council Tax for hardworking families. Councils choosing to increase should have the courage to put their case to local people. Any council proposing an increase of 2% or more will need to allow local people the opportunity to approve or veto the increase in a referendum. This threshold will apply to all local authorities, including the Greater London Authority, fire authorities and police and crime commissioners.
Parishes are an important part of local government, delivering valuable and valued local services. However that is not a reason for them to impose inflation-busting increases on their taxpayers. The average Band D council tax in England has risen by 2% since 2011 to 2012 – the equivalent figure for the parish element is 14.7% over the same period.
That is why I would welcome views on whether the highest spending parishes should be subject to the same referendum principle as the rest of local government. There is also a question about whether town and parish councils whose failings have been highlighted in a Public Interest Report should be included.
Consultation process
Today marks the start of a period of statutory consultation with local government on the settlement and I welcome their responses. The consultation closes on 15 January 2015.
We are publishing full supporting material online and I have placed copies of the consultation paper and other main documents in the Vote Office.
This is a fair settlement that continues to recognise the responsibility of local government to find sensible savings and make better use of its resources. It supports business growth, adding to this country’s wealth and helps deliver our long-term economic plan. It also enables councils to offer yet another year of frozen Council Taxes.
Mr Speaker, I commend this settlement to the House.