Response to Autumn Statement, November 2023

Summary

Despite local authorities’ dire financial situation and calls for support, the Autumn Statement had no new funding for social care services or any general local government funding beyond what was announced last year. The measures announced by the Chancellor are not expected to significantly alter London Councils forecast of a £600 million shortfall in boroughs’ budgets this year. However, we welcome the freeze on Local Housing Allowance rates, increased funding for homelessness prevention and new temporary accommodation, as well as measures to support Londoners with the cost-of-living.

London Councils’ views

The Autumn Statement did little to inspire confidence for local authorities facing financial difficulty or provide hope for those who rely on local government services. Demand for ever-more costly services is growing, but the resources to provide them continue to shrink.

Today, London boroughs’ overall resources remain about 18% lower than 2010-11 in real terms. Over that same period, London’s population has grown by almost 800,000 – equivalent to a city the size of Leeds.

Adult and children’s social care, a key driver of boroughs’ overall demand pressures, were hardly mentioned in the statement. There was no new funding for social care services or any general local government funding beyond what was announced last year.

London boroughs will still need to make over £500 million of savings in 2024-25, as part of an estimated £2 billion funding gap over the next four years. They have worked hard to budget and spend efficiently, but there is no painless way to make savings on the scale required. Any low hanging fruit and general efficiencies are long gone. Boroughs plan to use a quarter of their reserves to balance budgets over the next four years. This is not sustainable.

London Councils continues to argue that neither council tax (still reliant on property values from 1991) nor business rates (an increasingly burdensome tax for bricks and mortar business) are fit for purpose. Unfortunately, the Autumn Statement made no reference to potential reforms.

Despite the overall disappointing news on funding, the government is delivering some welcome additional support for housing and homelessness services.

Ahead of the Autumn Statement, London Councils called on the government to uprate Local Housing Allowance (LHA) rates to cover at least the bottom 30% of market rents. We therefore welcome the decision to increase LHA rates, which will take effect from April 2024. However, rates will be frozen again from 2025-26.

London Councils also called for an increase to the Homelessness Prevention Grant to support temporary accommodation pressures. While exact details are to be confirmed, there will be additional UK-wide funding of £120 million available in some form for homeless prevention.

The various measures set out to support with the cost of living—decreasing the employee National Insurance tax rate, increasing the National Living Wage, and honouring the triple-lock for pensions—will provide support for many Londoners. However, real household disposable income is predicted to worsen over the next couple of years and will be 3.5% lower in 2024-25 than it was pre-pandemic. Therefore, we anticipate demand for local authority services from residents in financial crisis will continue.

Growth remains the Treasury’s goal, and the Chancellor’s strategy relies on tax cuts to deliver. The government would be wise to consider the benefits of fiscal devolution to local authorities, a solution supported by London Councils alongside a growing chorus of voices in the sector. Giving councils greater powers and resource flexibilities are crucial for sustaining services, spending more efficiently and investing in local growth.

Local government is collectively warning of potential financial failures as a result of structural underfunding of local services, and yet, looking ahead over the medium term to 2028-29, Departmental Expenditure Limit (DEL) budgets will increase by only 1% in real terms. This actually implies real-terms cuts for ‘unprotected departments’ like the Local Government DEL.

London Councils will continue to lobby for sufficient resources for London local government and develop and promote new ideas to improve the lives of Londoners.

Our asks of London MPs

London Councils would appreciate anything London MPs can do to raise awareness about the following in the Chamber or in engagement with ministers:

• Given the perilous financial situation facing boroughs outlined above, call for an overall funding increase for local authorities to stabilise council finances and avoid a domino effect of Section 114 notices across the country. Ahead of the Autumn Statement, London Councils called for an overall funding increase of at least 9%, in line with last year’s settlement.
• It would be helpful to highlight that boroughs are increasingly facing new duties and financial burdens from the government, such as the increasing number of refugees who are becoming homeless after leaving Home Office accommodation, but this is not being reflected in government funding.
• There are several funding streams that remain unconfirmed for 2024-25 including the New Homes Bonus and service grants. It would be helpful to ask ministers when local government will expect to have certainty over these.
• London boroughs were again overlooked in plans to extend the scope of devolution across England. We ask that MPs continue to push for deepening devolution in the capital. 

Key announcements for London local government

Housing

• From April 2024, the government will raise Local Housing Allowance (LHA) rates to the 30^th percentile of local market rates.
• Subject to business case approval, London is to receive £23m in bus network funding to support housing in the Docklands 2.0 scheme.
• The government announced £32m aimed at reducing the planning system backlog in local planning authorities, as well as £5m for DLUHC’s Planning Skills Delivery Fund for local planning authorities to improve capacity, and £110m for a Local Nutrient Mitigation Fund to deliver schemes to offset nutrient pollution.
• There are plans to guarantee accelerated delivery decisions for major developments in exchange for a fee paid to local authorities. If accelerated timelines are not met, developers will receive a refund of these fees.
• In early 2024, the government will consult on a new permitted development right to convert one house into two flats without changing the façade.

Homelessness, Asylum, & Refugees

• Local authorities will receive £120m to invest in homelessness prevention. This is new funding for 2024-25, but the share for England is yet to be confirmed.
• A third round of funding of £450m was announced for the Local Authority Housing Fund to deliver 2,400 new housing units and temporary accommodation for Afghan refugees.
• ‘Thank you’ payments for ‘Homes for Ukraine’ sponsors will be extended for another year (and continue at £500).

Education & Skills

• To stimulate training and address barriers to entry, £50m has been committed for a two-year pilot on apprenticeships in growth sectors.

Infrastructure and Net Zero

• There will be £8.3bn over 11 years for roads resurfacing across England with £2.8bn to be divided between the East of England, South East, South West and London.
• The government will consult on amending the National Planning Policy Framework to ensure the planning system prioritises the rollout of electric vehicle (EV) charge points, including EV charging hubs. It will also consult on introducing new permitted development rights in England to end the blanket restriction on heat pumps one metre from a property boundary.

Business Rates

• The small business rate multiplier will be frozen for another year at 49.9p whilst the standard rate multiplier will be uprated with September CPI (6.7%) to 54.6p.
• The 75% Retail, Hospitality and Leisure (RHL) business rates relief scheme will be extended to 2024-25 with a £110,000 cash cap per business.
• For both the rate freeze and RHL relief measures, local authorities will be compensated for the loss of income and for new burdens related to administrative and IT costs.

Devolution

• A new Memorandum of Understanding with the devolution trailblazers, Greater Manchester and West Midlands combined authorities, was published outlining the approach to the single funding settlements to be implemented at the next Spending Review.
• The Statement indicated the previously announced “Funding Simplification Doctrine” for local authorities, which aims to assess suitable distribution methodologies for new funding streams, would come into force from January 2024.