Local Governement Finance

Over the last ten years, councils have needed to adapt to a tough climate of significantly reduced government funding, ageing and differing demographics, and technological advances. Looking back on the previous decade at the end of 2020, it is estimated that local authorities on average have lost 50% of their grant funding from government.

The onset of Coronavirus has exacerbated an already difficult situation for county councils and unitary councils, generating huge financial pressures that are not completely resolved and impacting on existing savings plans. Whilst there has been support for councils during the pandemic, the County Councils Network (CCN) will continue to make the case for extra funding for local authorities to address lost income and legacy costs of the pandemic.

Looking forward, CCN’s report with PricewaterhouseCoopers shows that yearly increases in people needing services and the rising costs of delivering those services means that county authorities will be required to spend an extra £6.4bn a year by 2030 compared to 2020, with care services consuming almost 70% of their total budgets at that point.

The pandemic has also asked questions around the long-term viability of some taxes and funding streams, such as future of the New Homes Bonus and the next stages in the fundamental review of business rates retention for councils. CCN will engage extensively with any proposed reforms to both funding streams.

Before the pandemic hit, CCN had been a vociferous campaigner for the completion of the Fair Funding Review, because the way councils are presently funded is outdated: no longer matching the demand for services and the needs of local authorities. The review has now been delayed until 2022. Whilst this is understandable, CCN will continue to press for its conclusion and implementation during the course of this parliament and for it to deliver a fairer way of funding local authorities.

The two key priorities for CCN this year will be arguing for fairer and sustainable funding; allowing councils to preserve frontline services, invest in local and national priorities and be innovative.

Local Government Finance Key Asks

With councils grappling severe financial pressures due to high inflation and a spike in demand for care and transport services, the government must provide a significant uplift in funding for councils in 2024.

The next government must implement the Fair Funding Review during the course of the next parliament, including a full baseline reset.

It is imperative that any new formula genuinely seeks to rebalance funding between urban and rural councils and creates a more sustainable and equitable system.

New Homes Bonus should be reformed, with a focus on reviewing the role of incentives so they better reward upper-tier councils role in providing infrastructure that enables sustainable housing development.

As part of any review of business rates and further devolution proposals, the next government should fully engage the sector on the future of rates retention and explore other options for fiscal devolution.

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Timelines: County Council Policies
Announcement Date: 01/01/2020