LGA responds to the Local Government Finance Settlement

Media release - 15 December 2016

Responding to today's Local Government Finance Settlement, Lord Porter, Chairman of the Local Government Association, said:

"By bringing forward council tax raising powers, the Government has recognised the LGA's call for the urgent need to try and help councils tackle some of the immediate social care pressures they face. Measures announced in today's settlement will help in part but fall well short of what is needed to fully protect the services which care for elderly and vulnerable people today and in the future.

"Councils, the NHS, charities and care providers have been clear both before and since the Autumn Statement about the need for an urgent injection of genuinely new additional government funding to protect services caring for elderly and disabled people. Given this unified call for action, it is hugely disappointing that today's settlement has failed to find any of this new money to tackle the growing crisis in social care.

"Bringing forward council tax raising powers will help some areas in the short-term but extra council tax income will not bring in anywhere near enough money to alleviate the pressure on social care both now and in the future. Increasing the precept raises different amounts of money for social care in different parts of the country and will add an extra financial burden on already struggling households.

"Social care faces a funding gap of at least £2.6 billion by 2020. Council tax rises will not be enough to prevent the need for continued cutbacks to social care services and very many other valued local services. Already planned further £2.2 billion cuts to Revenue Support Grant to councils next year will far exceed the benefit of any extra council tax income.

"Today's announcement of funding for social care from New Homes Bonus reforms is not new money but a redistribution of funding already promised to councils. It is wrong to present this as a solution, given the scale of the funding crisis. This is money which was taken from councils in the first place and this move will see money taken away from councils which is designed to incentivise new homes at a time when the Government has made boosting housebuilding a clear priority.

"The Government must recognise why social care matters and treat it as a national priority. There needs to be an urgent and fundamental review of social care and health before next year's spring Budget. Local government leaders, who are responsible for social care in their local community, must be part of that review. This is imperative to get a long-term, sustainable solution to the social care crisis that the most vulnerable people in our society deserve.

"It also needs to include action to properly fund social care with genuinely new government money. This is now the only way to protect the services caring for our elderly and disabled people, which are at breaking point and ensure they can enjoy dignified, healthy and independent lives, live in their own community and stay out of hospital for longer.

"Next year will continue to be hugely challenging for all councils, who we estimate face an overall funding gap of £5.8 billion by 2020. Further government funding cuts will result in local authorities up and down the country having to make significant reductions to the local services communities rely on, including filling potholes, collecting waste, maintaining our parks and green spaces and running children's centres, leisure centres and libraries, to plug growing funding gaps."

Notes to editors

Analysis of today's Local Government Finance Settlement by the Local Government Association, which represents more than 370 councils in England and Wales, reveals:

  • Councils will receive £2.2 billion (30.6 per cent) less Revenue Support Grant to run local services in 2017/18 than last year.
  • All councils will be able to raise council tax by up to 1.99 per cent in 2017/18 to fund local services without the need for a referendum - most district councils can increase by £5 per year at Band D level. 
  • England's 152 social care authorities will be able to increase council tax by up to a further 3 per cent in total in 2017/18. Income from this extra precept must be spent on social care. The total social care precept increase allowed across the next three years remains unchanged at 6 per cent.
  • This means the maximum social care authorities can increase overall council tax in 2017/18 is 4.99 per cent – this is an increase of 1 per cent above already promised powers. This 1 per cent increase above the previously announced social care precept limit next year will raise £208 million.
  • In 2017/18, social care authorities will receive the first payment of £105 million from the additional funding for social care in the improved Better Care Fund announced in the 2015 Spending Review that will rise to £1.5 billion by 2019/20.
  • The Government has confirmed New Homes Bonus payments to councils will be reduced from six years to five years in 2017/18, and will introduce a 0.4 per cent baseline so that local authorities will need to achieve growth of greater than 0.4 per cent before they receive any New Homes Bonus funding. This is expected to reduce the income of councils in receipt of the New Homes Bonus by £241 million next year in comparison to indicative figures released in February 2016. The Government has announced this will be used to support councils providing social care as a one-off measure in 2017/18. 

The LGA said the money raised by the councils which used the 2 per cent council tax precept this year will not even cover the cost of introducing the National Living Wage.

It warns the next few years will continue to be extremely challenging for councils who face an overall £5.8 billion funding gap by 2020.

16 December 2016


Greg Burns
0207 664 3333

LGA's On the Day Briefing

Read the Local Government Finance Settlement briefing and learn what it means for local government.