Financial Settlement 2019/20
- Meeting of Resources and Governance Scrutiny Committee, Thursday, 10th January, 2019 2.00 pm (Item 2.)
Report of the City Treasurer
This report provides an overview of the Provisional Local Government Finance Settlement 2019/20 as announced by the Communities Secretary and published by the Ministry of Housing, Communities and Local Government on 13 December 2018.
The Committee considered a report of the City Treasurer, which provided an overview of the provisional Local Government Finance Settlement 2019/20 as announced by the Communities Secretary and published by the Ministry of Housing, Communities and Local Government on 13 December 2018.
The City Treasurer referred to the main points and themes in the report which included: -
· The majority of the Finance Settlement was in line with expectations and followed the technical consultation in July 2018 and subsequent announcements in the Autumn Budget 2018t issued on 29 October 2018;
· There were two announcements relating to the Business Rates Levy and grant for New Homes Bonus which had had a positive impact on the Council’s financial position, these were: -
· The Government’s Business Rates Levy account was £180m in surplus and would be distributed to all councils on the basis of need as per the Settlement Funding Assessment. The Council’s indicative allocation was £2.699m and it was expected this would be received in the current financial year; and
· Government has now confirmed an additional £20m in 2019/20 for New Homes Bonus which would enable the baseline threshold to remain at 0.4% and provide the Council with an allocation of £8.202m, £1.202m higher than budgeted.
· These additional monies were ‘one off’ and the fact that they wouldn’t recur made budgeting more difficult;
· The budget assumed that the Council would increase the council tax precept by 3.49%, as presented last year, made up of a general precept element of 1.99% and the specific social care precept element of 1.5%;
· The Council’s indicative allocations for social care funding, which were £2.666m grant for Winter Pressures and £4.555 Social Care Support Grant, which could relate to both adult social care and children’s services;
· The Government’s objective to change the local business rate retention to 75% for all Local Authorities from 2020 was re-stated, however, the existing schemes in devolution areas, including Greater Manchester, would continue with 100% retention as expected; and
· Details of Local Government Funding Consultations.
Some of the key points that arose from the Committees discussions were: -
· What analysis had been done to calculate the impact of the ‘Fair Funding Review’ technical consultation for the city;
· The ‘Fair Funding Review’ favoured rural areas and did not take into consideration density and deprivation factors;
· What work was being done with other Core Cities to lobby for a fairer settlement;
· Concerns were raised that the ‘Fair Funding Review’ would only apply for one year making it very difficult to plan and deliver services;
· The risks associated with the changes to the Highways maintenance formula would be very detrimental to the city; and
· There were risks associated with the volatility of Business Rates.
The City Treasurer advised that to undertake a detailed and comprehensive analysis of the implications of the Fair Funding Review would require a significant amount of officer’s time, noting that the formal consultation on this was still ongoing and Manchester would submit a detailed response, and this would be shared with the Committee. She advised that the need to adequately reflect the pressures experienced by density and deprivation in the funding formula were being highlighted and work was ongoing with other Core Cities to lobby the government on this issue, amongst others related to formula review.
In response to the concern raised regarding Business Rates, the City Treasurer informed the Committee that Business Rate funding was distributed based on a formula, and this was currently protected via a safety net mechanism even if the collection fell. She advised of the risks associated with changes to policy and the proposed hard reset of business rates and the impact the latter would have on the retention on any growth experienced in the city since the last reset. She advised that a consultation exercise was currently underway regarding Business Rates and a detailed response to this would be submitted and this would be shared with the Committee.
The Executive Member for Finance and Human Resources informed the Committee that detailed planning regarding the implications of the Fair Funding Review would commence following the outcomes of the consultation exercise.
The Committee recommends that they would like to see the responses to the consultations along with an indication of financial risk where applicable.