WIREDGOV

Final arrangements for a fair and progressive funding settlement for councils that protect front-line services and shield the most vulnerable were published yesterday by Local Government Minister Bob Neill.

Council will only see an average 4.4 per cent reduction in revenue spending power and the grant has been adjusted so none will now face more than an 8.8 per cent fall.

This settlement reflects the desire to support areas with the most need and the urgent obligation to bring the country's public finances back in order, keep interest rates down and prevent the national debt escalating beyond £1.4 trillion on of taxpayers' money.

Ministers have consulted widely with the Local Government Association, London Councils and many individual local authorities, listening to concerns raised. Having considered all views, Ministers have today confirmed the proposals for the distribution of formula grant for 2011-12 as announced in December.

The final settlement:

• allocates a total Government Revenue Grant of £72.7bn to Local Authorities in 2011-12;
• distributes £29.4bn in formula grant in 2011-12 and £27.1 bn for 2012-13;
• keeps the average revenue spending power reduction for 2011-12 at only 4.4 per cent and reduces the upper limit from 8.9 per cent to 8.8 per cent;
• increases Transitional Grant to £96m in 2011-12 and £21m in 2012-13;
• makes a further £10m available through Formula Grant to compensate Shire Districts for the loss of concessionary travel funding in 2011-12;
• ensures a fair distribution between different parts of the country - north and south, rural and urban, metropolitan and shire;
• creates four new grant bands or 'floors' with different limits that protect those most dependent on grant against potentially steeper reductions.

Mr Neill said:

"We urgently need to reduce the country's public spending and local government accounts for around a quarter of all public expenditure so councils have a big part to play.

"We have listened to views and looked hard at the figures and have pushed more money to those most dependent on grant so now no council will face a reduction of more than 8.8 per cent and shire districts will get £10m to compensate for the loss of concessionary bus travel funding.

"These extra steps once again show we have worked to deliver a fair and progressive approach that directs grant to where it is most needed - the vulnerable and needy - whilst protecting taxpayers."

Local Government Secretary Eric Pickles added:

"This goes hand in hand with the new localism powers and spending freedoms we are handing councils so they can be as efficient and effective as possible with public funds, rooting out waste and focusing on frontline public services."

The Coalition Government remains committed to protecting local taxpayers. A growing number of councils have already indicated that they will be taking up the Government offer to fund a council tax freeze in April through its £650million fund. Authorities who do not increase their council tax are eligible for a grant worth 2.5 per cent of their council tax.

Today, the Government have also confirmed a further £5million funding to encourage the newly-formed Local Enterprise Partnerships and new Local Authority partnerships to work together across boundaries to deliver large scale housing and regeneration schemes in key growth and Housing Market Renewal locations.

The settlement is set against the background of the most radical shift in power to local government for a generation. Local authorities have already been given full control over £7 billion of funding, all non-schools ring fenced grants have been removed, councils and the NHS are being brought closer together and the bureaucratic burdens associated with inspection and targets have been removed.

Notes to editor

1. The final settlement has now been agreed by Ministers and will be proposed to Parliament: www.communities.gov.uk/documents/localgovernment/xls/1831488.xls (Excel, 1082 kb).

2. The provisional 2011-12 allocations were first announced on 13 December 2010 and a consultation ran until 17 January 2011: www.communities.gov.uk/news/newsroom/1796009.

3. The Government has given more weight to those parts of the country with the highest levels of need. For example, funding per head for residents in Hackney in 2011-12 will be £1043 compared with £125 per head in Wokingham. Full details can be found at: www.communities.gov.uk/documents/localgovernment/xls/1831500.xls (Excel, 456 kb).

4. In December, Ministers established a transitional grant of £85m for 2011-12 and £14m in 2012-13 to help councils manage issues around the Working Neighbourhoods Fund, a three year fund scheduled to end in March 2011.

5. Around a quarter of all council revenue is raised through council tax. The amount raised by individual councils through council tax varies, dependent on the nature of the area. Revenue from council tax, along with other income a council receives, determines the overall level of a councils spending power. The more dependent a council is on formula grant funding from central government to fund their budgets, the lower their spending power. A Plain English Guide to the Local Government Finance Settlement for 2011-12 is available here: www.communities.gov.uk/documents/localgovernment/pdf/1796186.pdf (PDF, 49 kb, 9 pages).

6. In 2010 it was proposed that the responsibility for all concessionary travel be moved from the lower (district) tier to the upper (county level) tier. The transfer of funding for concessionary travel was a concern raised with Ministers during the consultation by a number of authorities. Ministers have decided to help compensate Shire District councils for the loss of what they used to receive for concessionary travel. To address this, a further £10m has been added to Formula Grant - for 2011-12 only - in order to mitigate the impact of the transfer of responsibility and funding to county councils.

7. The Government is further prepared to take capping action against excessive increases.

8. The Localism Bill contains a radical package of reforms that will devolve greater power and freedoms to councils, Fire and Rescue Authorities, and neighbourhoods, establish powerful new rights for communities, revolutionise the planning system, and give communities control over housing decisions. Details can be found at: www.communities.gov.uk/news/newsroom/1818860.