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Local Government Finance

Statement made on 16 December 2021

Statement UIN HLWS496

Statement

My Rt Hon. Friend, the Secretary of State for Levelling UP, Housing and Communities and Minister for Intergovernmental Relations (Michael Gove) has today made the following Written Ministerial Statement:

Introduction

Today, I have set out the provisional Local Government Finance Settlement for 2022/23. This is a Settlement that, at a national level, makes available an additional £3.5 billion to councils, an increase in local authority funding for 2022/23 of over 4% in real terms. This will ensure councils across the country have the resources they need to deliver key services.

The proposals I am announcing today focuses on providing stability by:

  • Making available up to £3.5 billion more funding for councils across England compared to 2021/22. Overall, this means up to £53.9 billion of funding available for core services.
  • Providing a new, one-off 2022/23 Services Grant worth £822 million.
  • Striking a balance on Council Tax that helps councils invest in the services they provide to residents while protecting hard-working taxpayers from unfair hikes in rates, with a 2% core referendum threshold and 1% of additional flexibility for councils with adult social care responsibilities.
  • Making available over £1 billion of additional funding for social care.

Alongside this Settlement, the Government will be providing further support to local communities through: £2.6 billion of UK Shared Prosperity funding, which helps people access opportunities in places in need; a £4.8 billion Levelling Up Fund, which seeks to level up the country by investing in infrastructure that improves everyday life across the UK; and a further £2 billion of investment across the next three years to tackle homelessness and rough sleeping.

2022/23 Services Grant

Local government delivers a range of services that are at the core of every community.

I therefore propose to create a one-off 2022/23 Services Grant worth £822 million that will be distributed through our existing Settlement Funding Assessment. We will then take the time to fully consider its future distribution in consultation with councils.

This funding would be excluded from any proposed baseline for transitional support as a result of any proposed system changes.

Adults and Children’s Social Care

The Government is committed to ensuring local government has the resources it needs to support the most vulnerable through adult and children’s social care.

I propose, therefore, allocating £700 million of new grant funding going to social care. This means:

  • £636 million more into the Social Care Grant, including funding for equalisation against the 1% Adult Social Care precept.
  • providing an inflationary uplift to support integrated working with the NHS.

Local authorities can make use of over £1 billion of additional resource specifically for social care in 2022/23. This includes the increase in Social Care Grant and the improved Better Care Fund, a 1% Adult Social Care precept and deferred flexibilities from last year's settlement.

For many councils, adults and children’s social care are key priorities and the largest areas of spending. Councils are not expected to rely solely on this earmarked funding to meet the inflationary and demographic pressures facing these services; they also have access to funding from unringfenced grant, including the 2022/23 Services Grant, and from council tax.

On top of this funding to address core pressures, £162 million in Adult Social Care reform funding will be allocated in 2022/23 to support local authorities as they prepare their markets for adult social care reform and to help move towards paying a fair cost of care. The funding made available to councils means overall local government core spending power can increase by over 4% in real terms in 2022/23, including the investment in Adult Social Care reform.

Council Tax

This government recognises the importance of high-quality local services and believes in empowering local decision makers to shape thriving communities. This includes ensuring they have the flexibility to generate their own income through council tax, while protecting residents from excessive increases.

I have proposed the following package of referendum principles for 2022/23:

  • A core council tax referendum principle of up to 2% for shire counties, unitary authorities, London boroughs, the Greater London Authority (GLA) and fire and rescue authorities.
  • A principle of up to 2% or £5, whichever is higher, for shire district councils
  • An Adult Social Care (ASC) precept of 1% for all authorities responsible for ASC.
  • The ability to add up to an additional 3% of unused ASC Precept from 2021/22.
  • A £5 referendum principle for the 8 lowest-charging fire and rescue authorities.
  • A referendum principle of £10 for Police and Crime Commissioners (PCCs), including the GLA charge for the Metropolitan Police and the PCC component of the Greater Manchester and West Yorkshire Mayoral precepts.
  • No other council tax referendum principles for Mayoral Combined Authorities (MCAs) and no council tax referendum principles for town and parish councils.

The Government’s manifesto commits to continuing to protect local taxpayers from excessive council tax increases, and it is for the House of Commons to set an annual threshold at which a council tax referendum is triggered. This is an additional local democratic check and balance to avoid the repeat seen under the last Labour Government when council tax more than doubled.

This package of referendum principles strikes a fair balance. The council tax referendum provisions are not a cap, nor do they force councils to set taxes at the threshold level. Councillors, mayors and Police and Crime Commissioners and local councils will rightly want to consider the financial needs of local residents at this challenging point in time, alongside the public’s support for action on keeping our streets safe and providing key services.

Stability of Funding

Through this package we are providing local authorities with a firm foundation for funding throughout 2022/23. This means we are proposing to roll over much of the 2021/22 Local Government Finance Settlement, including:

  • Rolling over the current approach to the New Homes Bonus worth £554 million.
  • Keeping the Rural Services Delivery Grant at £85 million.
  • Maintaining the Lower Tier Services Grant at £111 million with an updated cash terms funding floor.
  • Increasing the Revenue Support Grant in line with inflation; an increase of £70 million.
  • Continuing with the 100% retention authorities in the five Devolution Deal areas and 67% for Greater London overall.

Updating the System

Government is committed to ensuring that funding allocations for councils are based on an up-to-date assessment of their needs and resources. The data used to assess this has not been updated in a number of years, dating from 2013-14 to a large degree, and even as far back as 2000. Over the coming months, we will work closely with the sector and other stakeholders to update this and to look at the challenges and opportunities facing the sector before consulting on any potential changes.

As part of this we will look at options to support local authorities through transitional protection. Councils should note the one-off 2022/23 Services Grant provided in the Local Government Finance Settlement in 2022/23 will be excluded from potential transitional protections.

Conclusion

In outlining these proposals, my priority is to provide stability in the immediate term so I can work closely with local government and other partners on options to update our assessment of local authority needs and resources. I welcome representations from all interested parties on the 4-week consultation we have launched today.

Please see a link to the consultation here.

Linked statements

This statement has also been made in the House of Commons

Department for Levelling Up, Housing and Communities
Local Government Finance
Michael Gove
Secretary of State for Levelling UP, Housing and Communities and Minister for Intergovernmental Relations
Conservative, Surrey Heath
Statement made 16 December 2021
HCWS510
Commons