So, we move on to the next debate, which is the local government settlement of 2021-22, and I call on the Minister for Housing and Local Government to move the motion—Julie James.

Motion NDM7617 Rebecca Evans

To propose that the Senedd, in accordance with Section 84H of the Local Government Finance Act 1988, approves the Local Government Finance Report (No. 1) 2021-22 (Final Settlement - Councils), which was laid in the Table Office on 2 March 2021.

Motion moved.

Thank you, Deputy Presiding Officer. Today, I'm pleased to present the 2021-22 local government settlement for the 22 unitary authorities in Wales to the Senedd for its approval.

Before I start, I hope you will join me in thanking local government for the critical work they do day in, day out for communities, people and businesses across Wales. Local authority staff work for their communities throughout the year, from refuse and recycling teams, teachers and social workers, to enforcement officers and housing teams. This is true each year but never more so than over the past year, as councils, their staff and elected members have responded and are continuing to respond to the impacts of the COVID-19 pandemic. And it is not just those in the front-line roles, either. Without those in what we often call back-office jobs, we would not have been able to get support out so quickly to businesses across Wales or able to provide food to vulnerable and shielding households, or had such successful test and trace arrangements contributing to the ongoing reduction in the numbers of cases of the coronavirus. We cannot forget either that many authorities have also responded to the unprecedented flooding that has afflicted so many residents and businesses in Wales over the past 13 months. This has had a huge and sometimes repeated impact on many communities.

In preparing for the Welsh budget and this settlement, the Government has engaged with local government throughout the budget process. Cabinet colleagues and I have considered with local government leaders, through the partnership council and its finance sub-group, the position for local government overall and on key services, such as education and social care. I hope that these wide-ranging strategic discussions will continue during the coming year in preparation for a comprehensive spending review. 

This year, I am pleased to be able to propose to this Senedd a settlement that means that, in 2021-22, the increase in the general revenue allocation to Welsh local government will be 3.8 per cent. This is the second-highest increase on a like-for-like basis in 14 years; the highest, of course, was this year. This is a good settlement for local government, and local government has welcomed it. It provides local government with a solid platform for the forthcoming financial year to continue to deliver the front-line services Wales needs. In 2021-22, local authorities in Wales will receive £4.65 billion in general revenue allocations from core funding and non-domestic rates. This baseline settlement increase of £176 million reflects an increase in the revenue support grant to respond to the negative impact of the pandemic on non-domestic rate collection. It also accounts for the impact of freezing the NDR multiplier. Through this settlement, we're also continuing to provide £4.8 million for authorities to deliver additional discretionary rates relief for local businesses and other ratepayers to respond to specific local issues.

The Minister for Finance and Trefnydd has been clear that one of the hard choices we have faced in setting our spending plans for next year is our approach to public sector pay. The reality is that we did not receive any additional funding through the Barnett formula to provide for public sector-wide pay awards next year, given the UK Government's decision to pause public sector pay rises except for the NHS and those on the very lowest wages. Last week's budget confirmed that the UK Government intends to cap pay increases in the NHS at 1 per cent and maintain the pay freeze in local government. People in Wales and most of us in this Senedd will be appalled at this failure to recognise the contribution of public sector workers throughout the past year. Pay negotiations in local government are conducted by local authorities across England and Wales. I regret the stance taken by the UK Government. The Welsh Government has done all it can to protect the funding for local authorities. The implications of pay awards in 2021-22, whatever they turn out to be, will need to be accommodated within authorities' budget planning in the light of this settlement.

In determining the distribution of funding across authorities for the settlement, we have directed funding into the schools part of the formula to recognise the decisions made on the 2020-21 teachers' pay deal. We are also continuing to provide funding for our proposals for new eligibility criteria for free school meals, given the continued delay to the roll-out of universal credit by the UK Government. Through this settlement, every authority will see an increase of at least 2 per cent over 2020-21 on a like-for-like basis, something that would have been unthinkable in the 10 years prior to 2020-21. I know that some authorities have commented on the variance between the highest and lowest increases. The improved estimate of relative population means that authorities with relatively higher population growth are seeing this reflected in their funding. As is always the case, these changes have been agreed with local government through the distribution and finance sub-groups. We should all be confident that our framework for distribution is based on transparent and publicly shared data that has been agreed and developed in partnership with local government.

