Michael Gove – 2022 Statement on the Local Government Finance Settlement in England

The statement made by Michael Gove, the Secretary of State for Levelling Up, Housing and Communities, in the House of Commons on 12 December 2022.

Today the Government have published details on the Local Government Finance Settlement for the next two years for English councils, which prioritises protecting local taxpayers and vital core services. Local government has long called for greater certainty on funding following repeated one-year settlements, greater local control of finances, and a focus on social care. This two-year policy statement delivers on all of these fronts.

The Government estimate that on average councils will see an increase of around 9% in their funding next year. We have delivered on the sector’s requests for additional funding through the £2.8 billion announced at the autumn statement for social care. We are also ensuring that this year’s settlement provides support across all tiers of local government through a new, one-off funding guarantee that ensures all local authorities will see a minimum 3% increase in their core spending power before taking any local decisions on council tax levels. Councils are best placed to make local decisions to meet pressures and ensure that our most vulnerable in society get the support they need, and therefore it is for individual local authorities to determine the level of flexibility they use in setting council tax. The policy statement confirms a core referendum principle of up to 3% for both 2023-24 and 2024-25.

The Government’s manifesto commit to continuing to protect local taxpayers from excessive council tax increases, and it is for the House of Commons to set an annual threshold at which a council tax referendum is triggered. This is an additional local democratic check and balance to avoid the repeat seen under the last Labour Government when council tax more than doubled. This package of referendum principles strikes a fair balance. The council tax referendum provisions are not a cap, nor do they force councils to set taxes at the threshold level.

Councillors, mayors, police and crime commissioners, and local councils will rightly want to consider the financial needs of local residents at this challenging point in time, alongside the public’s support for action on keeping our streets safe and providing key services.

The Mayor of London has requested flexibility to levy an additional £20 on band D bills to the Greater London Authority precept to provide extra funding for Transport for London. The Government have expressed ongoing concern about the management of TfL by this Mayor, and it is disappointing that London taxpayers are having to foot the bill for the GLA’s poor governance and decision making. While the Government will not oppose this request, any decision to increase the precept is solely one for the Mayor, who should take into account the pressures that Londoners are currently facing on living costs and his decision to raise council tax by 9.5% last year.

This will be a settlement that also recognises the importance of funding adult social care by confirming significant additional funding for social care. Additionally, for social care authorities, the Government will consult on a 2% precept, for both 2023-24 and 2024-25. When taking decisions on council tax levels, local authorities should recognise the pressures many households are facing.

In addition, the policy statement has set out key assumptions behind the second year of the settlement. This includes confirming that the review of relative needs and resources and a reset to business rates growth will not be implemented in the next two years, to give councils more certainty for budget planning. For 2024-25, the policy statement refers to the significant new funding stream expected from the extended producer responsibility for packaging scheme.

Finally, we are encouraging local authorities to consider whether they can use their reserves to maintain services in the face of immediate inflationary pressures, taking account, of course, of the need to maintain appropriate levels of reserves to support councils’ financial sustainability and future investment. The Government note the significant increase in some local authority reserves over the two years of the pandemic.

All of the proposals set out in the policy statement will be subject to the usual consultation process within the Local Government Finance Settlement.

This written ministerial statement covers England only.