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Local Government Finance

Volume 639: debated on Thursday 19 April 2018

I am writing in response to the Opposition day debate on “Reductions in Local Government Funding” of 28 March and the resolution of the House made that day. This Government recognise the vital role of local government in delivering the frontline services which communities across the country rely on. I am writing to the House to confirm the support this Government are providing to ensure councils have the resources they need to deliver vital local services.

In February, the 2018-19 local government finance settlement set out the resources available to councils in England. This is the third year of a four-year offer which was approved by Parliament, as was the case in both preceding years. The multi-year settlement was also overwhelmingly accepted by councils, 97% of which took up the offer in return for publishing efficiency plans. It has provided greater certainty, allowing councils to plan ahead and secure value for money.

Through the settlement, local government has been given access to £45.1 billion in 2018-19 and £45.6 billion in 2019-20. This is an overall increase since 2017-18 of £1.3 billion. This recognises both the growing pressure on local government’s services and higher than expected inflation levels. For adult social care in particular, a further £150 million was provided for 2018-19, which we expect will help support sustainable local care markets, in addition to the £2 billion announced at spring Budget 2017. With this, and other measures, the Government have given councils access to £9.4 billion dedicated funding for adult social care over three years.

Informed by the representations received from councils, organisations and members of the public, we are ensuring that the sector is equipped to drive economic growth, to think and act creatively and to deliver for their residents. We are clear that is about more than just the funding. Through additional flexibilities and responsibilities, we are responding to the sector’s request for more control over the money they raise as well as the tools to make this money go further.

Local authorities already have a strong incentive to grow their economies through 50% business rates retention and benefit from the additional income that growth in their business rates brings. Over 150 local authorities in 16 pilot areas are incentivised further by retaining 100% of their growth in business rates.

We are also looking towards the future. We are undertaking a review of local authorities’ relative needs and resources to address concerns about the fairness of current funding distributions. The consultation has now closed and my Department is carefully assessing over 300 responses from a wide range of stakeholders. We have sought the views of councils, representative associations and others to capture the key factors which should be included in a new funding formula and we will continue to collaborate with local government on this. We aim to implement its findings in 2020-21.

Local government also has a vital role to play in helping the broken housing market. The recent allocation of £866 million from the housing infrastructure fund for 133 local authority projects will help to deliver some 200,000 additional homes, and we have also announced an additional £1 billion of borrowing headroom to enable local authorities in the highest value areas to build more homes for social and affordable rent.

We further announced last month the 45 areas across England we are working with to develop Forward Funding infrastructure projects, with up to £4.1 billion of funding available to unlock a potential 400,000 homes. These are strategic, long-term projects which will deliver housing not just for now, but for generations to come— creating new settlements, growing places and supporting local authority ambition for growth and regeneration.

This Government remain firmly committed to ensuring local government has the support and resource it needs to deliver its services effectively and efficiently, while protecting hard-working taxpayers from excessive council tax rises.