Economy and Infrastructure

23.02.18

An unsettling finance settlement?

Source: PSE Feb/March 2018

Piali Das Gupta, head of policy at Solace, looks over the final local government finance settlement and argues that it does not do enough to support struggling council services.

The fortnight before Christmas has become a rather anxious time for councils as we wait for the provisional local government finance settlement to be published. For those unfamiliar with the rites of council finance, the settlement sets out how much funding central government proposes to allocate to each local authority the following year.

Councils need to have this information in order to be able to set the next year’s budget, including the council tax, which by law has to be done by 10 March. The earlier we get the settlement, the more time councils have to consider proposals and consult with the public in light of their overall financial position. The closer we get to Christmas without the settlement being released, the more anxiety mounts.

This year, provisional settlement day came down to the wire: 19 December. Immediate reaction from the sector was a bit muted. There has not been much by way of unequivocally “good” news in the settlement since before 2010, but the decision to drop proposed changes to the New Homes Bonus was generally welcomed.

Settlement falls short

Broadly, there was relief that there appeared to be no surprises, although there was general concern that it fell far short of addressing the crisis facing public services. Solace president Jo Miller commented on the day that “without certainty, stability and flexibility for local government’s financial base, the public services that our communities rely on will continue to be facing a cliff edge, and public money will be spent without the ability to plan effectively for the long term.”

Most in the sector considered it a bit of a damp squib and wondered why it had taken so long to come out. Last month, we learned of one possible reason: the provisional settlement was wrong. 

The error resulted from the Valuation Office Agency (VOA) having updated data which factored into business rates calculations and, ultimately, how much money councils will receive. This new data was not reflected in the provisional settlement, but has been taken into account in the final figures, published on 6 February. As a result, almost half of all councils learned that they faced a funding shortfall with a month to go to finalise next year’s budgets.

Councils cannot be worse off next year

For most, the sums involved reportedly amount to less than 1% of their annual revenue budgets, which might not seem like very much but will likely mean further service cuts or a dip into reserves for those who have to make up a shortfall. 

Neither of these options is optimal, especially when they have to be done in an unplanned way and budget proposals have already been out to public consultation. Solace called for the government to ensure that no council’s final settlement for 2018-19 was lower than what was set out in December, but it appears that no relief will be forthcoming. 

There are undoubtedly serious questions to be asked, particularly how the VOA and Ministry of Housing, Communities and Local Government allowed this to happen. As plans progress to make local government almost entirely funded from business rates and council tax, it becomes even more worrying to think about how exposed we are when we have so little control over the design and operation of the tax mechanisms that will fund our services.

Councils have little say in setting business rates, apart from discretion to offer discounts, and are also hostage to the VOA’s capacity to process appeals from businesses in a timely manner. The rates, moreover, only apply to businesses that have a physical footprint, which does not reflect the way that the worlds of commerce and work are changing. 

Similarly, council tax is based on property values that are more than 25 years out of date, but councils are powerless to update them, while the secretary of state effectively sets the upper limit for any increases.

There may come a day when the December rite of local government finance settlement will become obsolete. That certainly seems to be the government’s intention. This latest blip is a timely but unsettling reminder that the notion of being “self-financing” is very different to being financially autonomous.

(Top image © roberthyrons)

FOR MORE INFORMATION
W: www.solace.org.uk

Comments

There are no comments. Why not be the first?

Add your comment

 

related

public sector executive tv

more videos >

latest public sector news

Council controversially begins first monthly bin collection in England and Wales

25/09/2018Council controversially begins first monthly bin collection in England and Wales

Monthly bin collections have been introduced for the first time in England and Wales by Conwy County Council, despite major complaints from resid... more >
Nottinghamshire leader hits back: ‘We’re the most transparent and open council there is’

25/09/2018Nottinghamshire leader hits back: ‘We’re the most transparent and open council there is’

The leader of Nottinghamshire County Council has hit back against claims that the authority lacks transparency, claiming that the council is &ldq... more >
Exclusive: Notts leader rejects calls for council merger referendum, public decision due in May

25/09/2018Exclusive: Notts leader rejects calls for council merger referendum, public decision due in May

The leader of Nottinghamshire County Council has rejected calls from opposing councillors to put potential merger plans to a referendum, arguing ... more >

editor's comment

25/10/2017Take a moment to celebrate

Devolution, restructuring and widespread service reform: from a journalist’s perspective, it’s never been a more exciting time to report on the public sector. That’s why I could not be more thrilled to be taking over the reins at PSE at this key juncture. There could not be a feature that more perfectly encapsulates this... read more >

last word

The importance of openness after Grenfell

The importance of openness after Grenfell

Following the recent Grenfell Tower tragedy, Lord Porter, chairman of the LGA, argues that if the public are going to have faith in the safety testing process then everything must be out in the o... more > more last word articles >
Council controversially begins first monthly bin collection in England and Wales

25/09/2018Council controversially begins first monthly bin collection in England and Wales

Monthly bin collections have been introduced for the first time in England and Wales by Conwy County Council, despite major complaints from residents over piles of waste, rats and fly-tipping. ... more >
Nottinghamshire leader hits back: ‘We’re the most transparent and open council there is’

25/09/2018Nottinghamshire leader hits back: ‘We’re the most transparent and open council there is’

The leader of Nottinghamshire County Council has hit back against claims that the authority lacks transparency, claiming that the council is “the most open and transparent council there is.... more >

the raven's daily blog

Social value: what is it and why?

14/09/2018Social value: what is it and why?

Ben Carpenter, chief executive of Social Value UK, discusses the worth of social value, and argues that, before we start measuring social value, we should ask clearly: what is it, and why? Social value is so much more than a value for money exercise. If you see social value as simply a new catchphrase for ‘efficiency savings’... more >
read more blog posts from 'the raven' >

comment

Crown Commercial Service: Travel solutions on track

10/09/2018Crown Commercial Service: Travel solutions on track

Katrina Williams, head of travel at the Crown Commercial Service (CCS), explains how they are helping government organisations to get the best de... more >
LEPs need to do more for England's countryside

10/09/2018LEPs need to do more for England's countryside

Paul Miner, head of strategic plans and devolution at the Campaign to Protect Rural England (CPRE), highlights the findings of a recent survey wh... more >
What about social care?

10/09/2018What about social care?

Cllr Izzi Seccombe, chairman of the LGA’s Community Wellbeing Board, looks at the exclusion of social care from the government’s rece... more >
Re-evaluating public service reforms

10/09/2018Re-evaluating public service reforms

Chris Painter, professor emeritus at Birmingham City University, explores the paradox of reform principles persisting despite mounting evidence a... more >

interviews

Michael King: Time for Ombudsman reform

06/08/2018Michael King: Time for Ombudsman reform

Michael King first joined the Local Government Ombudsman service back in 2004 as deputy ombudsman. At the start of 2017, he was appointed as the ... more >
Helping a city understand itself

06/08/2018Helping a city understand itself

SPONSORED INTERVIEW The urban landscape is changing. How can local authorities keep up with citizen behaviour? Stephen Leece, managing directo... more >
Modern policing: the future is bright

06/08/2018Modern policing: the future is bright

SPONSORED INTERVIEW The public sector, and policing in particular, has often been criticised as being slow to adapt to change. But now, says L... more >
Data at the heart of digital transformation

03/04/2018Data at the heart of digital transformation

SPONSORED INTERVIEW Grant Caley, UK & Ireland chief technologist at NetApp, speaks to PSE’s Luana Salles about the benefits of movin... more >

public sector focus

View all News