Provisional Local Government Funding Announcement

Introduction

The finance settlement announcement was made by John Prescott, Deputy Prime Minister and Secretary of State for the Environment, on 2 December 1998. This year’s settlement is different from previous years in two important respects – it marks the end of "crude and universal capping" and it is intended to cover a three year period rather than the traditional one year period. That said, at this stage, we have yet to see any detailed figures for 2000/02 and 2001/02.

The Key Headlines of this year’s settlement are:

• Warwickshire County Council’s overall SSA is set to increase by 5.7%;

• For council tax benefit subsidy purposes the Government have set a guideline tax increase of 4.5%;

• Special Transitional Grant for Community Care has been discontinued. The service is now expected to be funded wholly from the Council’s mainstream budgets;

• A number of SSA methodology changes have been made, principally in relation to Social Services. Significantly there are no methodology changes in relation to the Area Cost Adjustment, the controversial mechanism which provides extra resources to meet the assumed higher costs of authorities in the South East.

Standard Spending Assessments

The SSA is the Government’s guideline to the cost of a standard service. For Warwickshire County Council the SSA for 1999/2000 is £315.611 million, representing an increase of 5.7% over 1998/99. Locally there are significant increases for Education, 5.4%, Personal Social Services*, 8.2%, and Highways, 6.3%. Detailed SSA changes summarised below.

*In 1998/99 the County received £3.045 million of Special Transitional Grant. This has been discontinued and is assumed to be included within the 1999/2000 SSA figures. Therefore on a like-for-like basis the Personal Social Services increase is approximately 3.3%

Changes in SSA calculation

In total, methodology changes account for only 0.2% of Warwickshire’s 5.7% SSA increase. The main changes compared to 1998/99 are:

• Elderly Residential and Domiciliary Social Services SSA – changes which recognise the additional cost in rural areas of providing social services for elderly people in their own homes. A positive change from Warwickshire’s perspective;

• Childrens’ Social Services SSA – technical changes made to reflect work carried out by the University of York (multi-level modelling) and higher allowances for the costs of foster care. A positive change from Warwickshire’s perspective;

• Environmental, Protective and Cultural Services SSA – a deprivation index has been introduced which has a negative impact from Warwickshire’s perspective.

SSA formulae are now expected to be frozen for the next three years.

Council Tax

If the County Council spent at SSA its council tax for a Band D property would be £530.75 (using the Government’s assessment of the local taxbase). In addition taxpayers would also meet the District, Parish and Police Authority council tax charges. If each of these authorities also spent at SSA the overall council tax for a Band D property would be £663.50.

In the absence of universal capping the County Council has slightly more flexibility in relation to the setting of its budget. In exercising this discretion, however, it will wish to have particular regard to the impact of its decisions on local tax payers. The table below illustrates the likely impact of different spending assumptions on the element of the local council tax which relates to County Council services. The figures are approximate at this stage.

In practice a number of factors will influence the final level of the local council tax including:

• The Government’s final settlement decisions;

• The County Council’s own budget decisions;

• The budget decisions of the Police Authority and District and Parish Councils;

• The District Council’s assessment of the local tax base;

• Any surplus or deficit on council tax collection in 1998/99;

• The impact of new arrangements in relation to council tax benefit subsidy (see below).

New Arrangements for Council Tax Benefit Subsidy

In the White Paper "Modern Local Government: In Touch with the People" the Government outlined its plans to make councils locally pay a share of the costs of council tax benefit. Previously, the national exchequer met the costs of council tax benefit as it did for most other social security benefits. The Government have now indicated that they will introduce a scheme along the following lines:

• Each year a guideline increase in council tax will be set. Government will continue to meet the costs of benefit for those concerned, up to the guideline;

• If an authority increases it council tax above the guideline level, part of the costs of council tax benefit which arise will be borne locally;

• Councils with above average proportions of residents receiving council tax benefit will not be adversely affected compared to those which are closer to the norm;

• People who receive benefit will not be penalised in any way.

For 1999/2000 the Government has set guideline level at the higher of;

• And increase in council tax of 4.5%; or

• The increase necessary to allow the authority to increase its budget requirement by the cash increase in it SSA.