The chancellor’s Autumn Statement was the proverbial curate’s egg for district councils – partly good and partly bad.
On the positive side, the decision to cap social housing rents at 7% in 2023 was a shift from the original proposal of 5% and reflected the response from the District Councils’ Network (DCN) which called for the higher figure.
While districts that have housing stock will do all they can to protect tenants from higher rents, a lower cap would have reduced funding for essential repairs and maintenance, including investment in energy efficiency measures. It would also have dented the ability of councils and housing associations to build much-needed new social housing.
It was important that the Government should stick to implementing the business rates revaluation in 2023. The decision that it will fund councils in full for the freezing of multipliers and the range of other reliefs is welcome. It is helpful that these decisions have been communicated at a relatively early stage. Revenues teams in districts will now be busy with ICT colleagues and the software houses on implementing changes to billing software, to ensure that the reliefs are successfully administered in the spring. The promise of new burdens funding is welcome.
The announcement that districts can increase council tax by 3% without a referendum provides welcome but limited additional flexibility compared to the 2% limit that applied in the current financial year. Officials have since confirmed that the usual rider of ‘or £5, whichever is the higher’ is planned. Pending the policy document that the Department for Levelling Up, Housing and Communities (DLUHC) expects to issue early in December, this is the only information about district councils’ overall funding position.
Districts understand and support the need for delay to social care reforms and the extra funding that has been announced for social services. But the absence of any additional grant allocation for districts is a lacuna. The DCN will continue to make the case for retention of all existing grant streams, including rural services delivery grant and the services grant that was introduced in 2022. New homes bonus must also be maintained, with 80% continuing to be allocated to district councils in recognition of their strategic planning role – without which little new housing would be built.
The 3% flexibility on council tax does not provide an adequate answer to districts’ financing needs. Inflation is running at 11.1% and is not likely to be much lower by April 2023. It is a paradox that a council tax increase of more than 3% would be considered ‘excessive’ when it will probably be only one third of the rate of inflation. The Local Government Association continues to lead calls for decisions on council tax to be taken by democratically elected councillors, ending the quasi-capping regime of referenda. A good start would be recognition that any increase below the rate of inflation – which represents a real-terms cut in the tax – should never be defined as ‘excessive’.
The real problem with the welcome but limited additional flexibility is that council tax represents a much higher percentage of districts’ spending than for other types of council. Fifty-six percent of districts’ net spending is council tax when it is 25% to 39% of other councils’ expenditure. A 3% increase in council tax, even if all districts apply it, would generate only about 1.7% of current spend. Government grants make up only 14% of districts’ income. It would be optimistic to expect that they will increase rapidly, either in the 2023-24 settlement or in the future. Districts are not exempt from high inflation. In the absence of other measures, the Autumn Statement seems to consign them to a further period of austerity.
While there may be some scope for districts to grow income from fees and charges and commercial activity, it is unlikely to close funding gaps that most districts are experiencing. If the Government will not provide extra grant alongside genuine flexibility on council tax, then it needs urgently to deliver reforms which would not cost it a penny but which would relieve some of the pressures on districts.
DLUHC published a policy paper in May alongside the Levelling-Up and Regeneration Bill which proposed increasing planning fees for major and minor applications by 35% and 25% respectively. The Department needs to move forward urgently with these changes, as well as the suggestion in the policy document that the Bill will include ‘doubling fees for retrospective applications’. They should be the first steps to legislation that empowers districts and other planning and licensing authorities to set planning and licensing fees so that they can recover the full cost of these services, instead of having to subsidise them from council tax.
The Office of Budget Responsibility seems to have let the cat out of the bag about the ‘planned 23% increase in the fuel duty rate’ in the spring budget, although the chancellor has been keen to deny that any decision has been taken. Any such increase would add to districts’ costs, particularly in waste collection fleets.
The Autumn Statement said nothing about the waste reforms under the Environment Act 2021. We have now experienced 13 months of silence from the Department for Environment, Food & Rural Affairs since the comprehensive spending review. If social care reforms are being delayed, perhaps it is now time for universal food waste collection in England also to be delayed or possibly even scrapped. Certainly the financial position of districts means that the idea of free garden waste collections should be consigned to the dustbin of history.
Without some bold changes in Government legislation and policy, the ability of districts to sustain the important range of strategic, preventative and universal services that they deliver seems likely to be further jeopardised.
Ian Miller is chief executive of Wyre Forest DC and lead chief executive, finance and investment workstream, District Councils’ Network
Tracy Bingham is strategic director and chief finance officer (section 151) for Oadby & Wigston BC and the District Councils’ Network’s finance policy officer
@IanM65 @TracyBingham151
