Finance bulletin 

Welcome to March’s finance bulletin.

The main fiscal event this March was the Spring Statement. The Chancellor, Philip Hammond MP, delivered his first Spring Statement. The Statement concentrated on forecasts for the economy and there were no new tax and spending announcements in. The Chancellor did, however, set out the direction of the Government’s thinking on a range of areas of interest to local government and provide an update on progress made on spending commitments made in the Autumn Budget 2017. Our response can be seen in our media statement issued on the day.  We also sent out a short note summarising the Chancellor’s speech and associated statements. We will continue to digest the announcements and respond on your behalf, including briefing for parliamentary debates and engaging in discussions with Government.

The Chancellor also used the Spring Statement to confirm that the 2018 Autumn Budget will set total public expenditure limits for 2020/21 and future financial years followed by a Spending Review in 2019. The Spending Review is likely to set national funding totals for local government. We at the LGA are starting work on influencing both events. As a starting point, the LGA is looking to produce estimates of the funding challenge facing local services by 2025. We expect the results of this work to be ready in the summer.

On 20 March, the Secretary of State for Housing, Communities and Local Government published a Written Ministerial Statement setting out an error made in calculating the size of the allocations of the specific grant to compensate for the under-indexing of the business rates multiplier. This affects local authorities which are part of the 2017/18 and 2018/19 business rates retention pilots. According to the Government, 2017/18 pilot authorities received £36 million more in compensation in 2017/18 than they should have. The Government has confirmed it will not be seeking to claw back the extra funding for 2017/18. However, adjustments will be made to funding for pilot areas for 2018/19.

The consultation on the Fair Funding Review closed on 12 March. The LGA’s response was submitted following wide discussion within the sector, including the LGA’s Leadership Board, Executive, and the Fair Funding Review and Business Rates Retention Task and Finish Group, Special Interest Groups (SIGOMA, CCN, DCN) as well as Treasurer societies and others. We also ran a series of regional consultation events jointly with MHCLG that were attended by over 200 delegates.

In our response we made a number of points, both general and technical, but fundamentally we are arguing that the outcome of the review will not be sustainable without sufficient funding and that additional resources are required. We have also commissioned a series of projects to develop tools that member authorities will be able to use to assess the outcome of various options being considered as part of the review.

Also in March, the National Audit Office published its report into the Financial Sustainability of Councils, including some stark messages about the funding of local government. We responded to the report with a media statement and briefed MPs for a debate in Parliament on this on 20 March. We also produced a briefing on council reserves in response to comments on reserves raised at Treasury questions in the House of Commons.