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Local Government Finance Settlement 2011-12

Volume 522: debated on Monday 31 January 2011

I have today laid before the House the “Local Government Finance Report (England) 2011-12 (HC 748)”. This report establishes the amounts of revenue support grant and non-domestic rates to be paid to local authorities in 2011-12, and the basis of their distribution. A draft of this report was issued for consultation on 13 December 2010.

We received a total of 330 written responses from 283 individual authorities, formal and informal groupings of authorities and others during the consultation, and Ministers met delegations from the Local Government Association, London Councils and a large number of individual local authorities.

Having considered the views of all those who have commented on the provisional settlement, I have decided to broadly confirm the proposals for the distribution of formula grant for 2011-12 as announced in December, after correcting a number of minor errors and inconsistencies that came to our attention during consultation.

We received many representations on concessionary travel. This is a prime example of how the last Government introduced a policy with no idea of how it would be funded fairly. It has left us with a challenging legacy. I have decided to help compensate shire district councils for the loss of what they used to spend on concessionary travel. To address this, a further £10 million has been added to formula grant—for 2011-12 only—in order to mitigate the impact of the transfer on shire districts.

We have also improved the minimum guarantee so that now no council will receive a “revenue spending power” reduction of more than 8.8% in either 2011-12 or 2012-13. Details on “spending power” are set out in an explanatory note which is being placed in the Library of the House. In finalising our methodology, we have accepted a number of representations including the exclusion of parish precepts from our spending power calculations.

The need to reduce public spending means that this is a unique settlement—we are looking for councils to show how efficient they can be, and to root out the wasteful spending that still exists while ensuring that money goes to the front-line public services.

Despite the huge pressures on public finances, the coalition Government have taken unprecedented steps to protect councils most reliant on central Government funding and freeze council tax.

We have taken a progressive and fair approach to calculating how the £29 billion of central taxpayer funding for local government grants this year will be allocated. More money is being channelled to those areas of the country that have the highest levels of need.

We are also helping to protect the public from excessive council tax rises with our £650 million fund so town halls can freeze council tax this April. This will offer real help to families and pensioners. We will provide each authority that does not increase its basic level of council tax with a grant equivalent to the revenue it would have generated had it increased it by 2.5%. I would like to impress upon authorities that under the terms of the scheme they will not receive any grant if they increase their council tax at all.

The Government anticipate that authorities will choose to take up the freeze. However, where authorities opt to increase their council tax instead the Government are prepared to take capping action against excessive increases. The Secretary of State will set out the capping principles that he intends to use to compare authorities’ budgets in the next few days, leaving ample time for authorities to consider their budgeting before the deadlines for setting their council tax.

I have also today laid before the House the “Limitation of Council Tax and Precepts (Alternative Notional Amounts) Report (England) 2011-12 (HC 774)”. This report takes account of changes to authorities’ functions and grants during 2010-11, and contains details of the figures that will be used to compare authorities’ budgets between years, should capping be 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:

Copies of the report and related tables showing each authority’s allocation of formula grant and other supporting material, and the “Limitation of Council Tax and Precepts (Alternative Notional Amounts) Report (England) 2011-12”, have been placed in the Vote Office and the Libraries of both Houses.