Provisional Local Government Finance Settlement 2015/16

Transcription

1 Lee Geraghty Deputy Director T Provisional Local Government Finance Settlement 2015/16 18 December 2014 FINANCE WITH VISION LG Futures Ltd., Marlowe House, Watling Street, Hockliffe, Leighton Buzzard LU7 9LS T Incorporated in England and Wales under registration number: VAT registration number:

2 Contents 1. Introduction Local Government Funding 2015/ The Provisional Settlement 2015/16 Your Authority Council Tax Next Steps... 9 Appendix A: Spending Power Calculations Separate Excel Workbook: Appendix B: Local Authority Specific Tables FINANCE WITH VISION 2

3 1. Introduction Purpose of this Note 1.1 On 18 December 2014, the Local Government Minister, Kris Hopkins MP, made a written statement on the provisional local government finance settlement 2015/16. This briefing note highlights key issues of note, and comparative information, for local authorities. 1.2 Key issues emerging from today s announcement are as follows: Local authorities freezing or lowering Council Tax level in 2015/16 will receive a Council Tax Freeze Grant equivalent to a 1% increase in Council Tax. Local authorities increasing Council Tax by 2% or above will be required to hold a local referendum. This applies to local authorities, fire authorities and police authorities. Council Tax Freeze Grant for 2014/15 is now included within the Settlement Funding Assessment for 2015/16. Rural funding has increased to 15.5m (previously 11.5m). This funding is now all within Revenue Support Grant (RSG) previously, 9.5m was in RSG and 2.0m was paid as Rural Services Delivery Grant. A deduction of 23.4m has been made from RSG to fund the Improvement and Development Agency. The 9.4m in Efficiency Support Grant payments for 2014/15 will be rolled into the Settlement Funding Assessment for 2015/16. Revenue Support Grant was identified as including 129.6m for Local Welfare Provision. It is important to note that this funding is not new funding. The DCLG have decided to split out an element of RSG to reflect what it believes should reflect Local Welfare Provision. However, this amount was previously paid as a Specific Grant in 2014/15, with no funding added to RSG for 2015/16. The loss in funding as a result of the 2% cap on the 2015/16 Business Rates Multiplier (announced at Autumn Statement 2014) will be refunded to local authorities through a S31 grant payment (in the same way as the 2014/15 2% cap). Spending Power 1.3 The Minister announced that local authorities will face an overall reduction in spending power of 1.8% (2.1% including the GLA); and that no local authority would experience a decrease of more than 6.4%. The main components of the Spending power figure are: Council Tax Requirement 42% Settlement Funding Assessment 40% Public Health Grant 6% Better Care Fund 7% Appendix A includes DCLG s summary of the national spending power figures for 2015/16. FINANCE WITH VISION 3

4 2. Local Government Funding 2015/16 Background 2.1. The 2015/16 provisional finance settlement represents the third year in which the Business Rates Retention (BRR) scheme is the principal form of local government funding. As in the previous two years, the provisional settlement provides authorities with a combination of provisional grant allocations and their baseline figures within the BRR scheme The provisional figures are expected to be confirmed in late January/early February 2015 (within the final settlement announcement) In 2013/14, the BRR introduced a number of new terms and principles into local government funding. In summary: Each local authority has a Settlement Funding Assessment this is split between resources received through Revenue Support Grant (RSG) and a Business Rates Retention (Baseline Need) amount. It is the Baseline Need amount that is funded through the Business Rates Retention scheme, whilst the RSG amount is fixed. Each authority also has an NDR Baseline amount this is the level of business rates authorities are assumed to be able to collect. All factors being equal, if local authorities collect business rates in line with their NDR Baseline, the resources received should be comparable with the Baseline Need amount. However, the assumed amount may be higher or lower than the actual amount, thereby causing authorities to gain or lose. A key determinant for local authority funding is therefore the actual business rates collected i.e. it is this figure that will determine if authorities receive funding comparable to the Baseline Need amount (and therefore the SFA), or a higher/lower amount. Local authorities therefore need to factor in local business rates income forecasts, alongside the provisional settlement figures, in order to estimate local resource levels for 2015/16 and beyond. There is no cap on the amount of resources that an authority can receive through the scheme. However, the scheme includes a levy on additional receipts due to NDR growth. As in previous years, there is a proportional levy ratio of 1:1 i.e. for every 1% increase in business rates base, an authority would see no more than a corresponding 1% increase in income, as measured against its Baseline Need, with a maximum levy rate of 50%. FINANCE WITH VISION 4