Senedd Members may indeed contrast this arrangement with the pork-barrel approach to local funding that appears to characterise other Government administrations. In this context, I have given careful consideration to the potential of including a funding floor for the settlement. The principle of a funding floor is to ensure that no authority suffers an unmanageable change from one year to the next. I have decided not to include a funding floor in this instance. In addition to the core unhypothecated funding delivered through the settlement, I am grateful that my Cabinet colleagues have provided earlier indicative information on revenue and capital grants planned for 2021-22. These currently amount to over £1 billion for revenue and over £760 million for capital for our shared priorities with local government.

Turning to capital, general capital funding for 2021-22 will be set at £198 million. This includes £20 million for the public highways refurbishment grant and a continuation of an additional £35 million provided for in the budget for 2020-21. This will enable authorities to continue to respond to our joint priorities of decarbonisation, the climate emergency and economic recovery following COVID-19.

The relationship between Welsh Government and local government has only been strengthened by the events of the past 12 months. I hope this positive relationship will continue beyond the term of this Government. It is because of this positive relationship that, in Wales, we recognise the need to support local authorities to respond to the pandemic. We knew that local government had the people and the skills to respond. This financial year, we have made available over £600 million to local government to enable them to do so. It has supported authorities to replace their lost income and meet additional costs from their core services. It has funded support for businesses and individuals, for schools and for families. I am very proud of the way local government and Welsh Government have responded together to the challenges of the COVID-19 pandemic. I hope that we can continue to work together to meet the challenges of the future, in particular to build a greener and more equal Wales.

I am aware a second good settlement in as many years does not make up for 10 years of the UK Government's austerity agenda, however. Having been part of setting a council budget, I know the challenges local authorities will still have had to make in setting their budgets. The setting of budgets, and, in turn, council tax, is the responsibility of each local authority. Authorities will be balancing the need to invest in services and service transformation with the financial pressures on local residents. Pay levels are only now at the level they were before the financial crisis, and council tax increases will be carefully considered in that context. The confirmation in the Welsh budget of over £206 million for the continued provision of the local government hardship fund will ensure that the financial impacts of the pandemic on local government will not be an added pressure on council tax payers. As I have said on more than one occasion, no-one goes into politics to want to cut services. I am proud that, through supporting local government, we are maintaining and delivering the services the people of Wales want and need. This final local government settlement is a core part of our budget to protect public services and our economy, to build a greener future and create change for a more equal Wales. I ask the Members of this Senedd to support the motion. Diolch.

Minister, firstly, I'd like to join you in commending the incredible work that our councils have done during the pandemic; the way that they've reacted and responded to the pandemic in all forms and the floods has been exceptional.

The local government settlement is a missed opportunity. Local councils in Wales will receive a smaller increase in funding compared to the previous financial year. This is in spite of the challenges facing councils as a result of the COVID-19 pandemic. The Minister claims this is the best possible settlement, but this is clearly not the case. It's disappointing that, despite receiving substantial additional funding from the UK Government, the Welsh Government has not provided local government with an ambitious long-term funding settlement to help our communities to build back better. Yet councils have repeatedly warned that they will face significant financial pressures over the next few years, and the lack of financial certainty from this Welsh Government could place vital local services at risk in the future.

