Government confirms final Local Government Finance Settlement 2016/17

The Government has now confirmed its final Local Government finance settlement for 2016/17 with some minor changes to the provisional settlement. In the provisional settlement, Cornwall Council lost a further £6m in funding with some slight-of-hand moving of rural funding into urban areas. Details HERE.

In what could be seen as the Government realising its error, it has increase the pot of money to the Rural Services Delivery Grant (RSG) by £91m over the periods of 2016/17 and 2017/18. For Cornwall Council this equates to a one-off increase in funding of £2.945m in 2016/17 and £1.460m in 2017/18. Allocations for 2018/19 and 2019/20 remain as per the provisional settlement.

Whilst I welcome this slight change of heart, it still means Cornwall Council is still down roughly £1.4m from the previous budget.

financegraph

Furthermore, the New Home Bonus nationally has seen an increase to the final New Homes Bonus allocations increasing the total amount to £1.462bn. This has resulted in a small reduction to the returned New Homes Bonus adjustment grant to a number of authorities.

The bad news is Cornwall Council’s overall NHB allocation reduces by £0.011m in both 2016/17 and 2017/18 and £0.007m in both 2018/19 and 2019/20 compared to the provisional settlement allocations.

Most of the other changes in the final settlement impact on District Council’s apart from the Government will consult on allowing well-performing planning departments to increase their fees in line with inflation at the most, providing that revenue reduces the cross subsidy that the planning function currently gets from Council Tax payers.

 

The Government hits rural local authorites in the Spending Review with Cornwall set to lose a further £6m

Back in November the Government released its Spending Review. As always there is a lot of spin on how the review is good for people. However, as they say, the devil is in the detail. That detail was released over the Xmas period and surprise surprise despite the spin; it means more cuts to local authorities. From the words of one financial officer this settlement is one of the most complex they have ever seen.

One of (and there is many) worrying areas is the re-distribution of the Revenue Support Grant (RSG) from rural local authorities to urban ones. Yep, you have guessed it; they have moved funding from Shire Counties and Cornwall to Metropolitan and London Boroughs.

What makes this worse is there was NO consultation by the Government on the redistribution of the RSG. No wonder they did not, as this will heavily effect those two-tier authorities (District and County). It is a small mercy that Cornwall is a single tier LA. Otherwise it would have been far worse for us.

In the first year of 2016/17, Cornwall Council will lose just shy of £2m. Over the period of the review (2019/20) the total amount we are set to lose comes to £6m. This is on top of the existing cuts the Government is imposing on local authorities like Cornwall Council.

For those technically minded, Cornwall Council currently recieves 0.9% of the overall Local Government budget of £18.6bn. The Local Government department will see a reduction of budget of just under £4bn in the period up to 2019/20. In 2019/20, our share of the fund will reduce to 0.86 of a pot of £14.7bn.

For other Unitary and County Council many have been harder with the redistribution of the RSG. Devon has been hit harder and is set to lose £7.6m of the RSG. Dorset £7.25m and Somerset £3.18m. Though some of the South West local authorities have fared better than areas such as Hampshire who will set a reduction of £12.5m, Surrey £16.7m and Kent £11.2m. Remember this is for the 2016/17 period only and if you use the same formula being imposed on Cornwall Council, these local authorities could be funding reductions of £30m/£40m. (details *)

To put the £6m extra cuts in to perspective, that is our entire Library and One Stop Shop Budget in Cornwall and would still leave us £2m short. This extra cut has to be found on top of the huge cuts Cornwall Council is already having to deal with in RSG grant funding. In 2015/16 Cornwall Council received £92m; this reduces in 2016/17 to £65.2m and is set to be reduced to £14.5m in 2019/2020.

Then this funding will be phased out by the end of this Parliament. In its place the Government has said local authorities will be able to keep 100% of the business rates. One of the issues is the Government has said it would top up this if your business rates if you income from these rates is lower than your needs. However, this commitment to top up is only in the first instance, and there is no guarantee this will be a long-term top up. Furthermore, Cornwall’s industry is SME, and therefore, it gives little scope for economic growth from large-sized business. And lastly, Business Rates cannot be raised above 2% unless you have a directly elected mayor, but a local authority can lower the rate to any level.

