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Provisional Local Government Finance Settlement 2024-25: England

Volume 742: debated on Monday 18 December 2023

On 5 December, I published a policy statement outlining proposals for the 2024-25 local government finance settlement to provide early certainty for councils. Today, I have set out the provisional local government finance settlement for 2024-25 and launched our formal consultation on the proposals. This settlement makes available over £64 billion for local authorities in England, an increase of almost £4 billion or 6.5% in cash terms in core spending power on 2023-24. This is a real-terms increase which demonstrates how the Government stand behind councils up and down the country.

Together, the policy statement published on 5 December, and this proposed settlement:

ensures stability by maintaining the funding guarantee introduced last year, to ensure that every council sees at least a 3% increase in core spending power next year before any local decisions on council tax rates; and

makes available an increase of almost £4 billion on 2023-24, of which £2 billion is additional Government funding; £1 billion of this is for children’s and adult social care in 2024-25.

Stability

Now is the time for stability and continuity. Despite recent decreases in the rate of inflation, the Government recognise that pressures still exist for all local authorities. In this proposed settlement, we are maintaining the funding guarantee we introduced at last year’s settlement to ensure stability for all local authorities, to support the vital work all tiers of local government undertake for communities across the country. By maintaining the funding guarantee, the Government are ensuring every local authority in England will see a minimum 3% increase in their core spending power, before taking any local decisions to increase council tax rates.

We are also uplifting core settlement funding, with the revenue support grant increasing by CPI, and local authorities seeing an increase in baseline funding levels (BFLs) and compensation grant as if both business rating multipliers had increased by CPI. We are continuing the approach set out at last year’s settlement for other grants such as the rural services delivery grant and new homes bonus, which we know are important to councils.

The Government note that whilst local authority reserves are falling, they remain significantly higher than prior to the pandemic. We continue to encourage local authorities to consider, where possible, the use of their reserves to maintain services in the face of these pressures.

We will continue to support projects that reduce costs and improve efficiency by extending the flexibility to use capital receipts to fund revenue costs of these projects to March 2030. We will also engage with the sector to explore additional capital flexibility options to enable invest-to-save and transformation initiatives.

The Government announced on 23 November that we are allocating £450 million across two years to a third round of the local authority housing fund, which will help support those in temporary housing need. This funding allows councils to manage homelessness pressures more effectively and makes it easier for vulnerable people to find a permanent home. The Chancellor announced at autumn statement that the local housing allowance will increase to the 30th percentile of market rents from April. This means 1.6 million low-income households will be around £800 a year better off on average in 2024-25.

Social care

The Government recognise that many local authorities are facing social care demand pressures. That is why we announced significant additional funding at the 2022 autumn statement. Together with funding announced in-year, this means £1 billion in additional grant funding for social care compared to 2023-24.

Council tax

The Government manifesto commits to continuing to protect local taxpayers from excessive council tax increases. This is an important local democratic check and balance to avoid the repeat seen under the last Labour Government, when council tax more than doubled. The proposed package of referendum principles strikes a fair balance. Local authorities should of course be mindful of cost-of-living pressures when taking any decisions relating to council tax.

As previously set out, we will allow councils to raise their core council tax by up to 3% without a local referendum, and will allow a further adult social care precept of 2% for all authorities responsible for adult social care services. The council tax referendum provisions are not a cap, nor do they force councils to set taxes at the threshold level. It is for individual local authorities to determine whether to use the flexibilities detailed above, taking into consideration the pressures many households are facing. These actions to protect hard-working people from excessive tax rises are in contrast to the Labour Government in Wales which is planning to hike council tax through a council tax revaluation and higher council tax bands.

The Mayor of London has requested flexibility to levy an additional £20 on band D bills to the Greater London Authority (GLA) precept to provide extra funding for Transport for London (TfL). The Government have expressed ongoing concern about the management of TfL by this Mayor, and it is disappointing that London taxpayers are having to foot the bill for the GLA’s poor governance and decision-making. Whilst the Government will not oppose this request, any decision to increase the precept is solely one for the Mayor, who should take into account the pressures that Londoners are currently facing on living costs and his decision to raise his share of council tax by 9.7% last year.

The exceptional financial support framework is available to provide support where a council has a specific and evidenced concern about its ability to set or maintain a balanced budget, including where there has been local financial failure. Where councils need additional support from the Government, they should take every possible step to minimise the need for that support to be funded by national taxpayers, while also recognising the cost-of-living pressures on families. As part of that process, the Government will consider representations from councils, including on council tax provision.

The Government view continues to be that councils in the most severe financial failure, that are seeking multi-year support from Government, should continue to take all reasonable local steps to support recovery including additional council tax increases. Therefore, for the 2024-25 settlement, in consideration of the significant financial failure of Thurrock Council, Slough Borough Council and Woking Borough Council, the Government propose that bespoke council tax referendum principles should apply. For Thurrock and Slough Borough Council, a core council tax referendum threshold of 8%; and for Woking Borough Council, a council tax referendum principle of 10%. Councils in significant financial failure can make use of any additional flexibilities provided to support their financial recovery and going forward the Government will consider all reasonable steps to protect both national and local taxpayers and ensure councils are acting responsibly.

Part time work for full time pay

We have made it clear that any attempt from a local authority to implement part time work for full time pay—for example, a so called “four-day week” or equivalent arrangements—is contrary to the interests of local taxpayers. This working practice does not represent good value for taxpayers’ money, nor places the sector in a good light with the public. We have included in the consultation our proposals to use financial levers within the settlement to disincentivise councils from operating part time work for full time pay in future settlements. Those councils which are considering or operating such arrangements should not start this practice or stop it immediately.

Conclusion

These proposals will provide councils with the support they need. It ensures stability, delivers additional resources for social care, and maintains balance on council tax.

I welcome representations from all interested parties on the consultation we have launched today. The consultation will run until 15 January. The Minister for Local Government will also be holding engagement sessions for Members of Parliament in the week commencing 8 January 2023.

This written ministerial statement covers England only.

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