LGC’s commentary on the increasingly likely delay to the implementation of the fair funding review
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The announcement of a Tory leadership contest last Friday has prompted a growing acceptance that the fair funding review will not be implemented next April.
While there is widespread reluctance amongst finance chiefs and senior councillors to wait even longer for reforms to a system it is acknowledged is at best out of date and at worst grossly unfair, the amount of work still required to refine the new formulas and consult on them means all of those LGC has spoken to in the past week have conceded it is likely to be delayed for a year.
The government’s planned spending review also seems unlikely to happen in anything but name, given a new prime minster, and almost certainly a new chancellor, will not even be in place until July, the month it was supposed to launch. We will of course have to have a Budget in the autumn, and spending will no doubt have been reviewed, but it’s hard to believe it will be the comprehensive look at public spending people have been hoping for.
So what does this mean for council funding in 2020-21?
LGC has been told a senior official from the Ministry for Housing, Communities & Local Government has already been taking soundings on what a “rollover” year should look like.
As LGC reported today, the sector has plenty of suggestions, none of which involve a rollover of core spending power alone.
And there is money in the system. As the Special Interest Group of Municipal Authorities points out local government as a whole has retained £1.8bn business rates growth since 2013. Some councils have done better than others out of this – typically districts and inner London boroughs – and it was due to be redistributed under a full reset of the system in 2020-21. Sigoma has called for at least a partial reset to go ahead regardless of the fair funding review and for this funding to be redistributed according to need.
In theory there is no reason why this couldn’t happen, even without the planned funding reforms a reset of the system is definitely due. However, LGC has been told the ministry favours the implementation of fair funding, increased business rates retention and a business rates reset at the same time as a coherent package of reforms that will put the sector on a sustainable footing.
This reluctance to tinker round the edges and introduce even more complexity into the already byzantine system of council funding is understandable - MHCLG is unlikely to want to have to argue about new baseline funding levels for councils next year only to unpick them if and when fair funding is introduced a year later. But that means more money must be found to tide over creaking social care services next year.
There is consensus amongst the sector that the additional £650m for social care announced at last year’s Budget should feature in any rollover – and that this should be confirmed quickly before councils set in train plans for savings that may prove unnecessary. With this week’s BBC Panorama programme showing the stark reality of social care cuts, this argument should not be too hard to win.
Confirmation that this money will rollover should be a priority for the next prime minister, as well as additional funding for children’s services given the Treasury has already acknowledged pressures there. In the absence of a fairer funding system for next year, certainty is the next best thing.
So far none of the ever-growing list of Conservative candidates appears to have shown a great deal of interest in local government, although Rory Stewart did chat to someone at a tran station about social care. Hopefully the many Conservative councillors among the electorate choosing the new party leader will succeed in changing this. And while we may get a new prime minister that does not automatically mean a complete overhaul of the ministerial team at MHCLG. While it seems safe to assume communities secretary and May loyalist James Brokenshire’s days are numbered, Brexit backing local government minster Rishi Sunak, who is reported to be taking a very close interest in developing proposals may not.
All of the above is, of course, based on the very big assumption that we get to next April without a general election and a new party or a new coalition in government.
Certainty remains a way off yet.
Sarah Calkin, deputy editor