29.11.2022

The RSN warns of the ‘perfect storm’ faced by rural communities and businesses

News council tax local government funding social care Rural Vulnerability Rural Access to Health and Care Services Services Rural Business energy prices

The RSN has provided a briefing to Rural MP’s of the different impact to rural communities and businesses compared to other areas of England from the Nov 2022 Autumn Statement

First it is vital to highlight what the RSN feel is the ‘perfect storm’ faced by rural communities and businesses. From a local government perspective, rural councils are much more reliant on council tax because of historically imbalanced government funding settlements. Moreover, the Fair Funding Review looks to be delayed yet again. More widely, there are large numbers of rural properties off-grid; there is the high cost of vehicle fuel impacting on rural areas with few public transport links. These factors impact on access to services including health. There are historically low rural wages, lack of affordable housing and the cost-of-living is higher. All these put rural areas into a spiral of disadvantage. The longer this continues the more impoverished rural areas become and the harder it becomes to rebalance. – the need for levelling up rural areas could not be greater.

LOCAL GOVERNMENT FUNDING: BASELINE POSITION

- Urban areas in 2022/23 receive some 59% (£105.21) per head in Settlement Funding Assessment grant more than their rural counterparts (it was 45% in 2015/16).

- Rural residents pay, on average, £104.20 (21%) per head more in Council Tax than their urban counterparts due to their Councils receiving less government grant.

- Rural residents pay more, receive fewer services and, on average, earn less than those in urban areas and the cost-of-living is higher. That is inequitable. See, Kovia Rural Cost of Living Report

RELIANCE ON COUNCIL TAX TO FUND LOCAL SERVICES

The most obvious issue relates to the decisions announced by the Chancellor in respect of allowed increases in Council Tax of circa 5% from 1st April 2023 and the impact on services.

Although all Councils, including those serving rural areas, desperately need additional funding to enable them to provide essential services to support their communities and businesses the reliance on Council Tax is grossly unfair on rural communities.

Historic underfunding of rural local authorities as set out in the Baseline Position above, means that rural residents are currently paying, on average, 21% (£104.20) per head of population more in Council Tax than their urban counterparts. If all Councils opt to charge the full increase of 5% then average (Band D 2 adult equivalent) council tax including both local and major precepts in rural areas would rise by £103, versus £72 for urban areas.

Because incomes earned in rural economies are lower than urban rural councils may not feel it appropriate to add the whole 5%. If they do levy the full 5% the cost impact for rural residents on locally earned incomes will be greater. If Councils do not levy the full 5%, they will have less income to provide essential services on which people rely.

SERVICES WILL BE CUT BACK

Government Grant will not rise to cover the costs of inflation. The same is true for both urban and rural councils but rural will fare worse.

It costs more to deliver services across rural areas and rural services start from a lower level due to the historic underfunding previously referred to – therefore the cuts will be deeper and more painful.

IMPACT ON DISCRETIONARY SERVICES

Discretionary Services are those which councils are not required to provide by law but which they have the power (as opposed to a duty) to provide.

For statutory services – such as Social Care - where the government grant does not meet service needs (which are growing year-on-year) councils still must find the money to provide the services. This means they have to reduce discretionary services

So called Discretionary Services are, nevertheless, essential for wellbeing in rural areas. They include Bus Service Support, Economic and Community Development, Support to the Voluntary and Community Sectors and Sport, Leisure, and Cultural Services.

SOCIAL CARE

The increase in funding announced or social care is much greater than had been expected. At that is generally to be very welcome. However, the formulae to distribute government funding remains a critical issue for rural areas.

DOMESTIC ENERGY BILLS

The main differentials between urban and rural domestic energy users arise because of many rural properties being off the gas grid. These also need to be looked at alongside other interventions that have a universal coverage.

The alternative fuels payment is being raised from £100 to £200. This is welcome; but it is unclear what period this is supposed to cover. The Chancellor seemed to suggest in his statement that this increase is aimed at providing support for the current winter, 2022/23.

UPCOMING ISSUES

In December,2022 the Government will issue its consultation on the Local Government Financial Settlement for 2023/24.

It is now understood that the Fair Funding Review promised in 2016 is now not going to progress for a further two or more years.