Local authorities warn of higher council tax and reduced services as Gove confirms provisional 2024-25 finance settlement
Councils in England have warned of continued pressure on their finances after the Levelling Up Secretary, Michael Gove, today (18 December) confirmed a provisional local government finance settlement of more than £64bn for 2024-25.
The total sum represents an increase of 6.5% but this presumes that local authorities in England will increase council tax by the total amount allowed without triggering the requirement to hold a referendum.
According to the Department for Levelling Up, Housing and Communities (DLUHC), every council in England will see at least a 3% increase in Core Spending Power. Those authorities with responsibility for adult social services will be able to raise an additional 2% through an adult social care precept.
DLUHC said a further £1bn would be made available in additional grant funding for social care in 2024-25 compared to 2023-24.
On council tax, the Department added: “It is for councils to determine council tax levels, but they should always be mindful of cost-of-living pressures when making any decisions.”
The provisional finance settlement proposes bespoke council tax referendum principles for Thurrock, Slough and Woking Councils in consideration of the significant financial failure they have suffered and their ongoing need for exceptional financial support. For Thurrock and Slough, a core council tax referendum threshold of 8% is proposed while for Woking a council tax referendum principle of 10% is suggested.
The Government is meanwhile inviting views on proposals to use "financial levers" within future settlements occurring after 2024-25 to stop the practice of ‘four-day weeks’, in light of its row with South Cambridgeshire District Council which is piloting the scheme.
Levelling Up Secretary Michael Gove said: “Councils are the backbone of their communities and carry out tremendous work every day in delivering vital services to the people they serve.
“We recognise they are facing challenges and that is why we have announced a £64bn funding package to ensure they can continue making a difference, including through our combined efforts to level up.”
Minister for Local Government Simon Hoare said: “It is good news for our local government sector that we are presenting an above-inflation increase in funding.
“We are, and will, continue to work alongside councils to ensure quality and reliable services are provided to those who need and use them, while also keeping a weather eye on ensuring value for the taxpayer.”
The consultation on the provisional settlement will be open for four weeks, closing on 15 January 2024. The Government will provide confirmation of the final local government finance settlement once the consultation has closed and all responses have been considered in early 2024.
Further details, including allocations for individual councils and the DLUHC consultation document, can be found on the provisional local government finance settlement page.
Responding to the Secretary of State’s announcement, Cllr Shaun Davies, Chair of the Local Government Association, said: “The funding uplift announced by the Government today assumes that all councils will increase their council tax bills by the maximum allowed in 2024/25. This means councils are again left facing the difficult choice about raising bills to bring in desperately needed funding.
“Today’s settlement does not provide enough funding to meet the severe cost and demand pressures which have left councils of all political colours and types warning of the serious challenges they face to set balanced budgets next year. Councils in England continue to face a funding gap of £4 billion over the next two years as today’s announcement does not change the funding gap facing councils this year and next.”
Cllr Davies continued: “It is therefore unthinkable that Government has not provided desperately needed new funding for local services in 2024/25. Although councils are working hard to reduce costs where possible, this means the local services our communities rely on every day are now exposed to further cuts.
“No council is now immune to the growing risk to their financial sustainability. The Government urgently needs to address the growing financial crisis facing councils and come up with a long-term plan to sufficiently fund local services through multi-year settlements."
Ahead of the provisional finance settlement, an LGA survey of council leaders and chief executives in England suggested that one in five thought it very or fairly likely that their council would need to issue a s114 notice this year or next. Half were meanwhile not confident they would have enough funding to fulfil their legal duties next year (2024/25).
The County Councils Network, (CCN) meanwhile predicted that county authorities would be "bitterly disappointed" by the provisional finance settlement.
Cllr Barry Lewis, Finance Spokesperson and Vice-Chairman of the CCN said: “The County Councils Network (CCN) had put together a strong case for emergency funding next year to address the significant financial headwinds councils face which are outside of our control. But despite constructive discussions with ministers over recent days the Government has chosen not to act.
“With no additional funding announced, our councils will have no choice but to implement more severe reductions to services and to levy higher council tax rises. This will undoubtedly be a double whammy for residents during a cost of living crisis, while an increasing number of local authorities will struggle to deliver a balanced budget next year.
“We know that government finances are tight, but there is a value in investing in public services, so we will now be making our case to county MPs ahead of the parliamentary vote on the final local government settlement to ensure that they are aware of the extent to which highly valued local services will have to be cut next year unless further funding is provided.”
The District Councils’ Network also warned of likely service reductions. It described the confirmation that spending power would rise by a minimum 3% for district councils before taking council tax increases into account as “nowhere near enough to compensate for an unprecedented growth in demand for temporary accommodation, the prolonged period of high inflation and the increase in the National Living Wage, as well as the fact that many councils are already financially stretched to their limit”.
District Councils’ Network Chairman Cllr Sam Chapman Allen said: “Critical services, essential for our most vulnerable people in our community, are on the brink due to inadequate funding from the Government…..
“The Government's lack of substantial new support for district councils is short-sighted and will lead to greater financial burdens on the taxpayer in the future.”
He added: “Faced with this provisional settlement, we regret that many councils may have no choice but to scale back or shut down key services, something we deeply regret. The result is likely to be a reduced level of support for vulnerable individuals and a decline in the public realm in towns and cities across England, all due to the Government's inadequate funding.”
Cllr Claire Holland, Acting Chair of London Councils, meanwhile said it was “deeply concerned 2024 looks set to be another year of massive budget pressures and a continuing squeeze on Londoners’ local services”.
She said: “The measures announced by the Government fall short of what we need. While the funding deal will bring some relief, it won’t be enough to plug the budget gaps we face and restore stability to town hall finances.
“Much of this uplift also relies on council tax rises, which will be extremely difficult for Londoners struggling with the cost of living.
“The entire system of local government funding needs urgent reform. For too long, boroughs in the capital have been left with inadequate resources despite London’s population and demand for services growing fast.”
Philip Hoult
