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Local Government Finance

Volume 486: debated on Wednesday 21 January 2009

I have today laid before the House two reports.

The first is the Local Government Finance Report (England) 2009-10. This report establishes the amounts of revenue support grant (RSG) and non-domestic rates (NDR) to be paid to local authorities in 2009-10, and the basis of their distribution. A draft of this report was issued for consultation on 26 November 2008.

The second report is the Limitation of Council Tax and Precepts (Alternative Notional Amounts) Report (England) 2009-10. This sets out the alternative notional amounts for the nine restructuring authorities which will be established on 1 April 2009. This report provides 2008-09 budget requirement figures for these authorities that can be used as a comparison in the event that the Government use our capping powers. A draft of this report was also issued for consultation on 26 November 2008 alongside the finance settlement, on which we received just one response from a restructuring authority, which confirmed its agreement with the figure in the report for its alternative notional amount.

On the settlement, we received a total of 109 written responses from 107 individual authorities, MPs, and formal and informal groupings of authorities. Ministers met delegations from the Local Government Association, London councils, and groups representative of county councils, shire districts and fire and rescue authorities. Having considered the views of the local authority associations and others who have commented on the provisional settlement, I have decided to confirm my proposals for the distribution of the 2009-10 local government grant and for the alternative notional amounts in relation to the financial year beginning 1 April 2009.

The final figures published today for 2009-10 confirm those originally published with the 2008-09 settlement in January 2008. In line with Government’s policy on multi-year settlements, it has always been clear that the settlement for 2009-10, as the second year of a three-year settlement, would not be changed from that previously published other than in exceptional circumstances. Having fully considered all the representations received during consultation I have not found such exceptional circumstances.

This settlement represents a continued real-terms increase in investment in local government, which will allow authorities to continue to deliver improving services at an affordable cost. Total formula grant for 2009-10 will be £780 million or 2.8 per cent. higher than in 2008-09 on a like-for-like basis. Specific grants, such as the dedicated schools grant, are on top of these figures and bring the total increase in funding for local authorities to 4.2 per cent. in 2009-10. In the 10 years up to 2007-08 we have increased total Government grant by 39 per cent. in real terms, with an above inflation increase for local government in each and every one of those years. There will be a further total increase over this three-year settlement of £8.9 billion.

Given this substantial rise in investment in local government over more than a decade, there can be no excuse for excessive council tax increases. I have made clear and I repeat today—that the Government expect the average council tax increase in 2009-10 to be substantially below 5 per cent.. We had to take capping action in 2008-09. If necessary, we will do so again in 2009-10 to protect council tax payers if they are faced with excessive increases. No authority should be in any doubt about the Government’s resolve in this matter, particularly during this period of economic downturn, including requiring authorities to re-bill if necessary.

I shall be sending copies of the Local Government Finance Report to all local authorities in England and making available full supporting information on the Communities and Local Government website at:

I have placed copies of the reports and related tables showing each authority’s allocation of formula grant and other supporting material in the Vote Office and the Library of the House.