I welcome the increase in funding for councils and particularly that rural councils will be receiving a larger share of the funding. That is welcome, as is extending the business rate relief, finally following the rest of the UK, but the settlement is still biased towards Labour-run councils in south Wales. Of the five councils with the highest increase in their settlement, all are located in south Wales; four of the five councils are all Labour-led. Councils in north Wales have generally received a lower increase compared to elsewhere, with only Flintshire receiving an increase in funding close to the Welsh average increase. Welsh Conservative-run councils are once again receiving a below-average increase in their settlement, receiving the second-lowest average increase in the 2021-22 settlement, which comes on top of the lowest average increase last time. It is disappointing that calls by local authorities and the WLGA to introduce a funding floor, as you talked about before, to ensure that all councils receive a fair settlement have been ignored by you, Minister. Furthermore, funding allocations made through the local authority hardship fund have exacerbated the existing regional funding inequalities.

We welcome the support provided to councils during the pandemic through the local hardship fund. However, the funding is primarily aimed at relieving pressures during this financial year, rather than providing the long-term sustainable funding the councils need. It is also true that councils in south Wales have received approximately 63 per cent of the funding allocated through the hardship fund so far, while councils in north Wales have received just 19 per cent. As we begin to recover from the impact of the COVID-19 pandemic, it is important to recognise the financial and economic costs of the pandemic on families across Wales by helping them to keep more of their hard-earned money to support themselves and their families. That is why we are calling for the Welsh Government to lower the costs of living in Wales by freezing council tax this year.

Presiding Officer, this settlement is a missed opportunity to help councils and communities to build back better following the COVID-19 pandemic. Despite substantial resources from the UK Conservative Government, the Welsh Government has failed to provide councils with a long-term ambitious funding settlement that enables them to invest in the services they provide and react to the impact that the COVID pandemic will have in the future. We need a fair funding settlement for all those councils to enable them to deliver services that people need, and an independent review of the funding formula to ensure that all local authorities receive their fair share of funding. Thank you.

I will also start by thanking local authority staff for the hard work that they've been doing the length and breadth of Wales in dealing with the impacts of the pandemic over the last 12 months. Throughout this troubled period, councils have often succeeded in ensuring that key services continue to be provided in exceptionally difficult circumstances, be that in the care sector, the refuse sector or in teaching. I think it's important that we thank them on the record.

The financial increase in the settlement is something to be welcomed, and I'm aware that some councils are very pleased with the settlement. But it's important to bear in mind the context, namely that this budget follows a decade of severe cuts, with councils having to make huge savings over the past decade. The analysis of the Wales Governance Centre shows that spending has fallen by 7.7 per cent in real terms between 2010 and 2019. It is disappointing, and it has already been said, but it is disappointing that the Government has decided not to set a funding floor in order to ensure that the two councils in receipt of a far smaller increase than the others, namely Ceredigion and Wrexham—they will get 2 per cent and 2.3 per cent; they will continue to lose out. I estimate that the cost of implementing this would be around £2.4 million, and I find it difficult to understand why this hasn't been provided, given that it could have made a significant difference to those councils.

Analysing the financial needs of the councils isn't simple, given that funding to deal with COVID is provided separately and that we need to take into account that council incomes have fallen, for example, through fees and payments that haven't been received for parking, and that taxation revenue has fallen in tourism and leisure. So, councils will come to the conclusion that they don't have enough funding to provide all of their services, and they will have some very difficult decisions to make. Once again, they'll have to choose between cutting jobs or increasing council tax quite substantially.

I called on you, Minister, at the beginning of February, to consider using some of the unallocated funds and to provide it to councils in order to enable them to avoid increasing council tax for the next financial year. Since then, the Conservatives have also adopted the Plaid Cymru policy, also asking for the same freeze. That's ironic, and I have to point this out, because this is a direct result of the Conservative policy of austerity, in terms of councils having to increase council tax repeatedly over recent years in the first place. As the Minister is fully aware—I know we're agreed on this—council tax is a very regressive form of taxation, and now another five-year term has gone by with a Labour Government not doing enough to make the system fairer. Facing an increase in council tax will be a huge blow to many families and individuals who've faced hardship over the past year. Yes, the budget for supporting those who are unable to pay council tax is important—it will provide crucial support, I recognise that—but that's just a sticking plaster, a short-term response to a long-term problem that will hit the poorest hardest in terms of taxation. If Plaid Cymru is in government after May, we will reform this tax in order to make it fairer and that will be a priority, and it will make a significant difference to the budgets of some of the families in greatest need. 

