Minister for Local Government (): On 5 February, my Rt
Hon. Friend, the Member for Surrey Heath set out the final Local
Government Finance Settlement for England for 2024-25. The final
Settlement includes new funding for local authorities worth £600
million and makes available up to £64.7 billion for local
authorities in England, an increase in Core Spending Power of up
to £4.5 billion, or 7.5% in cash terms, an above-inflation
increase, on 2023-24.
As a result of this Settlement, the vast majority of local
authorities will be able to set balanced budgets in 2024-25 and
continue to deliver vital services for their communities.
As members of the House will be familiar, there are a small
number of local authorities with severe local failure, where the
Government has had to step in and take the most serious action
through statutory intervention. These authorities are Birmingham
City Council, London Borough of Croydon Council, Liverpool City
Council, Nottingham City Council, Sandwell Metropolitan Borough
Council, Slough Borough Council, Thurrock Council and Woking
Borough Council. The House receives regular updates on the
progress of these interventions. In some of these cases,
significant local failures in governance and financial management
have resulted in acute financial failure, and these councils have
asked government for continued support to help them set budgets
including for 2024-25.
In addition, the Government has always stood ready to engage with
local authorities who may request support on an exceptional basis
due to local issues that they are unable to manage themselves.
Whilst those discussions are confidential, the Government is
committed to making the details of any support that is agreed
public, in the interests of transparency. Today, my department is
publishing on gov.uk details of in-principle capitalisation
directions provided to a small number of these local authorities.
I will deposit in the House library copies of any relevant
documents.
Capitalisation directions permit a local authority, in specific
and exceptional circumstances, to meet revenue costs through
capital resources, enabling them to manage budget pressures over
time (for example through the sale of council-held assets). They
do not include any additional direct grant funding. At this
stage, and in line with precedent, the Government has provided
these local authorities in-principle support only, to ensure that
they can set their 2024-25 budgets and deliver vital services for
their communities.
In line with the usual framework for agreeing capitalisation
directions, appropriate conditions will apply. These are intended
to ensure that the process is only used in circumstances where it
is truly necessary; address the drivers of the issues that have
led to local authorities requesting support; and ensure continued
progress towards achieving financial sustainability. In all
cases, the Government expects these local authorities to take
into account the need to reduce wasteful expenditure, and ensure
every area is making best use of taxpayers’ money. Where
statutory interventions are in place, any final agreement to
support will be contingent upon the demonstration of ongoing
improvement, transformation and recovery.
Where the Government has agreed to provide support, it is
essential that appropriate assurance arrangements are in place.
Where appropriate, any final agreement to support will be
conditional upon the completion of rigorous external assurance
reviews to assess, at a minimum, the local authorities’ financial
management practices, and the production of improvement and
transformation plans that focus on securing the local
authorities’ medium-term financial position. The Government is
taking additional action in the case of Plymouth City Council,
which has requested a very significant capitalisation as a direct
result of the incorrect accounting treatment of a transaction in
2019-20 through which the Council borrowed to pay off a large
part of its pension deficit. Given the unusual nature of
Plymouth’s approach, the in-principle capitalisation is
conditional on a thorough, independent investigation into the
transaction.
I am clear that the Government will not hesitate to take action
if needed to protect local taxpayers.
