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November 10, 2024
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Finance

Budget live: ‘Council finances will remain in a difficult position’


With chancellor Rachel Reeves due to deliver her first Budget this lunchtime, LGC will be providing the latest news, reaction and analysis as it happens.

4pm- Sigoma: ‘The start we need in reversing years of financial decline’

Sir Stephen Houghton, chair of the Special Interest Group for Municipal Authorities, said: “There is no doubt that council finances will remain in a difficult position, but it is very welcome that the government have committed to targeting additional grant funding in the short-term toward councils most in need, as well as a broader redistribution in the multi-year settlement to come. This is the start we need in reversing years of financial decline and ensuring resources are finally going to the right places.

“This will help to rebalance the local government funding landscape and ensure councils have the financial support to invest in vital public services. We look forward to working with the government to ensure in practice that the funding distribution is fair and directed to local authorities with the greatest need.”

3.55pm -Northern Housing Consortium: ‘Good first steps’

Northern Housing Consortium chief executive Tracy Harrison said the £500m top up for the affordable homes programme and other housing measures are “good first steps”

“The Spending Review will be critical. To make the biggest difference in the North, the Government must provide long-term investment to build new social homes and unlock brownfield land; make existing homes greener, warmer and safer, including those in the Private Rented Sector, and regenerate communities across the North.

“The government is continuing to deepen devolution with more areas set to receive integrated settlements, increasing local control and joining up spending. This will help make sure investment delivers real change for Northern communities and is something which should be expanded further in coming years.”

3.20pm – LGIU: ‘There’s a long way to go’

Jonathan Carr-West, chief executive, LGIU, said: “It could have been worse – there’s an additional £1.3bn in funding including money for social care and additional funding for housing and special educational needs: the very areas that are driving many councils to bankruptcy.

“But this extra funding is not even half the gap that councils currently face.

“The longer-term change that the sector desperately needs is all deferred for now… There’s a positive direction of travel set out, but there’s a long way to go and the pressure on council finances means there’s a real risk that some councils will not be able to hang on long enough to get there.”

3.15pm – IPPR North: ‘councils will need longer term commitments’

Zoë Billingham, director of IPPR North, said: “A boost to local government finances over the coming years is reassuring, but councils will need longer term commitments in the future, including multi-year settlements. At the next Spending Review, the government will have the opportunity to confirm it has turned away from needless austerity and instead embraced a new positive economic paradigm to turn our country around”.

3.05pm – Localis: ‘A tight outlook for local public finances,’

Localis chief executive, Jonathan Werran, said: “The Budget offers an anticipated triage of immediate resourcing crises facing councils with real terms funding increases of £1.3bn in grant funding and £600m extra money earmarked for social care. A 1.5% real terms uplift from this year in day-to-day spending suggests a tight outlook for local public finances, however, and for surety of local government’s revenue financing we will have to look beyond to the next set of spending reviews, and the chance to realise at long last the promise of multi-year settlements.

“By contrast, capital funding is an easier topic for chancellors to debate, and although the end to ‘tournament financing’ of individual bidding pots in favour of single place budgets is much to be welcomed, questions may well remain over how measures in this year’s Budget will unlock the sizable private and institutional investment in all types of infrastructure – digital, energy, housing and transport – required to deliver radical place transformation.”

1.45pm – NHS

Referring to the Darzi report Ms Reeves said things were “moving in the wrong direction” so she announced a £22.6bn increase in day-to-day health budget.

No further mention of social care.

1.40pm – Housing and other spending

Ms Reeves announced £5bn government investment to deliver housing commitments

She promised an “increase affordable homes programme”. And confirmed reduction of right to buy discounts and let councils retain the full receipts to reinvest.

£25m for North East CA to

Bus fare cap extended until December but increased to £3.

1.27pm – £1.3bn for local government

Ms Reeves promised a “real terms funding increase for local government” amounting to £1.3bn additional grant funding.

This includes £600m for social care and £230m for homelessness and rough sleeping

Greater Manchester and West Midlands CAs also had next year’s “integrated settlements” confirmed.

1.20pm – ‘Repairing public services’ including £1bn for Send

Ms Reeves announced an “injection of immediate funding” for public services ahead of the second phase of the spending review.

She said the overall envelope from 2024-35 onwards has been set and will mean real terms increases but a “new approach to public service reform” by using technology.

On Send provision “to improve outcomes” £1bn uplift 6% real terms increase from this year.

1.10pm – raising revenue to fund public services

The chancellor announced an increase in employers national insurance to 15% from April 2025 and lowering the threshold for when they start paying it to £5,000.

“We are asking businesses to contribute more”, Ms Reeves said.

Abolish non-dom tax regime to “close loopholes” as part of package to raise £12.7bn over five years.

VAT on private school fees confirmed and remove business rates relief.

1pm – Support for working people

A Get Britain Working white paper will be published soon and there will be funding for trailblazer projects to support people into employment.

