SIGOMA warns local government finance settlement undermining 'levelling up'
Posted on January 16, 2024
Following the funding settlement announced last month, SIGOMA has done some analysis about the increasing reliance placed on using Council Tax (and business rates growth) to fund essential services.
This approach is the direct movement of funding away from the most deprived areas to the least deprived areas. The most deprived authorities have the need for greater levels of funding, but the funding guarantee works directly against this.
Please see some key points below that detail SIGOMA’s response to the Government’s settlement proposal alongside a quote from the Chair of SIGOMA:
Cllr Sir Stephen Houghton, SIGOMA chair: “The finance settlement for local government failed to provide enough funding to match the demand-led pressures councils are facing. These pressures, following a decade of cuts, have pushed many councils to the brink. The settlement also failed to distribute funding fairly. Over the last 14 years, the method of allocating funding has been moving further and further from a needs basis, resulting in an ever-growing gap between councils in the richest and poorest areas. The provisional settlement cements that trend and severely undermines any notions of ‘levelling up’. The final settlement, expected in early February, must be used to provide additional funding for the most in-need places.”
Read detailed coverage of our analysis in the New Stateman here.
- The settlement announced last month is in line with what was set out for 2024-25 in the 2022 Local Government Finance policy statement, as this fails to recognise the challenges that have emerged in the 12–18-month period since the statement was published, such as workforce and recruitment issues, the broken children’s social care market, and rising demand for children’s and adults social care.
- Disappointingly it was a distributionaly flat settlement, which has failed to direct funding to the most deprived authorities. Where in the past couple of year the most deprived authorities have seen percentage increases of their Core Spending Power higher than the England average, this year the most deprived authorities have seen only a 0.2% increase in their Core Spending Power than the England average. The least 10% deprived authorities have seen an increase in their Core Spending Power 0.1% over the England average.
- Whilst Government has announced that Local Government Core Spending Power has increased by 6.5% on average, they failed to highlight that this increase (around half of it) comes from assumed council tax increases of up to 5%, ultimately leaving no real choice for councils to continue to pass the significant costs of providing services to their local communities. Many of the issues facing councils are in fact national issues and should as addressed by Government as such
- 20 SIGOMA councils, some of the most deprived in England, are below the national average increase in Core Spending Power of 6.5%.
Council Tax Focus
- SIGOMA is concerned with the extent to which increasing reliance is placed on using Council Tax (and business rates growth) to fund essential services.
- We fundamentally disagree with shifting the cost burden of providing essential local services from the central government to local taxpayers, these local services should be properly funded by the central government in the first place.
- This is due to the widely varying profile of Council Tax bands in England, with our councils having a much higher proportion of lower banded housing, meaning that either our average (Band D) tax must be much higher than other parts of the country or that we raise much less from a comparable Band D tax rate.
- The least deprived decile of local authorities is able to raise on average £1742 per dwelling from Council Tax whilst the most deprived decile of local authorities are only able to raise £1015 on average per dwelling.
- A 5% council tax rise raises far more in more affluent areas – in Wokingham, the least deprived local authority, a 5% council tax rise raises £129.97 per dwelling, but in Hull, the 4th most deprived local authority in England a 5% rise raises only £54.70.
- We are concerned by the significant reduction in the Services Grant for 2024-25. A reduction of this size should have been clearly communicated to councils well in advance, as many local authorities will have assumed this grant would have stayed the same or reduced by less than 50% in their budget planning.
- Additionally, the Funding Guarantee has increased by £63 million. However, our analysis shows that no upper-tier local authorities in the most deprived 30% receive funding through the Funding Guarantee. What’s more concerning is that the local authorities in the least deprived 10% receive the most funding per dwelling through this guarantee. This is a direct movement of funding away from the most deprived areas to the least deprived areas. The most deprived authorities have the need for greater levels of funding, but the funding guarantee works against this.
Read coverage of our analysis in the following publications:
- Evening Standard: Councils claim funding settlement benefits wealthier areas
- The Independent: Councils claim funding settlement benefits wealthier areas
- Perspective: Councils claim funding settlement benefits wealthier areas
- The Herald: Councils claim funding settlement benefits wealthier areas
- Local Government Chronicle: ‘Unprecedented’ calls from Tory MPs for PM to find more council funding
- Local Government: Finance settlement ‘undermines levelling up’
- The National: Councils claim funding settlement benefits wealthier areas
- Press Association: Councils claim funding settlement benefits wealthier areas
- Irish News: Councils claim funding settlement benefits wealthier areas