But to conclude, Deputy Llywydd, I would like to ask the Minister whether she agrees that we need to provide local government staff with fair salaries reflecting the crucial work that they have been doing during the pandemic, because, unfortunately, the settlement doesn't allow for this, which will mean that councils will have to try and find the money within existing budgets, which are already very tight indeed. The Unite, Unison and GMB unions have called for a pay increase of 10 per cent for council and school staff. Again, there is no provision in this settlement for any increase. So, I'd like to hear the Minister's comments on that when she responds to the debate. Thank you.

There are three things that either get overlooked or are presented in a confusing manner in the way the amount that each local authority gets is presented. I can think of no other area of Government expenditure where the percentage increase rather than the actual amount is announced, so the actual amount is lost and discussion resolves around the percentage change. Ceredigion, which we heard about earlier, had one of the lowest percentage increases, but it's actually twelfth in the league table of Government funding per person. And I would urge people to look at the league table of Government funding per person. They do hide it on page 5 of the data they provide, but it is there.

The Government's local government grant is to top up council tax, hence why Blaenau Gwent has the largest aggregate external funding. It has over 50 per cent of its properties in band A, and Monmouthshire has the lowest, with over half its properties in band E and above. There is a direct correlation between council bands in an area and the aggregate external funding each council receives. That that increase is driven mainly by relative population change is well known. As I will not be able to intervene on Russell George, I want to emphasise that Powys gets £16 per head more than Swansea. While Powys had the added cost of rurality, Swansea has the cost of providing regional facilities and for things such as street homelessness. Of the four councils receiving the most aggregate external funding, two are Labour controlled. Of the four receiving the least, two are also Labour controlled. On north Wales, three of the councils are in the top half of Government support and the other three in the bottom—hardly prejudiced against north Wales.

As part of the local government settlement, local authorities are receiving nearly £4.5 billion in core revenue funding and non-domestic rates to spend on delivering key services. And that's what local authorities do: they deliver key services. The non-hypothecated general capital funding will be £198 million, an increase of £15 million over that announced in the final Welsh budget last year. The increase in capital budgets over the last three years enabled local government to invest in increasing the supply of housing, which will minimise the pressure on local authorities' budgets and the homelessness services. It will also allow councils to start to respond to the urgent need to decarbonise in light of the climate emergency declared by the Welsh Government and many councils over the past year.

Overall, the settlement represents an increase of 4.3 per cent on a like-for-like basis. No authority has an increase of less than 3 per cent, with the highest at 5.4 per cent. In terms of local government support, it's a good settlement in comparison to the 10-year average and most years during the time I've been here. I would like to compliment local authorities on keeping their basic services working and supporting local businesses during the pandemic. Local authorities have done a phenomenal job, but local authorities always do a phenomenal job. 

It is important that all parts of the Westminster and Welsh Governments have not performed as well. While I often call on organisations to help themselves rather than asking for more money, that is what councils do. Swansea Council's budget position for 2019-20 improved by £18 million compared to the estimate set out at the beginning of the financial year. The council's £445 million budget for 2019-20 has produced a better than expected position in social services, and the careful use of the council's contingency fund, amounting to just over £11 million saved between them. This has been boosted by a further £7 million of capital financing savings as part of the medium-term strategy to fund the overall capital programme and future borrowing. 

This is how Swansea Council will be spending the extra money: schools will get an extra £6.85 million directly into classrooms, with £7.1 million for new IT kit, which has been such a help to schooling at home recently. Parents will see school meal prices frozen for the year. Social services, which have borne the challenge of COVID-19 in supporting the vulnerable, will get £7.7 million more, plus there will be £5.5 million on top to absorb any further pandemic pressures. For the environment, there will be an extra £6.1 million and a new team to deal with litter, street cleaning, and extending pothole repair services. There will be a new rapid-response team to deal with flooding problems. There will be more cash for better sports parks and community facilities, including £100,000 for improved public toilets, new free public Wi-Fi services, and investing in planting thousands of new trees and developing more green spaces.

