LGC’s essential daily briefing
Today’s top insight: Third of top-tier net losers under homes bonus change
Today’s settlement response #1: Margaret Willcox: Move on social care funding is woefully inadequate
Today’s settlement response #2: Richard Humphries: The government is abdicating its responsibility on social care
Speaking in Parliament yesterday, communities secretary Sajid Javid said the measures announced in the local government finance settlement amounted to a “real, significant increase in spending of £900m”.
The measures he was referring to are a change in the profile of the social care precept, which councils can apply to council tax bills, from 2% a year over three years to 3% a year over two years and changes to the new homes bonus scheme.
“These measures, together with the changes we’ve made to the new homes bonus, will make available almost £900m of additional funding for adult social care over the next two years,” Sajid Javid.
However, senior figures in the sector have been distinctly underwhelmed, branding the changes “short-term” and “robbing Peter to pay Paul”. So who’s right?
The precept changes
Nationally a 3% precept would raise £208m in 2017-18 and £444m in 2018-19, according to the Department for Communities & Local Government. It will not raise any additional cash in 2019-20, the final year of the parliament. However, the compounding effect of higher rises earlier on means that over the remaining three years of the parliament there will be an additional £652m available in council tax than if a 2% precept was applied over three years. LGC analysis suggests this would be an increase of about 1% more in council tax to spend over the period than there would have been under the previous precept plans. The DCLG’s figures are in cash terms rather than real terms and make assumptions about the level of growth in the number of properties eligible for council tax, so the actual figure could be slightly lower.
New homes bonus changes
New homes bonus payments began in 2012-13 and see councils receive a fixed amount for every new home built for six years from completion. It was designed to encourage councils to approve plans for new homes but is widely regarded to have been a fairly weak incentive. Yesterday it was announced the payment period will be reduced from six years to five next year and then four years in 2018-19. In addition, councils will now only receive payment for growth in the number of new homes above 0.4%, also releasing some more cash. The money saved from these changes, £241.1m, will be used for adult social care.
So £241.1m from new homes bonus and £652m from the bolstered social care precept equals £893.1m, close enough to £900m right?
Here comes the but…
It is far from certain that all councils will choose to raise the precept by 3%. Many have already started consulting on budgets for 2017-18 based on a 2% precept and may decide it’s not worth going back to the drawing board for what will be a minimal amount of extra cash that falls far short of the adult social care funding gap in their area.
Alongside the precept, councils can increase council tax by up to 2%; to raise it by anything more they are required to hold a referendum. This raises the prospect of increases in council tax of 5% a year in each of the next two years, which may be a difficult sell politically, especially in those areas which have elections in May 2017 (mainly county councils) or May 2018 (mainly London boroughs).
And another thing…
Claims that the new homes bonus money is additional cash are particularly infuriating for local government as the pot of funding is top-sliced from councils’ main grant from central government in the first place. Department for Communities & Local Government figures suggest about £75m of the £241m fund is being diverted from district councils; as they do not provide social care it could be argued this is new money for social care.
However, the remainder of the fund was already going to councils with social care responsibilities in the form of new homes bonus and as it was unringfenced may already have been spent on adult social care. A comparison of DCLG indicative figures for new homes bonus in 2017-18 with figures published in the settlement this week suggests about a third of top-tier councils will actually lose more in new homes bonus than they will gain from their share of the adult social care fund.
So, is there really £900m additional funding available for adult social care?
Sort of. The key word in the communities secretary’s statement is “available”. For many in local government Mr Javid’s claim that the precept change raises an additional £652m sticks in the throat as it relies on them asking their residents, the hardworking families ministers are so keen to champion, for additional cash.
A more accurate figure might be £727m as this excludes the new homes bonus funding that was already technically available to councils to spend on social care. Taking the new homes bonus and precept changes together, the Institute for Fiscal Studies has calculated there will be an additional £281m in the system specifically for adult social care next year and a further £425m in 2018-19 but £6m less in real terms in 2019-20 - £700m extra in total.
However, what is beyond argument is that the changes announced yesterday do not come close to closing what the Local Government Association estimates is a £2.6bn funding gap in social care over the next three years. We haven’t heard the end of this.