Healey confirms fair and affordable local government funding increase

Local Government Minister John Healey today confirmed a 4.2 per cent funding increase for English councils next year - describing this £2.96bn rise as a fair and affordable settlement for councils to continue to support their communities in these tough economic times.

Mr Healey said that this year saw the second lowest increase in average council tax ever, at 3.9 per cent, and he expects this trend to continue with the average council tax rise substantially below 5 per cent. He added that Government will not hesitate to take capping action against excessive increases if that proves necessary.

Local authorities will receive £73.1bn in 2009-10 and £76.4bn in 2010-11 - increases of 4.2 per cent and 4.4 per cent. This means that following a decade of above inflation grant increases local government is now receiving an extra £8.9bn through this current three year settlement.

This is the second year of the first ever three year funding settlement. Along with billions of pounds moved into budgets with no spending strings attached and a radically slimmed down performance framework councils have welcomed this increased certainty, equity and flexibility to budget and plan ahead, making their own decisions about spending priorities - particularly important in these tough economic times.

As part of this Government also today announced the Supporting People Programme funding of £1.66bn will continue to be paid as a named grant in 2009-10 but will be unringfenced. This is the largest single grant to councils to help millions of people live independently in their homes and means councils can spend this money as they see fit while continuing to help some of the most vulnerable people in their communities.

Local government is expected to make the same 3% annual efficiency improvements as the rest of the public sector. Delivering this would mean councils have an extra £4.9bn to spend over three years on improving services or cutting council tax pressures - worth almost £90 off the average band D council tax bill each year. Mr Healey today published figures showing that councils expect to make new efficiency savings of just over £1bn in 2008-09 - similar to what was achieved in the past. But he called for councils to go further and find more than £1.5bn new savings every year.

In a move to ensure the public know how their council is becoming more efficient the Minister announced that this information will be included on council tax bills next year.

Many local authorities were among those affected by the failure of Icelandic banks in October. The Government - with the Local Government Association - acted urgently to ensure no local authority faced serious short-term difficulty as a result and has also taken action to help local authorities and other creditors recover their money.

However, given the high level of uncertainty about how much money they will recover as they prepare their budgets so soon after these events, Mr Healey today announced an exceptional practical measure so that authorities will not need to make provision in their budgets for 2009-10 for any possible loss on these investments. This will give them time to adjust their medium term financial plans and be clearer about recovering their money before making decisions which affect their budgets or council tax.

John Healey said:

"These are tough economic times when every family, business and  organisation has to tighten their belts. We introduced three year funding  exactly so councils can plan ahead, and make the right long terms decisions  for their communities to ride out difficult periods like this. The funding  increases I am confirming today are tight, but they are fair and affordable and  will mean councils can continue to deliver quality services and support their  communities during these tough times.

"Helping hard-working families is more important than ever. So keeping  council tax under control is a top priority for Government. This year saw the  average council tax rise by 3.9% - the lowest increase for 14 years and the  second lowest ever. I expect this trend to continue and will not hesitate to use  capping powers as necessary to protect taxpayers from excessive increases  as I did this year.

"Better value for money is rightly what the public expects of both local and  national government. At just over £1bn for 2008-09 it is similar to what  councils have achieved in the past but is not good enough now. We need to  see councils find more than £1.5bn new savings every year.

"Councils should be doing this, not because Ministers say so. But because  council tax payers and service users rightly expect them to. So to ensure that  local residents have easy information about their council's efficiency  performance and to encourage them to challenge their council to do better this  will be included on their council tax bills next year."

As announced last year, to provide stability to all councils and ensure no one receives less than in previous years the grant floors will be continued. The grant floors will be:

• for authorities with responsibilities for education and social services, 1.75 per cent in 2009-10 and 1.5 per cent in 2010-11
• for police authorities, the floors will be 2.5 per cent in both years
• for fire and rescue authorities, and for shire district councils, the floors will be 0.5 per cent in both years.

Mr Healey also said that the nine new unitary authorities that will be established next year must deliver affordable council tax and their promised savings once they are up and running of over £100m a year. He has today laid before Parliament Regulations that enable the new councils to set their budgets, calculate their council tax and their contributions to the non-domestic rating pool, and to issue bills. These regulations also allow the councils to equalise their council tax over a period of more than one year which means they can introduce changes more gradually over a period of up to the fifth anniversary of the reorganisation.

John Healey said:

"I am confident that on 1 April we will see nine new councils which can and will  deliver improved services, greater efficiency, more empowered communities  and stronger local leadership.

"In the coming months I expect to see these new unitary councils deliver the  savings once they are up and running of over £100m a year which underpin  the proposals that were approved by Parliament earlier this year. But I also  expect to see continued quality and efficient local services and affordable  council tax across each area from the outset - the same as every council in  England. Average council tax increases should be substantially below 5 per  cent and I will use capping powers to protect local tax payers in these areas  and elsewhere if this is not the case."

Notes

1. Full details of today's Local Government Finance settlement can be found at:  www.local.communities.gov.uk/finance/0910/grant.htm.

2. Figures on the new efficiency savings councils expect to make during 2008-09  can be found at: www.communities.gov.uk/localgovernment/efficiencybetter/deliveringefficiency/.

3. The Local Government (Structural Changes) (Finance) Regulations were laid  before Parliament on 26 November 2008 and, subject to Parliamentary  approval, are expected to come into force on 24 December 2008.

4. These Regulations make the transitional arrangements necessary to smoothly  implement the nine new unitary councils being created for Bedford Borough,  Central Bedfordshire, Cheshire East, Cheshire West & Chester, Cornwall,  County Durham, Northumberland, Shropshire and Wiltshire from 1 April 2009.

They enable the councils that are preparing for reorganisation on 1 April 2009  to set their budgets and calculate their council tax and their contributions to the  non domestic rating pool for 2009-10, and to issue bills for that first year.

5. The Regulations also provide a procedure which the preparing and shadow  councils in the restructuring areas may elect to use, to equalise council tax  more equitably over a period of time up to the fifth anniversary of the  reorganisation. It will be for each authority in considering its budget and  council tax calculations to decide whether or not to adopt these procedures.

6. After the reorganisation date, the new unitary councils will have the powers  necessary to undertake any end year finance functions relating to their  predecessor councils. The Regulations will also ensure continuity by providing  that anything done under Part 3 of the 1988 Local Government Finance Act  and Part 1 of the 1992 Local Government Finance Act before the  reorganisation date by or in relation to a predecessor district will be treated as  if it had been done by or in relation to the new unitary council. This covers a  wide range of matters, but importantly ensures that billing and enforcement  activity undertaken by a predecessor authority can be continued by the new  council.