021104 Lg Settlement e

8/3/2019 021104 Lg Settlement e

http://slidepdf.com/reader/full/021104-lg-settlement-e 1/7

CABINET WRITTEN STATEMENT

TITLE: PROVISIONAL LOCAL GOVERNMENT REVENUE AND CAPITAL

SETTLEMENTS 2005-06

DATE: 2 November 2004.

BY: SUE ESSEX, MINISTER FOR FINANCE, LOCAL GOVERNMENT AND

PUBLIC SERVICES

Today I am announcing the details of 2005-06 revenue and capital

settlements for the 22 unitary authorities in Wales.

The Overall Settlement

Next year, after adjusting for transfers, local authorities in Wales will receive

an average increase of 5% on the previous year’s settlement .

This increase in the funding provided by the Assembly is based on a detailed

consideration of the funding pressures faced by local government. Thisconsideration has been informed by an unprecedented degree of

collaboration with local government through the Expenditure Sub Group, to

identify pressures, and to agree the assumptions that underlie the costing of

these pressures. This process allows us to set out in more detail than in

previous years, the cost assumptions upon which the settlement is based,

making the settlement more transparent than ever before.



In order to meet the increased costs of equal pay audits and pension

contributions, pay and prices we have allocated an extra £108 million.

In addition there is an extra £12 million provided to help local authorities to

address pressures in the health and social care system, including supporting

more people being cared for at home and in communities and the costs

associated with meeting higher standards of care. This is in addition to the

£20 million provided through the Capacity Grant outside of this years

settlement and which I have committed to funding for the next three years.

A further £25 million is included to implement the second phase of the

Teachers Workload Agreement including provision for support staff training.

This is in addition to the £33 million introduced last year.

Also the settlement includes £3 million in recognition of the additional costs

faced by local government from increased landfill tax.

In addition to the average 5% increase, the settlement also includes

transferred funding for Residential Allowances which has been funded as a

specific grant in 2004-05. This transfer conforms with the commitment of the

Assembly Government to transfer the Specific Grants into the settlement for

all authorities where it is appropriate to do so. Conversely, funding for PFI

projects is committed expenditure for particular local authorities and it

therefore makes sense to transfer this funding from the RSG to a specific

grant.

Specific Grants

In order to provide a comprehensive picture of the funding the Assembly will

provide in 2005-06, and to allow authorities to budget effectively, I am also

today providing local authorities with details of the other specific grants they

can expect to receive next year. The information I am making available on

specific grants shows that, in addition to the £3.3 billion authorities will receive

through the settlement, they will also receive £500 million in specific grants.



Taking account of the transfers the remaining specific grants will increase

next year by about £12 million. The major funding elements provided

through specific grant include £45 million for Cymorth and £38 million for

Childrens First.

The local government settlement, together with all other aspects of the

Assembly Government’s budget proposals, has been informed by the

Spending Review and the evaluation of all spending programmes’ contribution

to the Assembly Government’s objectives. As a result resources have been

targeted over the next three years to programmes associated with young

children, skills attainment, social care and sustainable communities. Local

Government has a major contribution to make to all these programmes and

will over the three-year period gain from the resources identified in the budget.

Distribution between Authorities

The overall settlement’s implications for individual authorities is dependent on

the standard spending assessment formula. It is important that the formula is

updated to reflect as accurately as possible each authority’s need to spend to

fulfil its responsibilities. For 2005-06, there are some changes to the formula.

The most significant changes are in the area of children and older person's

social services, where we now have the data to allow the introduction of

previously agreed indicators of need. In addition to that we have updated

those elements of the formula which use census indicators, so that the

Census data is now sourced from the 2001 Census rather than the 1991

Census.

These formula changes create a significant degree of turbulence in the

funding for local government. I recognise that authorities need a degree of

stability in their funding to manage service delivery and avoid putting undue

pressure on council tax rises. Therefore I have introduced a minimum

increase guarantee that all authorities will receive an increase of at least 3.5%

in their revenue support grant for next year. This will ensure that all authorities

receive a real terms increase in their basic settlement. This is a sensible



innovation in the circumstances of the current turbulence but I regard it as a

temporary measure.

The total standard spending assessment for each authority is derived from an

assessment of the major service areas including education and social

services. To improve transparency in local government funding I will at the

time of the final settlement publish the service assessments.

This year’s settlement is set against the background of the first council tax

revaluation for twelve years. It is a legal requirement that we carry out such

revaluations to ensure that the distribution of liability for council tax remains

fair over time. Given this settlement and reasonable budget setting by local

authorities, the majority of council tax payers in Wales should see very little

change in their council tax.

For those who do move up more than one band, a transitional relief scheme,

fully funded by the Assembly Government, will limit the impact on

householders’ council tax bills in the coming year. In addition to the funding

provided through the settlement I am providing local government with an

estimated additional £11 million for this purpose.

