Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to a newer version or another browser.

Your browser appears to have cookies disabled. For the best experience of this website, please enable cookies in your browser

We'll assume we have your consent to use cookies, for example so you won't need to log in each time you visit our site.
Learn more

Finance settlement preview: what to watch out for

  • Comment

LGC’s essential daily briefing.

During the festive season it’s quite common to hear the question: “Has he been?”

The majority, of course, are referring to Father Christmas but it could equally be applied to the communities secretary and whether he has delivered the provisional local government financial settlement.

While no parliamentary time has been set aside this week for Sajid Javid to adopt the role of Saint Nicholas and hand out his ‘gifts’ he could still do it at short notice – it happened last year.

Although being halfway through a multi-year settlement means most councils already know the bulk of what they are going to get, there are still some potential surprises in store.

The baseline housing growth which councils must see in their areas to get new homes bonus could be raised, while LGC previously reported that the Department for Communities & Local Government is also considering “withholding” new homes bonus payments from councils that are “not planning effectively for new homes”. There is a feeling in the sector that with such a focus on housing right now, ministers will follow through with that threat. 

We’re also likely to learn which areas have been successful following a submission of more than 20 bids to become business rates pilots. Some of these pilots stand to be pretty lucrative for the areas involved due to the additional business rates growth they will get to retain but the expectation is the government is only likely to back between four and six new pilots in 2018-19 at the most. 

A lot of eyes will also be on whether the controversial transition grant has been retained or ditched.

The two-year grant was introduced in 2016-17 when ministers changed the methodology on which cuts were applied. It is controversial because previous LGC analysis found that in the first year of the grant more than 70% of £150m was due to go to county councils. Metropolitan authorities were set to receive just 1.6%, or £2.5m, which was split between three councils, of which two were, and still are, Tory controlled: Trafford and Solihull MBCs.

Speaking to LGC this week Geoff Winterbottom, principal research officer at the Special Interest Group of Municipal Authorities, refuted the suggestion that the transition grant is “a no consequence issue” because no council gets any less funding than what it had expected.

“If there is additional funding available then we would want to see that distributed according to need and not bowing down to what we thought was quite a lot of political pressure last time and we would hope we won’t see that again this time,” said Mr Winterbottom.

LGC reported in September that the transition grant could continue for the next two years, having already been in operation since 2016-17. If it does run until the end of the decade, it will be more of a static grant than a transitional one and it would suggest there is a tacit acknowledgement in Whitehall that the total size of the cake is not quite big enough.

That issue is wrapped up into the fair funding review – the consultation of which is expected to accompany the settlement.

Ministers have repeatedly said they are committed to undertaking the review but nothing of note has materialised as yet.

In a presentation to the fair funding review’s technical working group last month, the DCLG’s deputy director Stuart Hoggan outlined how the department is “currently progressing a technical consultation on relative need”.

The slides said DCLG “envisage” the consultation will provide an overview on funding formulas “including potential future approaches”, common and service specific cost drivers, and the “potential statistical methodologies that could be used to ‘weight’ funding formulas and cost drivers”.

If/when the consultation does emerge, expect competing voices within the sector to get louder and louder.

But it will be important for different factions to stop themselves from fighting over the scraps and remain as united as much as they can, not least because the big battles might be taking place on the sidelines.

While a lot of the focus will be on the fair funding review, the DCLG and the Department for Education have already jointly commissioned in-depth research into cost pressures in children’s services. The chair of the Local Government Association’s children and young people board Richard Watts (Lab) revealed last week that there is already a “growing recognition” within DFE about the funding pressures on children’s social care services.

Then there’s the outcome of next summer’s green paper on adult social care to consider. 

Children’s and adults social care, combined, make up about half of all non-schools spend. Whatever the outcome of the fair funding review’s formula fiddling and methodology meddling, it will be the decisions made around the future direction of children’s and adults social care which will have a big impact on how much of the cake is left for everything else.

In the meantime, one thing the sector, and finance directors in particular, will be hoping for is that Mr Javid can deliver the settlement sooner rather than later.

David Paine, chief reporter

  • Comment

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions.

Links may be included in your comments but HTML is not permitted.