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May resignation sparks fears for fair funding in 2020

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Expectation is growing that reforms to local government funding will be delayed due to the “political upheaval” resulting from the Conservative party leadership contest, sparking fresh calls for the government to provide certainty over funding for 2020-21.

There has been long running concern that the government’s focus on Brexit may leave little time for the completion and implementation of the fair funding review by April 2020, with Chartered Institute of Public Finance & Accountancy chief executive Rob Whiteman calling for it to be delayed on 13 May.

However, the prime minister’s announcement last Friday that she will resign, triggering a contest to replace her that is expected to last until mid-July, has prompted a growing acceptance amongst finance chiefs that a delay is now all but inevitable.

Earlier this week Westminster City Council leader Nickie Aiken (Con) said “common sense cries out for a delay to both the fair funding review and the spending review in a period of significant political upheaval”.

The likelihood of a full, multi-year spending review taking place, which was due to be launched before Parliament’s summer recess begins on 20 July, is also much less certain with the change in prime minster likely to trigger a reshuffle resulting in a new chancellor. 

LGC understands senior officials from the Ministry of Housing, Communities & Local Government have asked senior council finance chiefs for their views on what should happen in the event of a one-year settlement. MHCLG would not confirm whether it was making contingency plans but a spokesperson said the ministry would “publish further information once the timing of the spending review is clear”.

“We recognise the spending review’s potential implications for the sector, including the implementation of local government finance reforms,” the ministry added.

Gary Fielding, president of the Society of County Treasurers, told LGC the preference was for the fair funding review to go ahead next year but “it would be politically naive to think it’s likely to, given it’s not going to get the political airtime”.

“It seems likely it’s going to be delayed a year. We are keen to make sure that whoever forms the next government still commits to implementing the fair funding review as soon as possible.”

Mr Fielding said he expected 12 to 24 months of uncertainty and called on the government to confirm as soon as possible whether temporary monies, such as the additional £650m funding for social care announced at the last Budget, would be rolled over.

“They need to do so as soon as possible otherwise people assume that it’s not coming and start to make savings. I think it’s important government realise that to make savings for next year we need to be starting that now, in terms of consulting with the public, consulting with staff.”

Geoff Winterbottom, principal research officer at Special Interest Group of Municipal Authorities, told LGC his members also wanted to see a new formula introduced but recognised it was a “big ask” in the time now available.

He said: “If they’re not able to introduce it in 2020-21, then the £1.8bn of business rates growth that is in the system should be redistributed according to need. They should do at least a partial reset so that growth gets added back in on a needs basis.”

Councils have been able to retain 50% of business rates growth in their areas since 2013, but some councils have benefited more than others. Under the move to allow local government to retain 75% of business rates, due to happen alongside the fair funding review, there is to be a full reset to redistribute this growth between councils.

The District Councils Network had previously called for the introduction of 75% business rates retention to be delayed a year due to the complexity of introducing both changes at the same time. Chair John Fuller (Con) told LGC while the sector did not want to see a delay to the fair funding review there were still “a lot of moving parts” to be agreed upon, including the “thorny issue” of any transition arrangements to soften the blow for councils likely to lose out under the new system.

He said: “There are some very big numbers at play here… With all the macro political changes going on you could understand why government might take the view that a pragmatic delay would be sensible.”

Cllr Fuller, who is leader of South Norfolk DC, said any “rollover” of funding for 2020-21 must include new money for children’s services as well as the “baking in” of additional adult social care funding, continued payment of new homes bonus and compensation for councils technically in receipt of negative revenue support grant.





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