Swansea is just one of the councils that is doing a phenomenal job. It's the area that I represent, and the one that the Minister represents, but it really is: give councils the money and they will do the job. They will do it better than any other organisations. We have seen, in England, during the pandemic, that the private sector is very good at making profit but not very good at delivering things such as school meals. If councils are given the funding, they deliver for our communities. I hope that this Government will continue to fund councils fairly and well, because the money they spend benefits us all.

Thank you. Can I now call on the Minister for Housing and Local Government to reply to the debate? Julie James.

Thank you, Deputy Presiding Officer. I'm just wanting to thank Members for their interest and their contributions. Just responding to the specific points that Members raised, just for a moment, I'm almost speechless at the brass neck of Laura Jones, who tried to accuse the Welsh Government of the kind of pork barrel politics that she has obviously come to expect in a local government settlement, as she represents a party that has been accused by a professor in Cambridge, Professor Diane Coyle, the Bennett professor of public policy at Cambridge University, of being pretty blatant in their pork barrel politics in directing £4.8 million of funding to Tory seats with no justification whatsoever. You can tell that that's what she expects of others, but I am here to tell her that we do not behave like that in Wales. As Mike Hedges pointed out, you can look at the amount-per-capita spend in an entirely different way, and the increase year on year, and you can see that there is absolutely no bias towards Labour authorities or towards any particular region. The distribution settlement works fairly and well, and it's why we have such a good relationship with local authorities, which is also not the case across the border, where the assumption on the level of funding available for local authorities assumes a council tax increase of 4.99 per cent across the board.

Turning to what Delyth said, I agree with a large percentage of what Delyth said. I did actually say, though, in my opening remarks, Delyth, that we were absolutely appalled at the UK Government stance on public sector pay. They're reneging on the promises they made to the NHS staff, and there is absolute naked disregard of the work that people have put into public service over the pandemic, both in England and indeed across Wales, where of course we have kept all of our response services in the public sector and people have absolutely stepped up to that challenge in a way that I am extremely grateful for. I say again, with no apology whatsoever, that without local government employees we could not have made it through the pandemic in the order that we have, and I am very grateful to them. However, we are not funded to provide that settlement, and it is dreadful that we are not funded to provide the settlement that we would have liked to have provided, because of course we will not get a consequential from the pay settlement in England, because they are not going to do it. It's outrageous, really. 

In terms of the comments on the sufficiency of the settlement, the Government does recognise the priorities and pressures we and local government are facing through the settlement and the wider funding available to local government. As is set out in the Welsh budget by my colleague and friend Rebecca Evans, the Minister for finance, our funding priorities continue to be health and local government services. This financial settlement is a significant continued improvement in funding for local government and delivers on that priority. 

Just to reflect what Mike Hedges said, it reflects our commitment to supporting those who need it most, and we know that that can mostly be delivered via our local councils. As he said, the range of things that local authorities are able to deliver across Wales, because of this excellent settlement, is something that will benefit us all. Of course we would have liked to have done a longer term settlement, but of course we are ourselves not given that longer term settlement, and so we cannot give onwards to the authorities that which we are not given ourselves. We've had that discussion on a number of occasions with local government and I know that they have made that point directly to the Secretary of State themselves that this is something we all need, and the Minister for finance said earlier that it would be much better if we had a multi-year settlement so that we could all plan for the future in a much more reflective way.

Delyth also made very good points about the ongoing pandemic and its wide-ranging and disproportionate effect on deprived residents across Wales. But I am pleased to be able to say, Delyth, that the hardship fund has completely covered off the areas that you mentioned, rightly, as areas of concern. So, we have been able to replace the lost income from car parks and other venues across Wales, and we have also replaced the lost income that care homes have not received, and we have also replaced the lost income for council tax and for NDR. So, local authorities are not in a position where the pandemic has stopped them being able to do things that they would otherwise have been able to do.

