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.


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