The Government has also claimed in its statements it will be helping rural local authorities with additional funding. For Cornwall Council this will amount to £200k in 2016/17. It is set to increase in later years. But this additional funding no-way makes up for the larger cuts to the RSG.

There is a further hit to two-tiered areas is in the New Homes Bonus (NHB) which District Council’s receive. This could be up to half the amount they receive. This money will be given to the County Councils are part of the Better Care Fund (BCF). Cornwall Council receives the NHB and the BCF. So for us, it is less painful than the two-tiered local authorities.

There is also going to be a massive bun-fight between the District Councils and County Councils over the split of business rates. Currently, this is split 80/20 in favour of the District Council’s (DC collect and give County 20%). The Government has indicated it will change this split in favour of County Council.

In a spooky coincidence, the Government has changed the regulations to allow District Council to merge and become unitary council in a fast-track process. In fact I think the plan is to force District Council’s into becoming Unitary Council’s via reducing the funding to Districts.

The bugbear is Councils get the blame for the Government’s cuts. I can assure you the cuts we are having make are not easily done, but when you have less money to provide services, you have little choice but to reduce services. And the reason why is the Government has cut the funding!!

One thing is for sure, this settlement is not good news for local authorities despite the spin!
*Figures correct from the LG Settlement to LA’s as of 18th Dec 2015.

The Goverment’s Spending Review: the other details

In the third and last blog post on the recent the Government’s Spending Review; I thought I would cover the other subjects and a general round-up on the review. Sorry in advance, it is a long post.

It has been clear in the review; the Government is continuing to wage its war against local authorities. One of the targets is the assets owned by local authorities and wants to further encourage local authorities to release surplus assets.

In Cornwall we are already going to a large-scale office rationalisation programme and have halved our building assets from 180-odd to 93. This will be scaled down further to around 50 buildings/offices.

The review gives details on updating the Transparency Code which will require all local authorities to record details of their land and property assets in a consistent way on the government’s electronic Property Information Management System (e-PIMS). It will also extend the One Public Estate with £31m funding to support local authorities to work with other local public sector property owners and design more efficient asset management strategies. Again, like the office rationalisation, we in Cornwall are doing this with partners such as health.

Local authority salaries will be targeted with a new guidance to local authorities to encourage them to reign in excessive salaries and do more to drive efficiencies for local taxpayers. Though what is deemed excessive is yet to be clarified. We all want value for money on how our taxes are spent, but why only target local authorities? Why not include Health too? I know nationally there are some eye-watering salaries for health execs.

The Government will also review sickness absence in public sector workforces and will not rule out legislation where necessary.

The Spending Review will strengthen the existing legislation around ‘Right to Contest’ to allow local communities to challenge the use of land and property that is in use by local authorities. In another ‘Right to’ the Government will launch a pilot scheme with five Housing Associations which will inform the final design of the extended Right to Buy programme.

On the subject of land, a cornerstone of the review was the areas of housing and local development. The housing budget will be doubled to £2bn per year from 2018-19 to make house building a priority, with more than 400,000 “affordable homes” to be built-in England.

How those homes will be built will no-doubt be made easier with the Government bringing forward further reforms to the planning system, including establishing a new delivery test on local authorities that will ensure delivery against the number of homes set out in local plans. In other words, planning will be made easier for development. The Government recognises the key role that local authorities can play by selling land for housing, and will set the contribution local authority land disposal can make by the Budget.

Though on the other hand, the Government wants to protect England’s countryside through the Common Agricultural Policy by assigning it £3bn. There will be protection of over £350m funding for public forests, National Parks and Areas of Outstanding Natural Beauty over the Spending Review period. Though, wanting to build more houses, but at the same time protect the countryside and AONB’s does seem at odds with each other.

Second homes and Buy to Let homes will be having a new Stamp Duty surcharge of 3%. It is expected that this will raise £3bn over four years. However, how will the Government know if it is a second home? I mean a purchaser cold say I am buying another house to move into, but then don’t. Will there be some time period where the Government could retrospectively demand the 3%

Though the government will use some of the additional tax collected from the Stamp Duty surcharge to provide £60m for communities in England where the impact of second homes is particularly acute, such as Cornwall. No details on how this will work.

