Local authorities to get finance settlement on set date

25 Oct 18

Westminster is to end the frustrations of the past and tell local authorities their settlement for the next year on a set date, the government has announced.

The change is to help local authorities deal with “future challenges” including the fair funding review, 2019 Spending Review and business rate retention, the Ministry of Housing, Communities and Local Government has said.

MHCLG minister Rishi Sunak made the announcement on Wednesday, responding to a significant review into local government finance processes by former director general of the Treasury chief Andrew Hudson, released on the same day.

Hudson noted in his report there were no statutory deadlines for central government to process the settlements and they had been getting later in recent years.

“Generally local authorities are frustrated both by the late announcement of the figures, and also by the fact that they often get no notice of when that announcement is coming,” he said in his report.

The review explained: “The provisional settlement date has been later in recent years: since the 2012 announcement for 2013-14, the provisional settlement has been announced between 15 and 19 December, compared to late November or very early December in the 2000s, with the final settlement in the first week of February rather than the last week of January.”

The LGFS for 2018-19 was approved on 6 February this year. See below for a table of previous settlement dates.

The government will now aim for future provisional settlements to be on or around 5 December and the final settlement to be no later than 31 January.

Hudson noted in his review local government finance departments were under increasing pressure, particularly over the past five with the reduction of revenue support grant but ability to retain greater levels of business rate growth.  

“This greater complexity comes at a time when resources have been reduced in MHCLG, in local authorities and in the bodies which represent councils,” the former HM Treasury director general noted. 

The total number of staff in post in the department fell from 1,822 in April 2012 to 1,375 in June 2017, the review stated. The number of staff working on local government finance has dropped from 115 full-time equivalent staff in March 2012 to just under 100 in August 2018.

Local authorities have statutory deadlines for setting their budgets: 1 March for precepting authorities, 11 March for billing authorities, which means proposed budgets need to be considered by a council’s executive and full council during February, the review pointed out.

The lateness of the settlement allowed “less time for scrutiny and less time for local authorities to set budgets,” Hudson said.

“In some cases, councils have even had to set their final budgets for the year based on the provisional settlement. While this is legal, it does not suggest a robust system.”

Sunak said: “We recognise taking a more planned approach towards the provisional local government finance settlement in future will be fundamental to ensuring local authorities are given more certainty, and the time and space to consider their financial positions for the coming year.

“With this in mind we will aim to publish the provisional and final settlements on or around the same dates every year from this December.”

MHCLG confirmed it is working with local government to design reform to business rates retention to make it simpler, as recommended in the review.

Hudson’s review was commissioned by former communities secretary Sajid Javid after a business rates miscalculation saw 27 councils erroneously paid £36m.

Sunak has written an essay on the potential of technology in local authorities for PF Perspectives.

settlement table

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