Report of the City Treasurer.

On 30 November 2024, the Chancellor of the Exchequer, Rachel Reeves MP, will deliver the Government’s Autumn Statement to the House of Commons. Alongside this report committee members will receive an update on the main announcements from the Statement, focusing on those which have a direct implication for local government funding.  

The committee considered a report of the City Treasurer which provided an outline of the government’s Autumn Statement, delivered by the Chancellor of the Exchequer on 30 November 2024, which had direct implications for local government funding.  

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The City Treasurer also provided a presentation at the meeting which highlighted the key points of the Autumn Statement and the expected impact on the Council’s budget position 

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Key points and themes within the report and presentation included: 

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·       The Government’s Autumn Statement did not include exact funding updates for local government but provided important indicators as to the outlook for council funding, which would be used to inform the medium-term financial plan and budget process; 

·       Taxation revenue increases of £41.2bn which would mainly be generated through a National Insurance increase, plus some wealth taxes and clamp down on avoidance; 

·       2025/26 Core Spending Power will increase by 3.2% in real terms, including £1.3bn increase in grant funding for local authorities, made up of: 

o   £600m additional social care funding; and 

o   £700m for targeted funding including inflation and additional funding to be distributed on a deprivation-based approach 

o   Plus £2.1bn from Council Tax +5.0% (OBR estimate) 

·       Business Rates update includes removal of charity relief for private schools and continuation of Retail Hospitality and Leisure reliefs at 40% 

·       Local government funding reform, including multi-year finance settlements from 2026/27; 

·       Funding for Children’s Services and Education; 

·       Capital funding implications; 

·       NHS funding; and  

·       Uncertainty remained over the distribution of large parts of this new funding.  

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Some of the key points and queries that arose from the committee’s discussion included: 

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·       If there was an assumption that council tax would increase by 5%; 

·       Whether additional funding for social care would help to reduce pressures;  

·       How these announcements would affect the Council’s financial performance;  

·       The impact of increased National Insurance contributions on the Council and its contractors;  

·       UK Shared Prosperity Fund (UKSPF) did not match previous funding received through the European Structural and Investment Programme (ESIP); 

·       If any work had been done to understand the impact on mainstream schools as a result of the removal of charity relief for private schools; and  

·       The impact on the Council’s relationship with Greater Manchester Combined Authority.  

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In response to queries, the City Treasurer explained that the Office for Budget Responsibility (OBR) assumed a 4.99% annual increase to council tax up to 2028/29 which would make up a large part of additional funding for the Council. The City Treasurer welcomed the additional funding for social care but noted that this was a challenging area which was forecasted to overspend by £20m this year. He stated that the impact of this depended on the distribution allocation of other funds but acknowledged that the overall settlement was much better than anticipated, when compared to the Spring 2024 budget.  

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The City Treasurer explained that the announcements within the Autumn Statement impacting on Local Government applied to the 2025/26 financial year and would not impact the current financial year. He stated that the Council was forecasting an overspend for the 2024/25 financial year and officers continued to try and reduce this. He stated that some health- and education-related funding had been targeted in the current financial year but there was no in-year funding for local government other than the extension of the Household Support Fund to cover October to March.  

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The committee was advised that the government had committed to funding the impact of increased National Insurance employer contributions on the public sector, but it remained unclear as to how this would be allocated. He highlighted potential risks to the supply chain and the impact on commissioned organisations which provided services for the Council, but this was being clarified with the government. He explained that officers were reviewing contracts to identify where the Council was contractually obliged to pass on contributions, and he acknowledged that it was in the Council’s interest to have a stable supply chain.  

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With regard to a member’s comment on UKSPF, the City Treasurer concurred that this provided less funding than that previously received from the European Union prior to Brexit. He explained that UKSPF was channelled through the Combined Authority, but work was ongoing to look at different mechanisms linked to the Integrated Settlement, which would allow greater flexibility and movement for funding housing, transport, skills and economic development. He stated that unspent funding would be retained. GMCA were working through their own budget process currently which would have some impact on the Council, which negotiated for levies and value.  

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The City Treasurer explained that a high-level calculation of the impact of the government’s decision to withdraw charity business rates relief for private schools, which suggested that this would be worth an additional £1.2m in business rates to the Council which would be retained under the 100% business rates retention scheme currently in place. He endeavoured to liaise with Education Services on the impact of this on school places within mainstream provisions.  

The committee was informed that the Council currently administered around 230 revenue grants and there was a commitment from government to move to streamlining these into the main Finance Settlement, which would be welcomed and provide greater certainty for budget planning purposes.  

The Executive Member for Finance and Resources stated that the new Labour government had inherited the worst government finances since World War Two and he welcomed their shift to looking at the mechanics of local government funding and to addressing system crises in demand-led services such as social care which was at the root of Council overspend. He stated that private equity groups were profiting from vulnerable children in care and the government were working to address this issue. He also stated that officers had worked to identify savings options and expressed confidence that the Council would be able to set a balanced budget in the coming months.  

Decision: 

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That the report and presentation be noted.?