Local Government Funding Reform: Settlement 2019/20 and the Road - PowerPoint PPT Presentation

Local Government Funding Reform: Settlement 2019/20 and the Road Ahead 1

Outline for the briefing today • 2019/20 Provisional Settlement and NNDR1 2019/20 • Funding Reform Consultations – Fair Funding – Business Rates Retention 2

Session 1: 2019/20 Provisional Settlement & NNDR1 2019/20 3

Provisional Settlement 2019/20 • Announced on 13 December 2018 • Updated Core Spending Power figures • Confirmation of continuing cuts to RSG • Removal of Negative RSG • Increases to RSDG (+£16m) and NHB (+£18m) Funding • £180m released from the BRR levy account • Provisional Social Care Allocations of £650m (Budget 2018) • 15 new 75% Pilot areas announced for 2019/20 (and 7 back to 50%) • No changes to the Council Tax referenda principles (aside from Police) 4

The biggest missing headline - confirmation of continuing large cuts to RSG RSG 2016/17 to 2019/20 • Continued major reductions to 8 RSG 7.2 • A cut of £1.3bn or 36% 2018/19 7 to 2019/20 6 • A confirmed cut of £4.9bn or 5.0 5 68% 2016/17 to 2019/20 £bn 4 3.6 • BUT part hidden by changes 3 made for 100% BRR pilots (in 2.3 17/18,18/19 and 19/20) 2 1 0 2016/17 2017/18 2018/19 2019/20 5

Funding 2012/13 to 2019/20 • Funding reduced from £28.1bn to £18.6bn over the period (34%) 6

Change in SFA funding • Change in SFA Funding by class of authority Change in SFA from previous year Services Cumulative Lower tier Upper tier change Authority group since 2016/17 2017/18 2018/19 2019/20 Fire 2015/16 ✓ ✓ Unitaries without fire -13.6% -11.5% -7.1% -7.5% -34.4% ✓ ✓ Metropolitan Districts -10.9% -9.0% -5.6% -6.4% -28.4% ✓ ✓ Inner London Boroughs -9.6% -7.8% -4.7% -5.6% -25.1% ✓ ✓ Outer London Boroughs -13.0% -11.0% -6.8% -7.4% -33.2% ✓ ✓ ✓ Unitaries with fire -13.6% -11.8% -7.4% -8.4% -35.4% ✓ ✓ Counties with fire -16.7% -15.1% -9.9% -8.6% -41.7% ✓ Counties without fire -17.0% -15.0% -9.9% -9.9% -42.7% ✓ Shire Districts -16.9% -15.0% -8.0% -5.8% -38.8% ✓ Fire Authorities -6.8% -8.9% -4.1% -2.4% -20.6% England -12.4% -10.6% -6.3% -6.5% -31.4% 7

Change in SFA funding Cumulative change in SFA by class of authority Cumulative change between 205/16 and 2019/20 8

Information provided by MHCLG • Updated Core Spending Power including split by grant source • Key Information for local authorities (and Pilots) i.e. SFA split • Calculator for NHB • SFA calculation Model • Council Tax referendum limits and rules • Funding allocations outside of Core Spending Power – Social Care – Levy Account • Relative Need Consultation • Business Rates Retention Consultation 9

Core Spending Power: England 2015-16 2016-17 2017-18 2018-19 2019-20 £m £m £m £m £m SFA -RSG removal + inflation 21,250 18,602 16,633 15,574 14,560 Slight Increase Under indexation grant 165 165 175 275 400 Tax rate Assumptions Council Tax 22,036 23,247 24,666 26,332 27,927 Improved Better Care Fund 1,115 1,499 1,837 No change New Homes Bonus Slight Increase 1,200 1,485 1,252 947 918 Slight Increase Rural Services Delivery Grant 16 81 65 81 81 Transition Grant 150 150 No change Adult Social Care Support Grant 241 150 No change Winter Pressures Grant 240 240 Budget 2018 Change Social Care Support Grant 410 Budget 2018 Change Core Spending Power 44,666 43,730 44,296 45,098 46,373 10

Core Spending Power: England 2018-19 2019-20 £m £m Settlement Funding Assessment 162 -RSG removal + inflation Slight Increase Under indexation grant 25 Council Tax -269 -120 Tax rate Assumptions Improved Better Care Fund Slight Increase New Homes Bonus 18 Slight Increase Rural Services Delivery Grant 16 Transition Grant Adult Social Care Support Grant Winter Pressures Grant Budget 2018 Change 240 240 Social Care Support Grant 410 Budget 2018 Change Core Spending Power -28 751 11

Individual Authority (1) • Net increase to Core Spending Power of £7.4m • Other Grants increase of £1.6m • SFA Reduction of £3.5m • Net Central Funding Change of - £2.0m • Offset by a Council Tax forecast increase of £9.4m 12

