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What the 2019-20 local government finance settlement means for councils

The 2019-20 local government finance settlement was announced in December. But while James Brokenshire, Secretary of State for Housing, Communities and Local Government, claims that Core Spending Power will increase from £45.1 billion in 2018-19 to £46.4 billion in 2019-20, observers are concerned that plans beyond 2020 remain unclear.

Short-term funding

The £1.3bn rise in council funding was welcomed by The Local Government Association (LGA). Its chairman, Lord Porter, said measures like the £650m designated to plug front-line funding gaps for services like adult and children’s social care show “the Government is listening to the LGA’s call for desperately-needed investment.”

Other positive measures include the elimination of the £152.9m “negative RSG” (Revenue Support Grant) in 2019-20 using foregone business rates, and the government’s decision not to further increase the threshold for the New Homes Bonus (NHB) next year.

Long-term concerns

Nonetheless, observers and analysts including the Society of Local Authority Chief Executives, CIPFA (Chartered Institute of Public Finance and Accountancy) and London Councils have expressed concerns that this settlement is the final one of a four-year plan—and there has been no clarification regarding what comes next. This is a concern compounded by the £3.2bn shortfall councils face after a decade of consistent funding cuts.

However, one of the central parts of this settlement does have a long-term view: the plan to increase business rates retention to 75% from 2020. The scheme is already being rolled out this year (2018-19), and participating councils across England collectively expect to gain an extra £2.4 billion in business rates growth by the year's end.

Council planning

In the short-to-medium term, councils may wish to turn to individual government schemes for additional funding. Measures such as the £675 million Future High Streets Fund could provide vital funds for regeneration schemes. If successful, these may help stabilise the decline, boosting business rate returns, and reducing non-payment rates.

Given that the government is already planning on boosting business rate retention, councils may also benefit from a greater focus on dealing with unpaid debts. Having systems in place to remind, recoup and recover unpaid bills will ensure that local authorities gain the maximum possible benefits from any changes.

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