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Secretary of State concern at amount of borrowing at some councils for commercial purposes

The Secretary of State for Housing, Communities and Local Government has expressed concern at the level of borrowing for commercial purposes that some local authorities are undertaking.

In a statement on the provisional Local Government Finance Settlement 2019 to 2020, James Brokenshire said: “I am aware of a few authorities though who are continuing to undertake significant amount of borrowing for commercial purposes.

“I share the concerns of CIPFA and others about the risks that these local authorities are exposing themselves and local taxpayers to.

“We are considering with HM Treasury what further interventions may be required.”

Elsewhere in the statement Brokenshire said:

  • Core Spending Power is forecast to increase from £45.1 billion in 2018-19 to £46.4 billion in 2019-20, “a cash-increase of 2.8% and a real-terms increase in resources available to local authorities”.
  • The Budget had committed around £1 billion of extra funding for local services, including £650m for adults and children’s social care in 2019/20.
  • The government will be publishing a green paper on the future of adult social care soon. “This is a complex issue and we’re working with local authorities – to ensure we get this right.”
  • The government will allocate £153m in foregone business rates to directly eliminate negative RSG (Revenue Support Grant).
  • The Rural Services Delivery Grant will be increased by £16m in 2019/20 to maintain this at last year’s level.
  • Up to £20m would be committed to maintain the New Homes Bonus baseline at 0.4% in 2019/20.
  • There will be a proposed distribution of £180m of the levy account surplus to all local authorities on the basis of 2013-14 Settlement Funding Assessment.
  • There will be no change to the Council Tax Referendum limits set for local authorities in 2018/19, “aside from further flexibility offered on the police precept level”.
  • Fifteen new 75% business rates retention pilots will get underway in 2019/20 together with one in London.
  • Two further consultations will be launched on reforms to the business rates retention system and the new approach to distributing funding through the Review of Relative Needs and Resources.
  • A continuous improvement tool will be launched in Spring 2019.

James Brokenshire 146x219The Secretary of State (pictured) concluded: “There is so much excellent, inspiring work that is underway in our local communities and it is right that we get behind it and have faith in the authorities who, day in, day out, always deliver. This settlement and the extra funding announced in the Budget reaffirm that faith.

“Delivering a cash-terms increase of 2.8% and a real-terms increase in spending for local authorities in 2019-20. Delivering extra support for the vulnerable, for quality public services, for our high streets and for local economic growth.

“And paving the way for a fairer, more self-sufficient, more resilient future for local government – and a brighter future for the people and places they serve.”

Documentation in relation to the provisional settlement can be viewed here.

In response Lord Porter, Chairman of the Local Government Association, said: “The recent Budget showed the Government is listening to the LGA’s call for desperately-needed investment in our under-pressure local services, such as roads and social care. We are also pleased that the Government has decided not to increase the New Homes Bonus (NHB) threshold further next year which makes up a considerable part of funding for some councils, particularly shire district authorities, and provided some extra funding for rural authorities.

“Next year will continue to be hugely challenging for all councils, who still face an overall funding gap of £3.2 billion in 2019/20. It is therefore disappointing that the Government has not used the Settlement to provide further desperately-needed resources for councils next year.

“Many councils will be forced to take tough decisions about which services have to be scaled back or stopped altogether to plug funding gaps. We must not forget that it is individuals and communities who feel the impact, whether it is through seeing their local library or leisure centre close, roads deteriorate or support for young people, families and vulnerable adults scaled back.”

Lord Porter added: “It is vital that the Government uses the final Settlement next month to provide the further resources needed to protect our local services in 2019/20 before ensuring next year’s Spending Review delivers a truly sustainable funding settlement for local government.

“As the nation continues to face huge uncertainty, it is councils who are getting on with the job of providing the services that matter to our communities. Investment in these local services, and councils’ prevention and early intervention work, is the only way councils can continue to make a positive difference to their residents’ lives. It will also help reduce pressures on the rest of the public sector, save money for the public purse and contribute to the wider prosperity and wellbeing of the nation.”