LGA criticises 2024/25 provisional finance settlement, says it does not change funding gap facing councils

It is “unthinkable” that Government has not provided new funding for local services in 2024/25, the Local Government Association has said in its submission to the 2024/25 Provisional Local Government Finance Settlement.

Last month the Levelling Up Secretary Michael Gove set out a provisional local government finance settlement of more than £64bn for 2024-25. The total sum represented an increase of 6.5% but this presumed that local authorities in England would increase council tax by the total amount allowed without triggering the requirement to hold a referendum.

In its submission, the LGA said: “The evidence of the financial strain on councils has been growing. The 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 across this year and next. The 2024/25 provisional settlement does not change the funding gap facing councils.

“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.”

The submission said:

• Shire district councils would see a lower core spending power increase on average next year compared to other councils. “This is something the Government should address in the final settlement.  This is especially so given the dramatic increase in homelessness costs, which also fall upon shire district councils.”
• Councils face a tough choice about whether to increase council tax bills to bring in desperately-needed funding at a time when they are acutely aware of the significant burden that could place on some households in a year of economic uncertainty and increased costs.
• Council tax rises – particularly the adult social care precept – have never been the solution to the long-term pressures faced by councils. “This is particularly the case for social care where increases in costs and demand do not align with capacity to raise council tax.  Increasing council tax raises different amounts of money in different parts of the country, unrelated to need.”
• Confirmation of the provisional amount for the New Homes Bonus for 2024/25 was welcome, but councils need clarity on the future of the New Homes Bonus to be able to plan their budgets beyond next year and into the medium term.
• Reserves can only be spent once and using reserves is not a solution to the long-term financial pressures that councils face. “If councils use reserves held to cover risks, to pay for day to day expenditure, they potentially face a situation of not being able to deal with emergencies when they arise.”
• The Government should commit to the Review of Relative Needs and Resources Review also known as the Fair Funding Review, reviewing both the formulas and the underlying data used for the assessment of relative needs and resources. "Transitional mechanisms attached to the outcome of the review should provide sufficient funding to ensure that no council experiences a loss of income. There should also be transitional arrangements for any business rates reset."

The LGA added: “This is the sixth one-year settlement in a row for councils which continues to hamper financial planning and their financial sustainability. Only with adequate long-term resources, certainty and freedoms, including a multi-year settlement, can councils deliver world-class local services for our communities, tackle the climate emergency, and level up all parts of the country.”