Individual Authority (1) • Other Grants +£1.6m – NHB change of – £1.0m – Multiplier Grant +£0.4m – Social Care Support Grant +£2.0m – Improved Better Care Fund +£0.9m – Adult Social Care Support Grant -£0.7m 2018-19 2019-20 £ millions £ millions 41.4 37.9 Settlement Funding Assessment 0.8 1.2 Compensation for under-indexing the business rates multiplier 150.6 160.0 Council Tax of which; 5.4 6.3 Improved Better Care Fund 3.5 2.5 New Homes Bonus Rural Services Delivery Grant 0.0 0.0 0.7 0.0 The Adult Social Care Support Grant 1.2 1.2 Winter pressures Grant 0.0 2.0 Social Care Support Grant 203.7 211.1 Core Spending Power 13

Individual Authority (2) • Net decrease to Core Spending Power of £0.527m • Other Grants decrease of £0.439m • SFA Reduction of £0.418m • Net Central Funding Change of - £0.857m • Offset by a Council Tax forecast increase of £0.330m 14

Individual Authority (2) • Other Grants -£0.439m – NHB change of – £0.478m – Multiplier Grant +£0.039m 2018-19 2019-20 £ millions £ millions 4.435 4.017 Settlement Funding Assessment 0.086 0.125 Compensation for under-indexing the business rates multiplier 6.146 6.476 Council Tax of which; 2.086 1.608 New Homes Bonus 12.753 12.225 Core Spending Power 15

Business Rates Pilots • 2018/19 – A further 10 Pilot areas created for 2018/19 plus London extended – Total cost to HMT of pilot status for 2018/19 forecast at over £0.8bn (IFS) – Announced as 1 year only • 2019/20 – It should be the final year of “pilots” – Original 5 areas to continue at 100% – London moved from 100% to 75% (but was 67% anyway in 2017/18) – 7 of the 10 new 2018/19 Pilot areas moving back from 100% to 50% – 15 Pilot areas at 75% outside of London (12 new – 3 from 2018/19) – Not just an extra 25% of growth for some (i.e. 50% to 75%), due to the levy also not payable – Will the pilot changes result in income distortion? 16

Business Rates Pools • A combination of existing pools that did not bid for pilot status and areas that bid for pilot status, where plan B was to pool • Usual 28 days to decide whether to remain as a pool or not (all or nothing) – same as the pilots. • It remains to be seen if MHCLG can make pooling worthwhile under the 75% scheme. Whilst a levy is proposed, will not (under the proposals) impact on most authorities, therefore what other incentives can there be to pool? – Higher safety net ? – Keep growth for longer ? 17

Council Tax Referendum Limits • Government has maintained the limit from 2018/19. So: – Upper tier authorities 2.99% plus (potentially up to 3%) can be made without a referendum – Lower tier authorities increases of less than 3% or £5 (whichever is the higher) can be made without a referendum • Social Care Precept is as was, so: – Balance of 6% over 3 years not used by end 18/19 • Town and Parish councils – deferred setting of referendum principles for town and parish councils • Extended limits for PCCs - £24 per annum 18

Council Tax – the change to the balance of funding 2015/16 2016/17 2017/18 2018/19 2019/20 £bn £bn £bn £bn £bn Government funding 22.6 20.5 19.6 18.8 18.5 (including SFA) Council tax 22.0 23.2 24.7 26.3 27.9 Council Tax as a 49% 53% 56% 58% 60% Proportion of Total • National funding has reduced by £4.1bn over 5 years, an 18% decline • Council tax projected CSP funding has increased by £5.9bn over 5 years, a 27% increase • Council tax will fund 60% of all CSP by 2019/20 compared to 49% in 2015 • Next CSP? 19

Council Taxbase Growth Assumptions – CLG inconsistency, but reduced • CLG have made following assumptions for changes in the taxbase – Average annual growth 2014-15 to 2018-19 up to 2019/20: calculated at nationally 1.96% – Increases in line with maximum use of new referendum limits • Starting point of council tax revenue in 2018/19 is lower by -£268m and estimate for 2019/20 is lower (excluding extra GLA Police) by -£154m (note additional SC precept to be raised in 19/20) • Likely taxbase growth for 2019/20 could be 1.5% so MHCLG overestimate could be approximately £115m 20

Other issues • New Homes Bonus – no change on pervious method set out, with the extra £18m in funding averting the possible increase to the deadweight for 2019/20, but no indicative future numbers now provided • An extra £153m of funding for high taxbase / tax rate authorities to avoid having negative RSG for 2019/20. Reducing SR15 funding reductions for these authorities • Additional RSDG – an increase of £16m to funding, to match 2018/19 levels • £180m released from the BRR levy account – Not shown in Core Spending Power. Why? 2020/21 comparisons? – Allocated based on 2013/14 SFA – not reflect SR 2015 reductions (taking into account tax rate and base) – Allocated after negative RSG wiped out 21

Completing NNDR1 2019/20 22