Provisional local government finance settlement 2012-13

The 2012-13 Provisional Local Government Finance Settlement was announced on 8 December 2011.

It builds on the announcements made in the Spending Review in October 2010, and the financial settlement for 2011-12, and sets out provisional allocations of grant funding for local authorities for 2012-13. The provisional Local Government Finance Settlement can be found on the DCLG website Opens in a new window. A Written Ministerial Statement on the 2012-13 Settlement was also published by CLG.

In addition to the Local Government Finance settlement announcement, HM Treasury also issued a Written Ministerial Statement Opens in a new window setting out adjustments to the departmental resource DEL budgets following the announcement in the Autumn Statement that public sector pay awards would be capped at 1% following the end of the current pay freeze.

Key points

• HM Treasury have announced the impact of the 1% cap on public sector pay awards in 2013-14 and 2014-15. The CLG Local Government resource DEL budgets (announced in SR2010) have been reduced by £240m in 2013-14, and £497m in 2014-15.
• By the Government’s methodology, no council will see their overall spending power fall by more than 8.8% in 2012-13, and the national average spending power reduction is expected to be limited to 3.3%. The average spending power reduction for London authorities is 4.0%.
• Formula Grant allocations and floor damping for 2012-13 are unchanged from provisional allocations announced in February 2011.
• Some special and specific grants have seen changes to announced allocations in 2011-12 and/or 2012-13. Significant changes include: a national reduction in 2011-12 PFI grant of 35%.
• Year 2 funding allocations for the Council Tax Freeze Grant, 2011-12, have been included in the overall Formula Grant totals (post-damping) in order that the distributable amount of business rates in England in 2012-13 does not exceed the Formula Grant control total.
• The Academies topslice for both 2011-12 and 2012-13 remain unchanged. DfE have published a consultation on the calculation and recovery arrangements for the academies transfer in 2011-12 and 2012-13.
• The provisional principles for determining whether local Council Tax increases in 2012-13 are ‘excessive’, and could therefore potentially trigger a council tax referendum, have been set at 3.5% for London boroughs, 3.75% for the City of London and 4% for the GLA.

Settlement Response

London Councils has published a response to the settlement Opens in a new window which reiterates its concerns over the long-term prospects of local government funding, local authorities absorbing a large share of public spending cuts and a continuing trend of tough settlements for London's boroughs in particular.