It’s that time of year again – the time that local government finance officers dread. Just before Christmas, the government tells councils how much money they’ll have to spend in the coming financial year. And in recent years, there’s not been much seasonal cheer to that announcement.
The Revenue Support Grant (RSG) has been the biggest government grant, although it’s being reduced year-on- year, for all councils.
It had been supposedly fixed for a four-year period, so in Hastings we were expecting a grant of £1.54m – a cut of 24 per cent. However, an extra £80,000 has been chopped from this.
This grant was going to be phased out over the next three years. Instead, councils were to be allowed to keep all the local business rates they collect. However, it now seems RSG will remain for some councils, with 75 per cent local business rate retention. Keeping all business rates collected would have benefited urban councils such as Hastings, but disadvantaged rural councils. So the government is now proposing to increase the ‘Rural Services Grant’ – a grant that benefits the generally wealthier, rural areas. Hastings gets no Rural Services Grant at all.
District councils such as Hastings will be able to increase their council tax by 2.99 per cent without triggering a local referendum. We will be doing that, raising an additional £180,000 – not even enough to keep pace with inflation. It increases the Hastings Council part of the council tax by around £7.40p a year. Police authorities can increase their precept by an extra £12 a year, and county councils are allowed an increase of 5.99 per cent. For East Sussex County Council, that would mean an increase of around £80 a year for a band D property. The Fire and Rescue Service will also be allowed a 2.99 per cent increase. So council tax for a band D property in Hastings will probably go up by around £100 a year, even though, because of government grant reductions, services will continue to be cut.
Another big grant paid to councils is the New Homes Bonus. This is paid for each new home built in the council area, based on the council tax payable on those homes. It benefits geographically larger councils areas, where there is more developable land. Also, it gives more money to councils in wealthier areas where houses built fall into higher council tax bands.
We’ve never done well in Hastings from this grant, because we’re a small, urban area with no big ‘green field’ development sites. So this year, Hastings (the poorest council area in East Sussex) will receive £649,559. Wealden (the wealthiest council area in East Sussex) receives £2,570,086. This grant has always been unfair, and there were plans to reform it. But we’re told these plans have been scrapped. The complete detail of the financial settlement will emerge over several weeks, as it’s made up of many different grants. Councils don’t get to know all the detail until February – meaning they must set their budgets without knowing how much money they’ve got. For richer councils, that doesn’t really matter, as most of their grant goes into reserves anyway. For Hastings, where every penny is needed and will be spent on local services, it’s a big problem.
So, Happy New Year – but spare a thought for the council finance officers who have to make the books balance, a task that gets harder each year.