After an effective campaign which highlighted the folly of the new police funding formula, the Police budget has been protected in real terms over the Spending Review period (£900m in cash terms by 2019/20). Council Tax precepts for the Police service will be allowed to rise by up to 2% or £5, whichever is higher.

Beefing up the role of the Police and Crime Commissioners (PCC) has been rumoured for sometime. The review will bring forward legislation to enable PCC’s to take on responsibility for fire and rescue services, subject to a clear business case, which the local fire service will have to provide. For the transfer of responsibilities it would need local support.

However, it is not clear what local support means, but as Cornwall Fire and Rescue Service is part of Cornwall Council I guess it would require the Council to say yes before anything could happen. We all know how the Government is a deft hand at changing legislation if something gets in the way of their plans, so I would not be surprised if councils were made to transfer the service.

Furthermore, a new statutory duty will be introduced for the emergency services to collaborate by early 2017 – subject to parliamentary approval – on areas such as procurement, new stations and vehicle maintenance.

In the review there will be at least £74m of funding for the Emergency Services Mobile Communications Programme. This will help fire and rescue services benefit from the latest mobile digital technology.

Tourism gets a boosts by the creating a new £40m Discover England Fund to boost tourism across England.

The Government will spend over £150m to keep South West Water household customers’ bills £50 lower for the rest of this Parliament, in recognition of the higher water costs faced by consumers in the South West. This will help 750,000 households.

It is good to see some Cornwall persific items in the Spending Review, with:

  • The extension of the Cornwall & Isles of Scilly Enterprise Zone will bring new investment opportunities and retention of further Business Rates growth;
  • An improved transport link to the South West with the government funding new air routes from Newquay to Leeds Bradford (more details to follow);
  • Commitment to fully fund the Roads Investment Strategy; Highways England will deliver 112 major schemes including the dualling of the A30 Carland Cross to Chiverton Cross.
  • Projects such as the A391 in Cornwall will be able to bid for funding from the £475m Local Majors Fund.
  • Network Rail’s programme of investment will fund the re-signalling programme for Cornwall.

In conclusion, much of the headlines have been around the Welfare Reforms and the U-turn on Tax Credits. The have also been headlines on the ‘end of austerity.’ In fact the spin has hidden the facts that Cornwall Council still has to deal with 30% cuts in its budget.

How this review will affect Cornwall Council is hard to tell at the moment, as the devil is in the details, and that detail will not be released to local authorities till the end of December or early January.

This is not the end of austerity, austerity is still here alive and kicking for councils, who as we all know, deliver so many essential services.

In case you missed the other two blog on the Spending Review, they are here: Education and Precept/business rates.

 

The Government’s Spending Review: Education

In the second blog post on the Government’s Spending Review, I thought I would cover the educational elements of the review. I do have to point out must of the detail has not been released, and will only know of the impact of the headlines when these details are made public in the next month or so.

The Department for Education (DfE) ‘central children’s services budget’ will be protected at over £300m per year ‘to help drive up social care workforce standards to improve support for vulnerable children’.

An increase of £1bn in funding per year by 2019-20 to support the extension of free childcare places for 2, 3 and 4 year-olds will be made available.

Free childcare for working parents of 3-4 year olds will be doubled from 15 to 30 hours per week from September 2017. This is restricted to families with an upper income limit of £100,000 and a minimum weekly income level per parent equivalent to 16 hours.

As for capital funding for new school places in primary and secondary schools, the Government has said in the Spending Review, £23bn will be made available over the period to support the creation of 600,000 school places, the opening of 500 new free schools, and the rebuilding and refurbishing over 500 schools. In Cornwall, we are providing new school places in our recently approved strategy, but this only takes up to the 2017/18 period. I really hope some of the £23bn will come to Cornwall.

Furthermore, capital funding of at least £50m will be made available to create additional places in nurseries.

In the Spending Review, it highlights its aim in addressing essential maintenance needs. This point is interesting, as to date, the Government has not addressed this area. for example Cornwall looking at least a £90m maintance backlog, but only having £5m/£6m to try to tackle the backlog.

Over £300m a year will be made available to increase the average hourly rate paid to childcare providers. Universal Infant School Meal funding is also set to stay.

