Michael Gove – 2022 Statement on Local Government Financing

The statement made by Michael Gove, the Secretary of State for Levelling Up, in the House of Commons on 7 February 2022.

Today, I am laying before the House “The Local Government Finance Report (England) 2022 to 2023” and “The Referendums Relating to Council Tax Increases (Principles) (England) Report 2022/23”, which together form the local government finance settlement for local authorities across England for 2022-23.

Having considered representations made by stakeholders across the country on the provisional settlement announced on 16 December, I am pleased to put before the House a settlement that focuses on stability and certainty. Indeed, no council will see a reduction in core spending power in cash terms for 2022-23 compared to 2021-22. The consultation received 148 representations from organisations, individuals and businesses, which have been diligently considered before finalising the settlement.

The settlement I have announced today:

Makes available an additional £3.7 billion for councils, an increase in funding for councils of over 4.5% in real terms for 2022-23. It will ensure councils have the resources they need to continue delivering key services for their communities. Overall, this means up to £54.1 billion of funding will be available for core services;

Provides a new, one-off grant to support all services delivered by councils worth £822 million;

Makes available over £1 billion of additional funding specifically for social care; and

Protects hard-working taxpayers from unfair hikes in rates, with a 2% core threshold and additional flexibilities for certain authorities, including 1% for councils responsible for adult social care services.

2022/23 Services grant

Over the spending review period, local government will have access to around £1.6 billion in additional grant per year for the next three years. This includes funding for supporting families and cyber resilience, which will be distributed outside of this settlement.

I intend to proceed with the creation of a one-off 2022-23 services grant worth £822 million, distributed using the existing settlement funding assessment. This funding will be excluded from any proposed baseline for transitional support in future years.

Adults and children’s social care

I recognise that social care, for most councils, continues to be a key priority and therefore an area that incurs increased and sustained cost pressures. This Government remain committed to supporting local government in providing a good quality of care to the most vulnerable.

This is why I intend to make available an additional £1 billion for social care in 2022-23. This includes putting £636 million more into the social care grant, which includes funding for equalisation against the 1% adult social care precept. The Government are committed to allocating funding in line with our assessment of where relative need is, and that is exactly what equalisation does. We are also providing a £63 million inflationary uplift to the improved Better Care Fund, which supports integrated working with the NHS.

This, alongside deferred adult social care precept flexibilities of up to 3% from last year’s settlement, forms a package of additional resource, specifically for social care, potentially worth over £1 billion.

On top of this funding, £162 million in adult social care reform funding will be allocated in 2022-23 to support local authorities as they prepare their markets for adult social care reform and to help move towards paying a fairer cost of care.

Council tax

This Government recognise the importance of high-quality local services and believe in empowering local decision makers to shape thriving communities. This includes ensuring they have the flexibility to generate their own income through council tax, while protecting residents from excessive increases.

This settlement means: a core council tax referendum principle of up to 2%; an adult social care precept of 1% for all authorities responsible for ASC; a principle of up to 2% or £5 for shire district councils, whichever is higher; a referendum principle of £10 for police and crime commissioners; and a £5 referendum principle for the eight lowest-charging fire and rescue authorities. This settlement proposes no other council tax referendum principles for mayoral combined authorities or town and parish councils.

The Mayor of London has requested flexibility to levy an additional £20 on band D to the Greater London Authority precept to provide extra funding for Transport for London. The Government have expressed ongoing concern about the management of TfL by this Mayor, and it is disappointing that London taxpayers are having to foot the bill for the GLA’s poor governance and decision making. While the Government will not oppose this request, any decision to increase the precept is solely one for the Mayor, who should take into account the pressures that Londoners are currently facing on living costs and his decision to raise council tax by 9.5% last year.

The Government’s manifesto commits to continuing to protect local taxpayers from excessive council tax increases, and it is for the House of Commons to set an annual threshold at which a council tax referendum is triggered. This is an additional local democratic check and balance to avoid a repeat of what was seen under the last Labour Government when council tax more than doubled.

This package of referendum principles strikes a fair balance. The council tax referendum provisions are not a cap, and nor do they force councils to set taxes at the threshold level.

Councillors, mayors, police and crime commissioners, and local councils will rightly want to consider the financial needs of local residents at this challenging point in time, alongside the public’s support for action on keeping our streets safe and providing key services.

Last week, the Government also confirmed a £150 non-repayable council tax rebate to households in England in bands A to D to help with rising costs. The rebate to bills will be made directly by local authorities to households from April. Local authorities will also have a share of the £144 million discretionary funding that can be used to target additional support at those most in need. Local authorities are best placed to do this, which is why the Government have given this flexibility.

Stability of funding

This is a settlement that is designed to provide stability to the sector by rolling over much of last year’s settlement. This includes:

Increasing the revenue support grant in line with inflation, which means an increase of £70 million;

Rolling over the current approach to the new homes bonus, worth £556 million;

Rolling over the current approach to the rural services grant, worth £85 million;

Maintaining the lower tier services grant, at £111 million, with an updated funding floor; and

Continuing with the 100% retention authorities in the five devolution deal areas and 67% for Greater London overall.

Looking ahead, the Government are committed to ensuring that funding allocations for councils are based on an up-to-date assessment of their needs and resources. My officials and I will work closely with local partners and take stock of the challenges and opportunities they face before consulting on any potential funding reform.

Finally, in recognition of the unique circumstances facing the Isle of Wight Council and its physical separation from the mainland, we are providing an additional £1 million for 2022-23.

Conclusion

This settlement is one that makes available an additional £3.7 billion to councils. In total, core spending power is expected to rise from £50.4 billion in 2021-22 to up to £54.1 billion in 2022-23, which will enable local government to continue providing key services to their local residents.

Councils are the frontline of public services within local communities and are the first port of call for so many people, from delivering critical social care services at every stage of people’s lives, to making sure we have efficient and effective waste services in place. This Government recognise the vital role they play in our society. This is a settlement that recognises that role.