5 National Control Totals 2.4. Table 2.1 below shows the amounts announced for 2015/16 and the comparable figures for 2014/15. The table is based on LG Futures initial interpretation of today s announcements and reflects: The decision to include 2014/15 Council Tax Freeze Grant of 142m into RSG (from 2015/16). The inclusion of 2m of the 2014/15 Rural Services Delivery Grant into the SFA figure. A shift of 50m from the New Homes Bonus Top-Slice to RSG (this would have been refunded to local authorities anyway by the same amount through the New Homes Bonus Adjustment Grant). The 2% cap on the increase to the Business Rates Multiplier (announced by the Chancellor in Autumn Statement 2014). This has led to a switch in funding between the element funded by Business Rates Retention and S31 grant of 43.1m. Table 2.1 National Control Totals Element 2014/ /16 ( m) ( m) Business Rates Retention 11,111 11,323 Revenue Support Grant 12,675 9,435 Settlement Funding Assessment 23,786 20,759 Plus: S31 Grant (2% RPI cap) 2014/ S31 Grant (2% RPI cap) 2015/16 47 New Homes Bonus plus Refund 950 1, /15 Council Tax Freeze Grant 142 Rural Areas Funding 2 0 Local Welfare Provision Efficiency Support Grant 9.4 Safety Net / Capitalisation Total Funding 25,305 22,174 Total Funding % change -12.4% FINANCE WITH VISION 5

6 2.5. The table shows a reduction in total funding of 12.4% in 2015/16 in funding previously distributed through Formula Grant (prior to 2013/14) and specific grants rolled into SFA. The 12.4% deduction is significantly higher than the reduction in Spending Power of 1.8% quoted by the Minister (and shown in Appendix A). This is because the funding streams above exclude projected Council Tax income, the Better Care Fund and Public Health Grant, all of which are shown to be increasing for 2015/ Further information relating to specific aspects of the funding system is set out below. Settlement Funding Assessment 2.7. Table 2.2 provides a breakdown of Formula Funding and the Specific Grants included in the adjusted SFA figure for 2014/15 and the values for 2015/16. Table 2.2 Breakdown of the National SFA Adjusted 2015/ /15 m Upper-tier Funding 14,240 11,796 Lower-tier Funding 3,632 3,035 Fire & Rescue Funding 1,141 1, Council Tax Freeze Compensation Early Intervention Funding 1,576 1,436 GLA General Funding GLA Transport Funding London Bus Services Operators Grant Homelessness Prevention Funding Lead Local Flood Authority Funding Learning Disability and Health Reform Funding 1,426 1,421 Rural Services Delivery Funding Council Tax Freeze Compensation Returned Holdback Council Tax Freeze Compensation Efficiency Support Grant 9 9 Carbon Reduction Credits Energy Efficiency Scheme adj 0 (6) Local Welfare Provision Settlement Funding Assessment 24,112 20,759 Safety Net 2.8. There is a Safety Net within the BRR system. This is triggered if an authority sees its income (from the business rates element of funding) in any year decline by more than a set percentage below its baseline funding level. The intention is that the baseline will m FINANCE WITH VISION 6

7 increase by RPI each year, so that the level of protection offered by the safety net remains constant over time As in previous years, the 2015/16 safety net threshold is -7.5% below Baseline Need The Safety Net is financed through a combination of levy amounts collected in 2015/16 and a top-slice of RSG. The top-slice of RSG in 2015/16 is 50m. New Homes Bonus The New Homes Bonus top-slice from RSG for 2015/16 was previously announced at 1bn, an increase of 300m from 2014/15. This amount has now reduced to 950m. This will reduce the funding distributed through the New Homes Bonus Adjustment Grant by 50m and increase the Revenue Support Grant by 50m. The amount of funding authorities will receive from this change remains the same. Pooling The DCLG have provided key information for pooling groups within a spreadsheet; this can be accessed by clicking here. There are 28 proposed pools that cover 196 local authorities. Prospective pools now have 28 days to decide if the pool is to go ahead in 2015/16, or if the pool is to be dissolved. FINANCE WITH VISION 7