The Government said they will protect the core schools budget in real terms enabling the per-pupil rate for the Dedicated Schools Grant to be protected in cash terms and the pupil premium will be maintained at current rates. Thought the latter does not take into consideration of inflation.

A worry is the announcement that the Education Services Grant will be reduced by around £600m, including phasing out the additional funding schools receive through the grant.

It is no surprise to see the Government re-affirm it aims of having no local authority schools and the removal – as yet unknown – statutory duties on local authorities in relation to schools. For the first-time there has been a clear message to Sixth Form Colleges who will be able to become academies, allowing them to recover their non-business VAT costs. No doubt in the first phase it will be to encourage, but in reality, they will have no choice but to convert.

The current national base rate per student for 16 to 19 year olds in school sixth forms, sixth form colleges and further education colleges will be protected in cash terms for the Spending Review period. Yet, this is after funding cuts in this sector have already been implemented, like for Sixth Forms where they saw a reduction in funding of £800 per pupil.

A new funding system for schools will be introduced from 2017-18. A detailed consultation on the specifics of the proposed new system will be published in early 2016. It is about time the Government addressed this, as I have highlighted on this blog before the huge differences in funding between local authorities.  This new national funding formula will include elements for schools, high needs and early years.

 

 

The Government’s Spending Review: the detail behind the spin for the social care precept and business rates

On Wednesday, the Chancellor of the Exchequer, gave the Government’s Spend Review for the next four years (2016-17 to 2019-20 ). It had four objectives: to develop an integrated health and care system, spread economic growth through a devolution revolution, address social failures in order to extend opportunity, and protect national security.

There were many parts to the review and not all apparent in the headlines and spin. Those in Local Government circles were very worried that the axe would again fall on them. The last few years have been brutal for this sector, with services reducing or stopping all together due to the cuts in funding. So there was a lot of nervousness on the impact of the review for services Cornwall Council provides. In this blog post, I will cover the social care precept, funding and business rates.

The Chancellor said there would be a new Social Care ‘precept’ which allows Councils responsible for Adult Social Care to increase Council Tax by a further 2% above the current (2%) referendum threshold. If this was implemented for Cornwall this would generate additional revenue of around £4.7m per annum and would add £25.88 per year to the Band D charge (on top of the already proposed £25.49 increase at 1.97%).

My issue with this new precept is social care is not only about adults! Social care also includes lots of children related services. So why didn’t the Chancellor just say social care, and then allows Council’s to decide how to spend this money. I can tell you children’s services are under huge pressure with reduced budget and increased demand. Furthermore, if you do not address issues early on in a childs live, the reality is it will cost you far far more as they get older.

The skeptic in me things the Government has again thrown a hospital pass to local authorities by giving this new precept powers, whilst at the same time reduce grant funding to local authorities. So when a service is at breaking point, the Government can say ‘but we gave local authorities the powers to fund these services’ but knowing really they cut the original funding. Sneaky ‘persons of disputed parenthood.’

Which brings me on to local government spending. The Chancellor confirmed that the Revenue Support Grant (RSG) will be phased out entirely by 2019-20. There will  be a consultation ‘shortly’ on changes to the local government finance system to ‘rebalance support including to those authorities with social care responsibilities’. Currently, the Council receives £174.25m as part of its RSG

This consultation will ‘pave the way’ for the implementation of 100% business rate retention’ and will assess the main income streams available to local government, including council tax and business rates. In addition it will consider the necessary responsibility transfers to maintain fiscal neutrality. In more simpler words, we in local government are going to get less.

Cornwall Council receives as part of its current budget £82.3m in business rate receipts. So if the government wants to local authorities to have fiscal neutrality with the removal of the RSG and Cornwall Council keeping 100% of the business rates, we need to make sure the actual amounts add up because I cannot see where the £88,55m is going to come from if Cornwall Council is going to remain at the same levels of funding.

Local authorities can also lower business rates, but they cannot raise them over a certain threshold unless there is a directly elected mayor. I believe this to be 2%.

I also have to laugh at the comment in the spending review on Councils will be ‘encouraged’ to draw on their reserves to manage change. How that will be put in place is uncertain. But reserves are already being used, and if you spend all your reserves, you have nothing left if something goes wrong.

So far, I cannot see many positives for Cornwall Council in this spending review. Post to come will be on the other aspects of the Spending Review.