Source · Select Committees · Housing, Communities and Local Government Committee
Recommendation 1
1
Accepted in Part
Paragraph: 25
Local authorities face systemic underfunding and £4 billion gap from demand and inflation.
Conclusion
Local authorities have seen significant reductions in their spending power coincide with increasing demand for their services and inflationary pressures exceeding those in the wider economy. Recent funding settlements, while increasing in cash terms, have not kept pace with these pressures leading to a downward spiral. The prospect of further real terms funding cuts is likely to exacerbate existing concerns about systemic underfunding, with the current funding gap already estimated at £4 billion.
Government Response Summary
The government acknowledges significant funding pressures and details recent additional measures for local authorities, including £600 million extra funding, increased rural grants, and a 4% Core Spending Power increase for all councils for 2024-25, while committing to return to multi-year settlements in the next Parliament.
Paragraph Reference:
25
Government Response
Accepted in Part
HM Government
Accepted in Part
1. As the Secretary of State acknowledged in December, the Department recognises that there are “significant funding pressures facing Local Government”. That is why, having listened to the views of local government, on 24 January the Government announced additional measures for local authorities in England worth £600 million. We are prioritising support for social care councils - this includes £500 million of new funding for councils with responsibility for adult and children’s social care, distributed through the Social Care Grant. 2. The Government recognises the importance and difficulties of serving dispersed populations. Subsequently, we are prioritising councils with rural populations by increasing the value of the Rural Services Delivery Grant by over 15%, from £95 million to £110 million in 2024-25. This will be the highest increase since 2018-19, and the second successive year of above-inflation increases. In addition, the Government recognises that all councils are facing increasing costs and demand for services. We are therefore increasing the Funding Guarantee to ensure all councils will see at least a 4% increase in their Core Spending Power before any local choices on council tax, efficiencies, or reserves. 3. The final Local Government Finance Settlement for 2024-25 makes available up to £64.7 billion, an increase in Core Spending Power of up to £4.5 billion or 7.5% in cash terms on 2023-24 – meaning local government has seen a real-terms increase in Core Spending Power from 2019-20 onwards. 4. The Government remains committed to giving councils longer term certainty, and it is the Government’s intention to return to multi-year settlements in the next Parliament when circumstances allow. Spending decisions beyond 2024-25 are a matter for the next spending review. It was therefore not possible to deliver a multi-year Settlement this year without clarity on departmental budgets into the next spending review period.