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Financial plans 'meaningless' without fair funding steer, says LGA

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Councils’ financial planning has been made meaningless because of the uncertainty over what to expect from the fair funding review, the Local Government Association (LGA) has warned.

The review would anyway be a failure unless its conclusions were accompanied by increased resources, it added.

In a response to the review, due to be approved today by its executive, the LGA pointed out that the current spending review period and four-year settlement offer both expire from April 2020, after which the government intends to implement the results of the fair funding review and greater business rates retention.

The LGA’s response said: “The financial uncertainty facing local authorities makes financial planning meaningless without some guidance from government on what could be expected.

“We continue to call for the government to provide exemplifications of the impact of the review, and details of the transition mechanism - in particular in the 2020-22 period - as soon as possible.”

The LGA said there is a consensus among local authorities that the review should “build a simpler, more transparent system of assessing relative needs and resources”.

But it said: “Ultimately, the review will not be successful and lead to a sustainable outcome if it is not introduced alongside additional resources.

“We estimate that councils face a funding gap of over £5bn by the end of the decade, on top of a £1.3bn pressure to stabilise the adult social care provider market today.”

The LGA condemned the system of distributing funding as “no longer fit for purpose” and said business rates retention and calculations of reductions in the four-year settlement “added further layers of opacity” to an already excessively complex system.

“It is positive that the government is attempting to reduce the number of cost drivers and formulae used in the relative needs assessment,” the response said. “It is important that complexity is only added where it is unavoidable and where it has a material positive impact on fairness.

“However, the right number of formulae and cost drivers must ultimately be driven by evidence or the outcome will not be seen as ‘fair’.”

Earlier this week, local government minister Rishi Sunak said the fair funding review was an “enormous opportunity” to simplify and “improve accuracy” in the process.

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