I wasn't asked in this debate—but I've been asked elsewhere, and so I'll reflect on it—why we are using 'COVID funding' to allow authorities to do things like, for example, repair potholes in roads. And the answer to that is because it's replacing income they would otherwise have used to repair the potholes in the roads. That's the purpose of it. It's not just for public health purposes, it's to replace lost income and lost opportunities. So, I'm very pleased to be able to say that we've done that on an ongoing basis, and, again, my colleague Rebecca Evans has been able to say that we will be able to do that going forward for at least the next six months as part of the COVID response, and local authorities have been very glad to have had that confirmation of their ongoing efforts.

So, we will be able to continue to maintain full entitlements under our council tax reduction scheme for 2021-22, and again we're providing £244 million in the local government settlement in recognition of this, and that is because, as we said, we remain committed to protecting vulnerable and low-income households, despite the shortfall in the funding transferred by the UK Government following its abolition of council tax benefit. I'd just like to point out to Laura Jones that this council tax benefit does not exist in England. Perhaps she's forgotten that. We are protecting the most vulnerable in our society against the disproportionate effect of council tax, and that is not the case in England.

The settlement today continues to provide unhypothecated capital funding to local authorities to meet their own priorities and to invest with Welsh Government in our shared priorities. It continues the additional £35 million provided for in the budget for 2021, and £20 million for the public highways refurbishment grant, which can include support for active travel infrastructure. The budget today announced a capital stimulus programme of over £224 million. This includes an additional £147 million to ramp up housing programmes, and an extra £30 million to accelerate the ambitious twenty-first century schools and colleges programme. This capital investment is helping to support economic growth, sustainable jobs and training opportunities in every part of Wales, as well as the benefits of the capital structures themselves.

Many of you today have made the case for your own local authority, of course. The formula produces relative winners and losers, but all authorities saw an increase in funding on a like-for-like basis this year, and all authorities see an increase next year. No authority should be in a position where they're disadvantaged, as the planning assumptions that we gave them are at least what they received. The distribution formula is a joint endeavour between the Welsh Local Government Association and the Welsh Government. We agree all changes through established working groups. The formula continues to use the most up-to-date, appropriate data, and there is an ongoing programme of work to refine it and explore future development. Local government proposes changes to the distribution formula or elements of it through the established joint governance arrangements we have in place. This means that we here in Wales are absolutely confident that we deliver an equitable and objective distribution of the funding available, unlike what is happening in England before your very eyes. I want to reassure all areas of Wales that there is no deliberate bias or unfairness in our formula, and to suggest so is absolutely unfair to those who engage so positively in the work to deliver it, and that is across all local authorities and the experts again who sit on our distribution sub-group.

As I say, any formula, of course, means winners and losers. If local government collectively wishes to more fully review the formula, I am open to that. I say so endlessly on the floor of this Senedd, Deputy Presiding Officer. I will say it again. But we should be mindful of how long the fair funding review in England has taken to produce a similar concept to what we already had in Wales, though without the same level of funding for councils in England as we provide here in Wales. But no system is set in stone. Several research papers on local tax reform have been commissioned and published by the Welsh Government as part of an extensive programme of work on options for potential local government finance and local tax reform. We hope this research informs the development of the local government finance system during the next Senedd term, whoever is in power.

I am more than happy to commend this settlement to the Senedd; I am proud of it. It reflects our commitment to public services and continues to support local government across Wales to deliver for the people of Wales. I remain grateful to local government, and I am very grateful indeed to my own team of officials who have worked so very hard to deliver this settlement to us. I commend the motion, Deputy Presiding Officer.

Thank you very much. And the proposal is to agree the motion. Does any Member object? Is that an objection from—? [Objection.] Okay, thank you. I didn't know whether you were flicking your pen then or not. Yes, there is an objection. So, we will vote on this at voting time.

Voting deferred until voting time.