To support people with cost of living the national living wage for over 21s is being increased to £12.21.

Government to provide further £1bn to extend Household Support Fund.

12.40pm – ‘Invest, invest, invest’

Rachel Reeves started by speaking about a “decade of national renewal” and said “the prize on offer is immense”.

“The only way to drive economic growth is to invest, invest, invest,” she said.

On economic growth Ms Reeves promised an “end to short termism” with a “mission to grow our economy”.

Investment in infrastructure and changes to planning rules get a mention, as does the creation of Skills England.

Chancellor said there will be a 2% productivity and savings target for all government departments.

 

12.30pm – PMQs: Temporary accommodation a ‘source of national shame’

Dame Meg Hillier (Lab) raised the issue of temporary accommodation at prime minister’s questions. Sir Keir Starmer described it as a “source of national shame”.

He promised to build 1.5 million homes and said the chancellor would say more soon.

Later Rachel Blake (Lab) asked for an update on homelessness strategy and said there was a “once in a generation” opportunity to end rough sleeping.

Sir Keir said he is “working with mayors and local leaders” and that increasing housebuilding was central to this.

Jim Dickson (Lab) called for additional investment to “kickstart economic growth” in particular a new lower Thames crossing. Sir Keir responded that members would be hearing more about growth “shortly”.

Responding to a question about Rushmoor BC’s budget gap Sir Keir reiterated the commitment to multi-year funding and said “we will work hand in hand with councils”.

11.25am – Controversy over bus fares

One policy in the Budget that we know about already is an increase to the cap on bus fares. The current cap of £2 will be extended for a year, but rise by £1.

The new £3 cap, which will cost £151m to the government, will apply from 1 January until the end of 2025. The government says the move will “ensure fares remain affordable” while preventing a “financial cliff-edge for bus operators” that would have put vital services at risk.

But Greater Manchester CA, which is set to regain full control over its bus services, will maintain the previous £2 cap.

Mayor Andy Burnham (Lab) said: “Because of the decisions we have taken, and the progress we have made, GM is in a different position to other areas across England when it comes to bus funding and bus fares.

“We hope that the measures we are taking will continue the increase in patronage we have seen since the introduction of the original £2 cap in September 2022 and the launch of the Bee Network in September 2023. The more that people use the system, the easier it will be for us to sustain the low-fare structure.”

Elsewhere, the increase to the cap has been met with widespread concern about the impact on local residents. Geoff Hill (Ind), cabinet member for transport at Windsor and Maidenhead RBC, said he was “disappointed” at the move, saying “the £3 is going to going to hit people quite hard and drive people off the buses”.

And Keane Duncan (Con), executive member for highways and transportation at North Yorkshire Council, commented that the “small saving this will generate means the decisions feels like penny pinching from rural areas”, saying the additional cost for a typical worker commuting daily would be about £500.

The move has also renewed calls for franchising of buses in areas beyond Greater Manchester and London. West Midlands CA mayor Richard Parker (Lab) said that while the decision was “disappointing”, he understood the financial pressures.

Mr Parker said the West Midlands was “moving in [the] direction” of franchising, but added that “it will take time to overcome the effects of past decisions”.

10.18am – Clarification needed on levelling up funding

One important issue expected to be clarified in the chancellor’s budget speech is the future of levelling up funding.

Last month, senior councillors told LGC they had yet to receive confirmation that cash promised in round three of the levelling up fund, the longer-term plan for towns or as part of levelling up partnerships will still be made available.

All three funds were announced between September and November 2023, and are worth a total of £2.4bn.

A government source recently told the BBC that all levelling-up spending was under review, and described some of the commitments as “unfunded”.

The think tank Power to Change is calling for these commitments “to be honoured where possible”, but says councils should work closely with the community to ensure it is well spent.

Power to Change is also lobbying for a change in the way funding is distributed. It says levelling up funding was “too centralised, too fragmented, too short-term, unnecessarily competitive and onerous”, claiming this was “a large part of the reason why such a significant amount of funding is in limbo”.

Based on new polling, the think tank says “government should put trust in local people to decide what’s best for their local area”.

8.45am – London Councils: We’re in a ‘dire’ state

In a last minute plea this morning, London Councils highlighted that its members face a £700m shortfall for next year. Chair Claire Holland (Lab) said boroughs are in a “dire” situation and that: “Housing and homelessness pressures in the capital are astronomical. If things carry on as they are, boroughs will be tipped over the edge into effective bankruptcy, requiring costly interventions from central government to balance the books.”

29 October

LGC Briefing: The Budget will force the government to start showing its hand

Yesterday reporter Jonathan Knott summed up the mood of Ministry for Housing, Communities & Local Government questions in Commons, where MPs – for the last time this year – were told to ‘wait for the Budget’ for the answers to their detailed questions.

Jim McMahon promised to stand “shoulder to shoulder” with councils, but Mr Knott wrote “actions speak louder than words”.



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