In addition, the Welsh Assembly Government is concerned that all those in

Wales who are entitled to Council Tax Benefit should receive it. Although it is

not a devolved matter, I am committed to working with the Department for

Work and Pensions and local authorities in Wales to ensure that everything

possible is done to achieve this.

For future years 2006-07 and 2007-08, the figures published in the

Assembly’s Draft Budget for the Revenue Support Grant will provide

authorities with more of the details which they need to prepare their medium

term financial and strategic planning. I have also instructed my officials in

consultation with local government to consider over the next few months the

issues to be addressed in moving to even greater stability and certainty in



local government strategic planning through the production of three-year

settlements.

The Welsh Assembly Government policy statement, “Making the

Connections”, sets out the commitment to ensure that the growth in resources

is increasingly focused on improving the quality of service and that substantial

efficiencies are achieved in the means of service delivery. We have set a

target of £600 million efficiency savings in the next 5 years. In budgeting to

meet cost pressures in each part of the Welsh public sector including local

government for next year I have assumed that there will be a 1% saving next

year and in each succeeding year. Any efficiency gains which authorities

make over and above this will create the capacity to introduce additional

public services.

I am convinced that local government has the ability and ambition to make

major innovations in delivery. The Welsh Assembly Government is supporting

local government in this through new funding for the Excellence Wales

scheme to promote and transfer good practice, through increased funding to

support improvement in individual authorities and through “Value Wales”, a

cross-public sector source of expertise on procurement and shared services. .

Through the work of the Wales Procurement Initiative Team and the Local

Government Procurement Support Unit, local authorities have already

benefited from joint procurement of telecoms services and recruitment

advertising and will also, as of this autumn, there will be other joint

procurement opportunities. Value Wales will build on the success of these

initiatives: the Welsh Assembly Government is trebling its investment in

providing expert support on procurement, construction and e-government right

across the public sector.

This Government recognises that it also has a responsibility to reduce the

burden on local government where possible. I have already announced that

the Welsh Assembly Government will be working to reduce the burden of

plans it requires of local authorities. This could mean, on the WLGA’s own

estimates, over £20 million of local authority resources being freed up.



Local Authority Business Growth Incentive Scheme

I am also pleased to provide details today of the Local Authority Business

Growth Incentive Scheme. This scheme aims to reward the contribution

made by local authorities to economic development. Through this scheme

over £60 million is being provided, outside of the Assembly’s normal

budget to increase the resources available to Welsh local authorities over

the next 3 years. Because we can only estimate how much growth local

authorities will generate based on a trend analysis over the last few years,

the total of the extra resources available are classed as Annually

Managed Expenditure and subject to twice yearly review. Therefore,

although not part of the Assembly’s Departmental Limit, for the sake of

transparency I will show this as a separate line in the final budget. I also

intend to make arrangements to ensure over £13 million extra will be

available for local authorities in Wales to include in their budgets for 2005-

2006. I am today consulting on distribution arrangements and technical

matters associated with the scheme but will ensure that authorities can

take account of this distribution in their financial planning for 2005-2006 to

2007-2008. This scheme rewards and incentivises Welsh local authorities

for their success in economic development and provides the resources to

local authorities to sustain further growth.

Capital Settlement

With regard to the capital settlement, the capital allocation for 2005-06,

including specific capital grants has increased to £595.9 million, an increase

of 16.2%.

I have increased the General Capital Fund by £15.7 million (8%) in 2005-

2006. This now totals some £212.8 million. This is unhypothecated capital

funding of which £48.7 million is paid as capital grant, the remainder, some

£164.1 million, is provided as support for borrowing (formerly credit



approvals).

In respect of specific capital grants these have increase by 21.4% to £383.1

million.

In conclusion I believe this to be a fair and reasonable settlement for local

authorities. It has been prepared following careful consideration of the

pressures on local government. I have also made available information on

specific grants so as to give authorities as much information as possible on

which to base their own budget plans, knowing what they can expect to

receive from the Welsh Assembly Government. I fully expect authorities to

act with similar careful consideration in setting their budgets for next year.

I believe that a reasonable budget increase for local authorities next year,

having given consideration to the cost pressures and the need to make

efficiency savings would be around 5%. In this circumstance the large majority

of council tax payers in Wales would benefit from the revaluation by having

little increase or a decrease in their council tax. There is a responsibility on

local authorities to seek to control the rate of increase in tax for households

moving up a band and therefore to set their objective of keeping their budget

increase within the reasonable limit to which I have a referred. I will be looking

to see that this is achieved.

I believe these proposals to be fair and reasonable and I look forward to

considering the responses that are made.

021104 Lg Settlement e

Documents

Transcript of 021104 Lg Settlement e