8 3. The Provisional Settlement 2015/16 Your Authority 3.1. The provisional settlement figures for your authority are shown in Appendix B. An explanation as to what each of the tables show within Appendix B is set out below. Settlement Funding Assessment 3.2. The government has announced the SFA figure for your authority within the provisional settlement. This figure is based upon 2014/15 funding levels, adjusted for the reduction in resources between 2014/15 and 2015/ The SFA amounts for your authority and comparative figures are shown as follows: Appendix B Table 1 and Figure 1 show your authority s provisional SFA figures for 2015/16 against the adjusted 2014/15 figure. Appendix B Table 1a shows how the 2014/15 adjusted SFA figure for your authority was calculated. This change was due to the inclusion of 2014/15 Council Tax Freeze Grant ( 142m), Efficiency Support Grant ( 9.4m) and the removal of 6.3m due to Carbon Reduction Credits. Appendix B Table 2 and Figure 2 compare your authority s change in SFA between 2014/15 and 2015/16 against comparator groups. Business Rates Retention 3.4. The key figures for your authority in relation to Business Rates Retention are shown as follows: Appendix B Table 3: The determination of your authority s top-up/tariff amount, its NDR Baseline and levy rate. Appendix B Table 4: The Safety Net Threshold for your authority and the percentage reduction in NDR income that would be required in order for your authority to reach the Safety Net (based upon current NDR income at NDR Baseline levels) Due to the variable nature of the BRR element of local authority funding, the provisional settlement no longer provides the absolute funding level for authorities. Similarly, the government s NDR Baseline for your authority is only based on an adjusted average income figure, and therefore may not be representative of your NDR Baseline. In order to illustrate the potential loss/gain in income that Business Rates could have, relative to your Settlement Funding Assessment, a sensitivity analysis is shown in Appendix B Table 5 and Figure 3. FINANCE WITH VISION 8

9 4. Council Tax Council Tax Freeze Grant 4.1. The Minister announced there will be a Council Tax Freeze Grant equivalent to a 1% increase in council tax to authorities that freeze or lower their council tax levels in 2015/16. The Minister confirmed that the freeze grant and a referendum limit applies to all local authorities, including the Greater London Authority, fire authorities and police and crime commissioners. Referendum limit 4.2. For authorities wishing to increase council tax by 2% or more, a local referendum will be required for 2015/16. Parishes 4.3. Parish councils have not been subject to the referendum limit previously and are not for 2015/16. However, the Minister welcomed views on whether the highest spending parishes and those that have been highlighted in a Public Interest Report should be subject to the same referendum limit. FINANCE WITH VISION 9

10 5. Next Steps Responding to the Provisional Settlement The consultation document contains seven questions, these being: Question 1: Do you agree with the Government s proposal that local welfare provision funding of 129.6m should be identified within the settlement by creating a new element distributed in line with local welfare provision funding in ? Question 2: Do you agree with the Government s proposal that the funding for the Improvement and Development Agency for Local Government for services to local government should be 23.4 million in ? Question 3: Do you agree with the Government s proposal to reduce the New Homes Bonus holdback from 1bn to 950m? Question 4 Do you agree with the Government s proposal to increase the rural funding element from 11.5m, as previously proposed, to 15.5m? Question 5: Do you agree with the Government s proposal to reduce the fire funding element of Revenue Support Grant for each fire and rescue authority, by an amount equal to 0.24% of the total pensionable pay for that authority? Question 6: Do you agree with the Government s proposal to compensate local authorities for the cap on the multiplier in , calculated on the same basis as in ? Question 7: Do you have any comments on the impact of the settlement on persons who share a protected characteristic, and on the draft Equality Statement? 5.1. The deadline for written responses to the provisional settlement 2015/16 is 5pm on Thursday 15 January Responses can be: ed to: settlement.consult@communities.gsi.gov.uk Posted to: Shafi Khan Department for Communities and Local Government Fry Building 2 Marsham Street London SW1P 4DF Enquires should be made to: Shafi.Khan@communities.gsi.gov.uk FINANCE WITH VISION 10

