Local Government Finance

Michael Gove Excerpts

Wednesday 24th January 2024 Written Statements

[The Secretary of State for Levelling Up, Housing and Communities (Michael Gove)]

Today, the Government have announced additional measures for local authorities, worth £600 million. This includes £500 million of new funding for councils with responsibility for adult and children’s social care, distributed through the social care grant. Further details on the exceptional provision of this funding will be set out at the upcoming Budget.

Taking into account this new funding, local government in England will see an increase in core spending power of up to £4.5 billion next year, or 7.5% in cash terms—an above-inflation increase—rising from £60.2 billion in 2023-24 to up to £64.7 billion in 2024-25.

By making progress on the Government’s plan to halve inflation, grow the economy and reduce debt, we now can provide this extra funding to councils to continue to provide vital services for their communities.

Introduction

On 18 December, I published a consultation on the provisional 2024-25 local government finance settlement. This consultation’s proposals made available over £64 billion to local authorities, an increase in core spending power of almost £4 billion, or 6.5% in cash terms on 2023-24.

The consultation ran until 15 January 2024 and we received 267 responses. Alongside this, the Under-Secretary of State for Levelling Up, Housing and Communities, my hon. Friend the Member for North Dorset (Simon Hoare), engaged extensively with colleagues across the House, meeting over 90 MPs and local government leaders to understand their views. I am grateful to all who responded.

We know that councils have faced cost pressures as a result of high inflation. That is why the Prime Minister has prioritised halving it—it is important that we stick to the plan. The Government have also listened to the sector and to the issues raised by Members of the House. For this reason, I am today announcing a wide-ranging package of support for local government.

First and foremost, I am pleased to announce an additional £500 million of funding for local government to deliver social care. This is further to the £1 billion in additional funding announced at the autumn statement 2022 and in July 2023. It will enable councils to continue to provide crucial social care services for their local communities, particularly for children.

Moreover, at the final settlement, I will set out plans to:

increase the funding guarantee to 4%, ensuring that all authorities see a minimum increase in core spending power of 4%, before local decisions on council tax—a key ask of district councils. Local authorities should of course be mindful of cost of living pressures when taking any decisions relating to council tax;

support rural councils by increasing the rural service delivery grant;

provide support to authorities experiencing significant difficulties because of internal

drainage board levies; and

provide additional funding for the Isle of Wight and the Isles of Scilly, in recognition of their unique circumstances.

These measures mean the local government finance settlement for 2024-25 will make available over £64.7 billion, an increase of 7.5% in cash terms on 2023-24. Representatives of all tiers for local government have expressed support for these measures, which will provide critical support across the sector to deliver services.

Social care

The Government recognise that pressures on social care, including for children, have increased significantly. In February 2023 the Government published their strategy for children’s social care reform. After listening to the sector’s consultation responses, and to make sure that councils can continue to deliver these services while we build the evidence for reform, I have today announced an additional £500 million of funding for local government. This will be allocated through the social care grant, which is ringfenced for adult and children’s social care. Where possible, councils should invest in areas that help place children’s social care services on a sustainable financial footing, while being mindful of the level of adult social care provision. This includes investment in expanding family help and targeted early intervention, expanding kinship care, and boosting the number of foster carers. This increase in funding will be reflected in the local authority allocations published at the final local government finance settlement.

This funding, in turn, will reduce pressures on other areas of children’s services, such as home to school transport, where we recognise there has been a significant increase in pressures for special educational needs and disability services.

Funding guarantee

We know that the whole sector is facing pressures, and we need to support all tiers of government to provide the services on which our communities rely. We have listened to the asks of the sector during the consultation period and, as part of this commitment, we are increasing the funding guarantee. This means councils will see their core spending power increase by a minimum of 4% before they have taken any local decisions on council tax. This is an increase from the 3% funding guarantee that we had proposed in the provisional settlement.

Rural services delivery grant

The Government have listened to the sector’s consultation responses and recognise the specific challenges and difficulties that local councils can face in serving dispersed populations in rural areas. I am therefore announcing my intention to provide a significant increase in funding delivered through the rural services delivery grant. I am announcing a £15 million increase to the grant in 2024-25. This is an increase of over 15%, making available a total of £110 million next year. This is the largest cash increase in the rural services delivery grant since 2018-19, and the second successive year of above-inflation increases.

Internal drainage boards

Last year we provided one-off funding to local authorities struggling with internal drainage board levies. We have listened to authorities that continue to face sustained increases in these levies. We will again provide £3 million outside of the settlement to support those experiencing the biggest pressures. We will work with the sector and the Department for the Environment, Food and Rural Affairs to implement a long-term solution.

Islands

In recognition of the unique circumstances facing our island authorities, and their physical separation from the mainland, we will be increasing funding to the Isle of Wight and the Isles of Scilly.

We will set out full details at the final settlement.

Working with the sector on efficiency

I would like to emphasise that this money, alongside all funding announced at the provisional settlement, should be used by local authorities to deliver the frontline services on which our communities rely, rather than put aside for later use. We will therefore continue to monitor the level of local authority reserves.

Looking ahead, we know that there is work to be done between national and local government to improve productivity in local government, as part of our efforts to return the sector to sustainability in the future. While the new funding announced today is an important part of these efforts, alongside ongoing work in adult and children’s social care, we can go further. That is why today we are asking local authorities to produce productivity plans setting out how they will improve service performance and reduce wasteful expenditure to ensure every area is making best use of taxpayers’ money. I encourage local authorities to consider whether expenditure on discredited equality, diversity and inclusion programmes meets this objective.

The Department for Levelling Up, Housing and Communities will be establishing an expert panel to advise the Government on financial sustainability in the sector, which will include the Office for Local Government and the Local Government Association. The panel will review local authority productivity plans and advise the Government on best practice in this area. The Government will monitor these plans and use them to inform funding settlements in future years. Our aim is for local authorities to produce these plans by the summer recess, and we will design a process for local authorities that will enable them to do so. We will provide more information on these requirements for local authorities at the final settlement.

With regard to part-time work for full-time pay arrangements—the so called four-day working week—the Government continue to believe that this reduces the potential capacity to deliver services by up to 20% and, as a result, does not deliver value. The Government have already taken steps to deter the sector from operating these practices, consulted on the use of financial levers at future settlements, and will legislate if necessary.

Conclusion

These proposals will provide councils with the support they need, ensuring stability and delivering additional resources for the most acute pressures. We will also hold the sector to account and help maximise local authorities’ efficiency and value for money.

Alongside the measures announced today, the Government continue to protect local taxpayers from excessive council tax increases through the proposed package of referendum principles, including the 3% core council tax principle and the 2% adult social care precept. It is for individual local authorities to determine whether to use the flexibilities detailed above, taking into consideration the pressures many households are facing.

We are committed to improving the local government finance system beyond this settlement in the next Parliament, and the Minister for Local Government will be engaging with the sector on this over the coming months.

The final local government finance settlement will be published in full early next month, and the statutory reports that comprise the settlement will be subject to debate in the House of Commons shortly after.

This written ministerial statement covers England only. The Barnett formula will apply to this funding in the usual way.

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