Local Government Finance: Provisional Settlement 2022/23

The Government published the provisional local government finance settlement for 2022-23 on 16 December 2021

A more detailed review of the proposals by the RSN’s local government finance consultants (Pixel Financial Management) will be sent to members as soon as possible.

To all intents and purposes this is a one-year settlement with relatively little change. Therefore, there is no narrowing of the gap in funding between rural and urban areas at this time. This means 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 (20.6% higher in rural areas); and
  • Short-changed – through the flawed – urban biased – funding formula/distributional methodology

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:

  • Still pay over £104.37 (20.6%) per head more in Council Tax
  • Get some £105 (37.1%) per head less from Settlement Funding Assessment (SFA) (general grant)
  • Get £12.21 (14.4%) per head less in social care support overall
  • Face a gap between urban and rural SFA per head, which has risen from 41% in 2015/16 to 59% for 2022/23 (although in monetary terms the gap has closed)
  • Get almost £120 (28.5%) per head less in Government Funded Spending Power (which excludes Council Tax).
  • Get some 33.1% (£5.47) less per head in Services Grant than their urban counterparts
  • (Despite all of the above) still have over £15 per head less overall Spending Power.

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)
  • Are required to pay for more of their essential services through Council Tax (67.1% compared to 54.8%)
    and yet
  • Get fewer services – which are often more expensive to access

The announcement is for a one-year settlement in 2022-23. There are no projected or indicative numbers for the remainder of the spending review period (2023-24 and 2024-25).

More fundamental changes in local government funding have been clearly signalled for 2023-24. So, this one-year settlement feels like a rollover settlement from 2021-22, with the focus very much on “stability”.

The settlement itself is relatively good for local government as a whole – certainly compared to the settlements the sector received before 2020-21. Core Spending Power is increasing by £3.5bn (6.9%, cash), well above inflation, for now at least. An increase of £2.1bn in grant funding within Core Spending Power in 2022-23 means that there is less reliance on council tax increases (£1.4bn) than in previous settlements. The increase includes having to meet the costs of increases in the national minimum wage and increased employer’s national insurance costs. Higher motor fuel (a huge costs in rural areas) and energy cost. Service pressures continue to increase.

Local government received £1.5bn in additional funding in Spending Review 2021. Only around 40% of this funding increase has been allocated to social care, a smaller share than we had expected. Inflation has been applied to the Improved Better Care Fund, and £636m added to the Adult Social Care Support Grant.  The remainder of the £1.5bn has largely been allocated through the new 2022-23 Services Grant (£822m). This is an SFA increase by another name, which is received by every authority, including those with “negative RSG”.

More fundamental changes in the distribution of funding could be implemented as early as 2023-24. Work will start “in the coming months” to work out “with the sector” how to update funding distribution and “challenges and opportunities facing the sector”. Some or all of the Fair Funding Review could be resurrected, and a business rates baseline reset seems likely. Damping or transitional support should help to soften losses in funding.  In that context, the 2022-23 settlement is a one-year holding position.

The RSN will continue to input into the review referred to. Pixel are continuing to gather evidence on our behalf on the costs of ‘remoteness’ as previously reported to members

In the context of the proposed review the RSN will seek discussions with the Rural Fair Share Group of MPs early in the New Year to ensure they are fully briefed as to the current situation. A briefing paper is being prepared which will be sent to member councils

There is a four week consultation closing on 13th January, 2022. The RSN will circulate its draft response for comment from members and to assist members in their responses. As always it is important that all members respond setting out their authority’s position and stressing rural impacts


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