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

Leeds sets out plan to become one of world’s first zero-carbon energy economies

17/12/2018Leeds sets out plan to become one of world’s first zero-carbon energy economies

Leeds City Region is aiming to become one of the world’s first zero-carbon regions as it sets out a new energy strategy to meet the Paris C... more >
Council mergers: taking local government by storm

17/12/2018Council mergers: taking local government by storm

It’s no secret that councils up and down the country are scrambling to keep services afloat as they try to balance dwindling resources with... more >
National Social Value Conference 2018: Going upstream

17/12/2018National Social Value Conference 2018: Going upstream

PSE’s Daniel Broadley reflects on the key messages to take away from this year’s National Social Value Conference, which took place o... 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 >
Leeds sets out plan to become one of world’s first zero-carbon energy economies

17/12/2018Leeds sets out plan to become one of world’s first zero-carbon energy economies

Leeds City Region is aiming to become one of the world’s first zero-carbon regions as it sets out a new energy strategy to meet the Paris Climate Agreement and provide a boost to the region... more >
Council mergers: taking local government by storm

17/12/2018Council mergers: taking local government by storm

It’s no secret that councils up and down the country are scrambling to keep services afloat as they try to balance dwindling resources with growing demand. In line with the ‘doing mor... more >

the raven's daily blog

Don’t let a culture of resistance take hold of your organisation

17/12/2018Don’t let a culture of resistance take hold of your organisation

If we want to introduce change throughout local government, then we have to encourage our people to buy-in, writes Danny Longbottom, director of local government and health at BT. In my role I have the privilege of meeting lots of people in local government across the UK. More often than not, the subject of digital transformation crops up... more >
read more blog posts from 'the raven' >

comment

Council mergers: taking local government by storm

17/12/2018Council mergers: taking local government by storm

It’s no secret that councils up and down the country are scrambling to keep services afloat as they try to balance dwindling resources with... more >
National Social Value Conference 2018: Going upstream

17/12/2018National Social Value Conference 2018: Going upstream

PSE’s Daniel Broadley reflects on the key messages to take away from this year’s National Social Value Conference, which took place o... more >
LGA Autumn Budget round up

17/12/2018LGA Autumn Budget round up

Chairman of the LGA Lord Porter puts the chancellor’s Autumn Budget under the microscope and looks at what it means for local government. ... more >
The digital buying community is live

12/11/2018The digital buying community is live

Many of the requirements from buyers posted on the Digital Marketplace were either non-compliant or poorly worded, which resulted in challenges f... more >

interviews

Digital innovation in the public sector: The future is now

17/12/2018Digital innovation in the public sector: The future is now

One of the public sector’s key technology partners has recently welcomed a new member to its team. Matt Spencer, O2’s head of public ... more >
Artificial intelligence: the devil is in the data

17/12/2018Artificial intelligence: the devil is in the data

It’s no secret that the public sector and its service providers need to invest in technology to help make better use of their resources. Bu... more >
New Dorset Councils CEO on the creation of a new unitary: ‘This is going to be the right decision for Dorset’

05/11/2018New Dorset Councils CEO on the creation of a new unitary: ‘This is going to be the right decision for Dorset’

The new chief executive of one of the new unitary authorities in Dorset has outlined his approach to culture and work with employees, arguing tha... more >
Keeping the momentum of the Northern Powerhouse

15/10/2018Keeping the momentum of the Northern Powerhouse

On 6 September, the biggest decision-makers of the north joined forces to celebrate and debate how to drive innovation and improvement through th... more >

public sector focus

View all News