11 Tel: LG Futures Support 5.2. LG Futures is also able to Provide support to local authorities to analyse the implications of the settlement locally; Provide advice regarding the implications of the Business Rates Retention Scheme; Support local authorities in responding to the consultation and putting forward their case If you have any queries about this note or for further information about our support, please contact Lee Geraghty at or by telephoning FINANCE WITH VISION 11

12 Appendix A: Spending Power Calculations Taken from PROVISIONAL SPENDING POWER England except GLA Spending Power Components adjusted Council Tax Requirement excluding parish precepts m 20, , Settlement Funding Assessment m 22, , SFA: Adjustment to reflect Section 31 grants for business rates initiatives m minus Council Tax Support Funding to Parishes m Efficiency Support Grant m 2.29 Commons Registration Authorities m Inshore Fisheries Conservation Authorities m Lead Local Flood Authorities m Community Right to Challenge m 3.00 Community Right to Bid m 2.56 Fire Revenue Grant (FireLink and New Dimension elements) m Council Tax Freeze Grant m New Homes Bonus m , New Homes Bonus: returned funding m Council Tax Support New Burdens Funding m Local Council Tax Support and Housing Benefit Admin Subsidy m Social Housing Fraud m 4.60 City of London Offset m GLA Transport Revenue Grant m Department of Health Revenue grant m Public Health Grant (Ring-fenced) m 2, , Adult Social Care New Burdens m Better Care Fund m 1, , Provisional Revenue Spending Power including Better Care Fund m 49, , Change in Provisional Revenue Spending Power m Change in Provisional Revenue Spending Power % Footnotes 1 The council tax requirement figures for have been estimated by assuming the historic growth rate in local authority tax bases continues and that there are no increases in Council Tax levels. 2 In line with normal practice, SFA for has been adjusted to reflect policy changes, to allow year-on-year comparisons. This includes for example Council Tax Freeze Grant, which was rolled into the settlement in , and the move from funding Local Welfare via a DWP grant to within the settlement in Estimated value of Section 31 grants to compensate local authorities for the cost of capping the business rates multiplier in and announced at Autumn Statement Council tax support funding for parishes, this funding is assumed to be constant at the level estimated in FINANCE WITH VISION 12

13 5 Indicative Freeze Grant has been estimated by assuming historic growth rate in local authority tax bases continues and that there is 100% take up of a 1% grant. 6 These are provisional allocations, final allocations will be confirmed by the Final Settlement. In London, boroughs will pool a proportion of their Bonus allocation to the London Enterprise Panel, the local enterprise partnership for London. Pooled funds will be spent in borough areas in support of London Growth Deal priorities. 7 The Local Council Tax Support element of these calculations are provisional. Final figures will be confirmed at the Final Settlement. The Housing Benefit element of these calculations for reflects the allocations after the funding related to Single Fraud Investigation Service has been recycled. As this reduction in funding is due to a reduction in duties the figures have been adjusted by the same amount. 8 Department for Health Revenue grant in includes the Local Reform and Community Voices grant (comprising allocations for the Independent Complaints Advocacy Service, additional allocations for Deprivation of Liberty Safeguards, and additional allocations for Local Healthwatch) and the Social Care in Prisons grant. In the LRCV grant also included allocations for Independent Mental Health Advocacy and for veterans Guaranteed Income Payments; these are in the Better Care Fund for The recent reforms to Adult Social Care introduce a number of new burdens to local authorities. To be able to compare funding in to the cost of these new burdens has also been included in the column. The allocations for early assessments for the cap and for deferred payment agreements have been allocated using new methodologies developed by the Review of Adult Social Care Relative Needs Formulae, as consulted on in Summer The Better Care Fund is a pooled budget to help local places improve the integration of health and care services. It is designed to enable local places to integrate health and care services that are currently commissioned by the NHS and local authorities. The revenue funding of 3.46bn is from within NHS budgets and will be pooled with social care capital grants. The NHS and local authorities must agree locally through Health and Wellbeing Boards how the funding will be spent across health and care services. The minimum contribution is worth 3.8bn. Published plans show that, with additional contributions from local authorities and Clinical Commissioning Groups, the total value of locally pooled BCF funding will be 5.2bn FINANCE WITH VISION 13