Provisional Local Government Finance Settlement

Part of the debate – in the House of Commons at 1:05 pm on 17th December 2020.

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Photo of Robert Jenrick Robert Jenrick The Secretary of State for Housing, Communities and Local Government 1:05 pm, 17th December 2020

Today I have written to all local authorities in England thanking their councillors, officers and employees for their exceptional service this year. From carers to teachers to social workers to refuse collectors to council officers, as well as the elected members, they have worked tirelessly over the course of this pandemic to keep us safe, to provide support to the most vulnerable, to assist local businesses and to deliver public services under immense pressure. I think I speak for the whole House in saying a sincere thank you and in wishing them and their families a happy and peaceful Christmas.

From the start of the pandemic, we committed to ensuring that councils had the resources they needed to step up and support their communities. We have provided councils with more than £7.2 billion of additional funding for covid-19 expenditure. We have ensured that councils receive support to manage associated losses in income, including from sales, fees, charges, leisure centres and local taxes, and that is expected to amount to further billions of pounds of support. That commitment remains undimmed, and the settlement we are announcing today ensures that councils have the resources they need to continue that work next year, to play their part in the recovery of their communities and to deliver first-class public services.

As we look ahead to 2021 and 2022, the annual settlement makes an extra £2.2 billion available to fund the provision of critical public services including adult and children’s social care. Within that, we are giving authorities access to an additional £1 billion for adult and children’s social care, made up of £300 million of social care grant and the flexibility of a 3% adult social care precept. On average, English councils will see a 4.5% cash-terms increase in core spending power, which is also an increase in real terms. That is testament to the support that our local government deserves, and it comes off the back of three settlements in a row that have increased funding in real terms.

The £1 billion grant announced at last year’s spending review will continue, along with all other existing social care funding. Balancing the contributions of national and local taxpayers, we are giving councils increased flexibility through a 2% council tax referendum limit, with an extra 3% for social care authorities. Councils will, of course, want to take into account the financial circumstances of their residents and to protect households from excessive increases in bills. It is incumbent on councils to balance these competing pressures and reach the right decision for their local areas.

To help councils continue reducing council tax for those least able to pay, including households hit hard financially by the pandemic, I am making £670 million of new grant funding available outside the core settlement for local council tax support. Lower tier councils, including districts, will benefit from a new one-off £111 million lower tier services grant, and we are providing certainty and stability by confirming that the main funding allocations for the full range of council services will rise in line with inflation.

Our settlement also addresses the extra costs incurred by councils in rural areas, providing an extra £4 million to the rural services delivery grant—the highest contribution to date, at £85 million. We are also proposing a further £622 million of new homes bonus allocations, We will invite views on how we can reform the scheme next year to ensure that it is focused where homes are needed the most and where councils are ambitious to get on and deliver them.

Despite the arrival of vaccines, we will continue to live with covid-19 for some months. That is why, alongside the core settlement, I am announcing comprehensive measures, including £1.55 billion of additional, unring-fenced grant funding for covid expenditure. Our measures insure against funding shortfalls, and I am particularly pleased to confirm today the scope of and approach to our very well received scheme to reimburse councils for 75% of irrecoverable lost tax income from 2020-21.

As the cold weather sets in, the protection of those sleeping rough amid the pandemic continues to be one of my priorities. Our world-leading Everyone In initiative was and remains a powerful testament to what local and central Government can achieve together. We are building on that work to ensure that as few of the 29,000 people who were helped off the streets under that scheme, and subsequently, return to life on the streets, spending over £750 million next year to tackle homelessness and rough sleeping—a 60% increase on the previous you spending review. In addition, we are providing £165 million of new funding to councils for the troubled families programme, underlining our continued commitment to the most vulnerable in society. Following the passage of the Domestic Abuse Bill, we will provide £125 million funding next year to enable councils to meet their duties in full to provide the support that victims of domestic abuse and their children undoubtedly deserve.

Serious challenges remain, but the start of the vaccine roll-out last week offers us cause for optimism and allows us to at least begin to glimpse the world beyond the pandemic. We want to work with local councils to build a new country beyond covid—a country that is more prosperous, greener, safer and more neighbourly. Local government will be integral to the achievement of that shared vision. We will establish a new £4 billion levelling-up fund, building on the success of our £3.6 billion towns and high streets funds. Any local area will be eligible to apply directly to this fund, which will finance the everyday infrastructure, town centre regeneration and culture that communities need and local people want. The UK shared prosperity fund will help to level up and create opportunity across the UK. A UK-wide investment framework for that will be published by my Department early next year.

The Government are funding vital local infrastructure, with total capital spending at £100 billion. That will fund once-in-a-generation changes to local communities and deliver the highest sustained levels of public sector net investment since the 1970s, including the biggest hospital building programme in living memory, and £2.2 billion investment in our schools funding programme to rebuild 500 schools over the next decade. In addition, local councils will benefit from £1.7 billion for local roads maintenance and upgrades to tackle potholes, which will improve local connectivity and deliver better roads for our communities.

I want local government to emerge stronger, more sustainable and better able to meet the needs of those it serves. That means greater openness and accountability, and in a minority of cases it means better financial management and regard for taxpayers’ money. To that end, my Department is publishing today its response to Sir Tony Redmond’s excellent review of the effectiveness of external audit and transparency. We will provide councils with an additional £15 million next year to implement Sir Tony’s recommendations. We are preserving the ability of local authorities to invest in programmes to power growth by lowering Public Works Loan Board interest rates, but we must also protect taxpayers from unwise risky investments of the kind we have seen, sadly, in some councils in recent years. Those practices must now end.

When there is a clearer path ahead, we will work with the sector and Members across the House to seek a new consensus for broader reforms to local government, including the fair funding review and the business rates reset, and we will ensure that councils are set on a long-term trajectory of sustainable growth and fair resources.

This will, I hope, be viewed as a significant settlement that paves the way for a bright future for our local communities as they seek to bounce back from an exceptionally difficult year. The settlement will deliver £2.2 billion of extra funding, a 4.5% cash and real terms increase in core spending power, and it will further fund councils to ensure that they steer the course of the remaining months of the covid-19 pandemic with certainty and confidence. Building on last year’s settlement, which exceptionally received cross-party support, it puts councils, which were at the forefront of our response to the pandemic, at the forefront of our recovery, and I commend this statement to the House.