2023-2024 Provisional Local Government Finance Settlement Proposals and what it means for rural communities
Under the Provisional Settlement proposals, the gap in funding between rural and urban areas will, in fact increase. There is therefore a continuation of historic underfunding and unfairness for rural communities.
Once again, through the proposals, rural residents, communities, and businesses will, through their principal local authorities, find themselves in comparison to their urban counterparts both:
- Overcharged – through higher Council Tax in rural areas (20.3% higher in rural areas);
- Short-changed – through the flawed – urban biased – funding formula/distributional methodology
HEADLINE ANALYSIS OF THE PROPOSALS
The RSN’s analysis of the Provisional Settlement proposals shows in 2022/23 rural residents in comparison to residents in urban areas will, on average:
- Pay £109.73 (20.6%) per head more in Council Tax
- Get some £111 (59.4%) per head less from Settlement Funding Assessment (SFA) (general grant)
- Get £8.41 (13) per head less in Social Care Services Grant
- (Despite all of the above) still have over less overall Spending Power per head.
The conclusion of the above is that once again Principal Councils serving rural areas in comparison to urban:
- Get less government grant per head of population and are required to pay more per head of population in Council Tax (through lower incomes when earned in the rural economy – where the cost-of-living is higher)
- Are required to pay for more of their essential services through Council Tax
- Get fewer services – which are often more expensive to access
LOOKING TO THE FUTURE
More fundamental changes in local government funding have been delayed yet again. There will be no action in “this Spending Review period” – effectively in the life of this Parliament.
The impact of the delays to the review are:
- London is getting some £236M a year more in Government Grant than the formula says it should (of which £166M is received by only 5 boroughs) – this at the expense of rural and non-London local authorities.
- Rural Services Delivery Grant (RSDG) was at £85M in 2020/21 (and still is at that level). £85M should, as presently assessed, be £96.27M in 2023/24 to reflect inflation.
- Due to their underfunding, Rural Councils in 2022/23 were only able to budget to spend £67.00 per head on so-called discretionary services whilst urban areas budgeted to spend almost twice that (£131.3I per head).
- Cost of Living is higher in rural areas, but wages earned in the rural economy are lower.
- If in 2021/22 rural residents had paid the average urban band D council tax, those council taxpayers collectively would have been better off to the tune of £419.3m. Much of this would have been spent by them locally meaning a loss to the rural economy generally. This impact is greater still when the difference between average London and average rural Band D council tax is applied, and sees the rural council taxpayers collectively, and rural economy, suffering to the tune of £1.520bn. THIS IS FOR A SINGLE YEAR – the cumulative impact over a period would have been enormous.
- As an example, an average Band D charge for Herefordshire Council this year is £2114 but for Southwark is £1595. That is over £519 (or 32.5%) more a year for rural residents to be paying in Herefordshire compared to Southwark residents.
The RSN is calling for ACTION - NOW
- The existing formula must be applied from 2023/24 - in full without damping. This does not require any new monies to be found.
- There can be no justification for penalising rural authorities by continuing to deny them their full formula allocations. They have already been denied that benefit for 9 years.
- If the formula is not going to be applied, then the amount necessary to do so for rural councils should be distributed via the RSDG mechanism and all authorities exemplified in benefiting from the 2013 formula changes should receive the relevant amount through RSDG.
- Furthermore, RSDG should be uplifted in line with inflation, in the same way as the Settlement Funding Assessment (SFA)
The government is currently consulting on the 2023/24 Provisional Local Government Finance Settlement. We urge all rural local authorities to respond to the consultation before the closing date of 16 January 2023.