Local Government Finance update

Additional Funding

In total I have announced over £3.2 billion of additional funding for councils to support their continued efforts to address the impacts of the coronavirus pandemic in their communities, both through increased expenditure and those budgetary pressures that arise from falls in income during the lockdown period.

Recognising that councils are best placed to decide how to meet pressures in their local area, this funding has not been ringfenced; however, we expect councils to prioritise spending in those areas where we asked them to carry out extra work and new tasks, in particular, in relation to adult social care, children’s services, public health services, shielding the vulnerable, homelessness and rough sleeping, supporting the NHS, and managing excess deaths.

An initial £1.6 billion of funding was announced on 19 March, and allocated based on a mixture of the Adult Social Care Relative Needs Formula; and the 2013-14 Settlement Funding Assessment, which is a measure of general service needs – both of which are familiar formulations to local councils. Further details of this allocation, broken down by individual local authority, can be found on the government website.

On 18 April I announced a further £1.6 billion to support councils in their continued response to the pandemic. Full details of the allocation of this further funding were announced on 28 April 2020 and have, once again, been made available on the Government website. These additional allocations have been made on a per capita basis, using the latest ONS population projections. This reflects that this is a national emergency and there are a range of pressures across local government. For two-tier areas, the split of this funding between county and district authorities will be 65:35. This provides significantly more funding to district councils than the first round of allocations reflecting the impact that a reduction in incomes from sales, fees and charges has had, particularly on these councils. However, this formulation also continues to reflect the acute pressures on social care.

Of the additional funding, £28.5 million will support standalone fire and rescue authorities (including Greater Manchester Fire). In addition, the Home Office will launch a £6 million Fire Covid-19 Contingency Fund specifically to support fire and rescue authorities who incur significant costs as a result of additional duties during the covid-19 outbreak.

Cashflow Support

On 16 April, I announced measures to provide cashflow support to authorities. These were intended in part to mitigate the impact of temporary delays in tax payments. These measures include deferring the payment of the central government share of business rates by councils: payments collectively worth £2.6 billion; and, bringing forward central government payments of social care grants worth £850 million, so that they are paid entirely in April rather than in April, May, and June.

Future Reform

I am committed to reforming the funding framework for local government so that it is simpler, more up to date, and more transparent. However, in order to ensure that we get these reforms right, both the Government and councils need to work together to arrive at the right approach. Neither we nor councils currently have the capacity, nor the necessary degree of financial certainty, to engage properly with these reforms now. As such, I have announced that we will be suspending implementation of the Review of Relative Needs and Resources and the planned increase to 75% business rates retention in 2021-22. These decisions will allow councils to focus on meeting the immediate public health challenge posed by the pandemic.

The Government will work closely with local councils as it determines how best to treat accumulated business rates growth and the local government finance settlement in 2021-22.