Agenda item

The Local Government Finance Settlement was the basis by which the Government allocated out funding to individual authorities.  The Department for Communities and Local Government issued a consultation document titled “The 2018/19 local government finance settlement – technical consultation paper” on 14 September 2017, with a deadline for a response of 26 October 2017.  The proposed 2018-19 settlement was framed in the context of the overall Spending Review package.  The 2016-17 settlement offered local authorities a four-year settlement, giving greater certainty over their funding. The Authority was amongst the 97% of local authorities who accepted this offer. The proposed 2018-19 settlement funding was therefore allocated in accordance with the agreed methodology announced by the Secretary of State at that time.

The National Fire Chiefs Council was drafting a response to the consultation document, and it was felt there was merit in utilising that response as a basis for an individual response by the Authority. As such it was proposed that any response be delegated to the Treasurer, in consultation with the Chief Fire Officer and the Chairman of the Resources Committee.

However, Members considered two particular areas which were relevant to the Fire Authority as highlighted in the report.

The third year of the multi-year settlement offer

The document confirmed that “barring exceptional circumstances and subject to the normal statutory consultation process for the local government finance settlement, the Government intended to present these figures to parliament as part of the 2018-19 provisional local government finance settlement in due course.” The four-year settlement showed the Authority’s funding being reduced by £5.5m (18%) over this period, although it was noted that the majority of this reduction occurred in the first two years of the settlement.

Hence, barring exceptional circumstances, we expected to receive £24.4m of funding in 2018/19, a reduction of £0.9m.

However, the four-year funding settlement was predicated on the Government maintaining its public sector pay cap at 1%. Any pay awards in excess of this would either require additional funding or would directly impact on future council tax levels.

Question 1: Do you agree that the government should continue to maintain the certainty provided by the 4-year offer as set out in 2016-17 and accepted by more than 97% of local authorities?

Issues to consider in any response

We welcomed the certainty that the four year settlement provided, and supported the principle that, other than in exceptional circumstances, this would not change. However we felt that the lifting of the 1% public sector pay cap qualified as exceptional circumstances and therefore believed that the settlement needed to take account of both this and future years pay awards, in order to ensure that local government funding, and in our case Fire Authority funding, kept pace with pay increases.

The Fire and Rescue Services National Employers had made an offer to the Fire Brigades Union of a 2% pay increase in 2017/18 followed by a further 3% increase in 2018/19, however the 3% offer in 2018/19 was conditional upon governments across the UK providing funding to enable authorities to meet this cost. In order to put this into context for Lancashire the 2% pay award equated to an increase of £0.7m compared with the 1% budgeted cost of £0.3m, a 3% increase equated to £1.0m compared with the 1% budgeted increase of £0.3m, potentially over £1million more cost than budgeted or allowed for in the funding settlement. If funding was not increased to meet these additional costs then the entire burden would have to be met by further savings, which would potentially mean revisiting the Emergency Cover Review, or from reserves, or from council tax increases.  Whilst this offer had been rejected, it appeared highly likely that any final agreement would exceed the 1% pay cap and as such we believed it was essential that additional funding be provided to meet the eventual pay awards.

Council tax referendum principles

The document outlined the following council tax referendum principles:-

·          a core principle of less than 2%;

·          a continuation of the Adult Social Care precept of an additional 2% with additional flexibility to increase the precept by 1% to 3% in 2018-19, provided that increases did not exceed 6% between 2017-18 and 2019-20;

·          shire district councils would be allowed increases of less than 2% or up to and including £5, whichever is higher;

·          Police precepts in the lowest quartile would be allowed increases of less than 2% or up to and including £5, whichever was higher.

This meant that Fire would be limited by the general principle i.e. a council tax increase of less than 2%.

Question 9: Do you have views on council tax referendum principles for 2018-19 for principal local authorities?

Question 10: Do you have views on whether additional flexibilities are required for particular categories of authority? What evidence is available to support this specific flexibility?

Issues to consider in any response

Should greater flexibility be provided to Fire Authorities to increase council tax by a margin greater than 2%? Should this be set at £5 as per the flexibility provided to all Shire District Councils and Police precepts in the lower quartile? This flexibility would seem to be particular relevant given the uncertainty on pay awards and the breaking of the public sector pay cap referred to earlier.

It did seem to penalise Fire Authorities, who had the lowest average precept of any principal authority (£72 compared with Shire Districts of £176 and Police and Crime Commissioners of £172), by not allowing flexibility in line with other types of authorities. Whether the Authority then chose to utilise that flexibility was a different issue, and one which would be debated as part of the budget setting process.

If greater flexibility was provided should this be limited to just those authorities who were in the lower quartile of council tax levels? Lancashire had the 8^th lowest council tax out of 29 precepting authorities, was that in the lower quartile? However what was clear was that regardless of whether we were in the lower quartile our actual council tax increases had been the lowest of any authority for a number of years, only a 2.9% increase since 2011/12 and the only Fire Authority to freeze council tax for 2017/18. A similar flexibility was agreed in 2013/14, where 5 Fire Authorities increased council tax by the permitted £5, all of these Authorities still remained in the bottom quartile, but all of them have had the highest increase in council tax over the last 6 years, an average increase of 16% compared with 9% for all others. Was it right that the same flexibility was extended to the same authorities, or should it be extended to all authorities? If all Authorities faced similar pressures, with pay increases being the most notable, should the flexibility be extended to all Authorities similar to the model for Shire District Councils?

RESOLVED: - That any response be delegated to the Treasurer, in consultation with the Chief Fire Officer and the Chairman of the Resources Committee.