So, we move on now to item 5, which is a debate on the local government settlement for 2023-24, and I call on the Minister for Finance and Local Government to move the motion—Rebecca Evans.

Motion NDM8214 Lesley Griffiths

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) 2023-24 (Final Settlement—Councils), which was laid in the Table Office on 28 February 2023.

Motion moved.

Diolch. Today I'm presenting to the Senedd for its approval the 2023-24 local government settlement for the 22 unitary authorities in Wales. First, I'd like to record my thanks to local government, both elected members and staff across local government services, for the critical work that they do for communities, people and businesses across Wales. It's been an incredibly busy number of years now for local government, from floods to the pandemic to the way in which they're responding to the cost-of-living crisis, and of course meeting the needs of those people who are fleeing the war in Ukraine. And I know that you'll all want to join me in thanking them for their hard work and dedication.

In preparing for the Welsh budget and this settlement, we've engaged closely with local government throughout, and I'm grateful to local government for the way in which those discussions have been held. This year, I'm pleased to propose to the Senedd a settlement for 2023-24 that is 7.9 per cent higher than in the current financial year on a like-for-like basis. This equates to an increase of £403 million over 2022-23, with the smallest local authority increase, of 6.5 per cent, being higher than the vast majority of increases for authorities in prior settlements for a number of years. In 2023-24, local authorities in Wales will receive £5.5 billion in general revenue allocations from core funding and non-domestic rates. For 2024-25, the indicative Wales-level, core-revenue funding allocation is £5.69 billion, an uplift of £169 million or 3.1 per cent. This figure is dependent on both our current estimates of NDR income and any 2024-25 UK budgets. This settlement, therefore, provides local authorities with a stable platform on which to plan their budgets for both this coming financial year and next year. In setting the level of the core funding for local government, I responded as far as I can to the impacts of inflation, including on pay for hard-working staff. In particular, I've included funding to enable local authorities to meet our real living wage for social care commitment as well as the increased costs of teachers' pay. In any other year, I would be stressing that this is a good settlement for local government, building as it does on the increase of 9.4 per cent for 2022-23. But we cannot ignore the impact of the continuing high rates of inflation, and those are, of course, continuing to have a big impact on local authority costs.

In addition to the core unhypothecated funding delivered through this settlement, I've provided indicative information on revenue and capital grants planned for 2023-24. These currently amount to over £1.4 billion for revenue and nearly £1 billion for capital for our shared priorities with local government. General capital funding for local government for 2023-24 will be set at £200 million and will be unchanged for the following year, including £200 million in each year to enable authorities to respond to our joint priority of decarbonisation, and I ask the Members to support the motion.

Thank you, Minister, and Welsh Government also for bringing forward today's debate on the 2023-24 local government settlement, which, of course, councils and councillors up and down Wales have been eagerly awaiting, because we know this local government settlement is crucially important for our councils and councillors, who do so much in providing the public services that our local communities rely on, and this is why it's so crucial that our fantastic councils are funded sufficiently to enable them to deliver these vitally important services. And Minister, I certainly join you in your opening comment in recognising the outstanding work delivered by many of our councils, especially over recent times.

I'd firstly like to say also, on this side of the benches, we certainly welcome that there is an increase to the local government settlement, and the 7.9 per cent. It will make a difference for those local authorities. And I've heard in evidence in the Local Government and Housing Committee and from a number of council leaders that this is perhaps more than anticipated a few months ago. I was also pleased, Minister, to see that population data from the 2021 census has been able to be used in the funding formula allocations for the next financial year as well. As you know, it's something I've raised a number of times, in terms of the use of data, so I'm pleased to see that it is being refreshed. Certainly, a concern continues to be, though, that some of those other data points aren't able to be refreshed at the moment, but I also understand that progress is being made to see how this data can be improved as soon as possible.

But, Minister, there are concerns within the local government settlement, which aren't being dealt with, I believe, sufficiently at the moment, and therefore will not enable us to support your motion here today. The first concern from my side and from our side of the benches is a link between these continued council tax rises and the levels of reserves that local authorities are holding. So, you will know that councils in Wales at the moment are currently holding over £2.5 billion-worth of useable reserves. What we're not seeing is councils seeking to use those and keep council tax at a sensible level. So, for example, in Caerphilly, there's a 7.9 per cent council tax rise, but they have £233 million in useable reserves; we see in Carmarthenshire County Council residents are going to be paying a further 6.8 per cent increase in council tax, but the council there has £230 million in useable reserves; we understand that Rhondda Cynon Taf has over £250 million in useable reserves. I certainly acknowledge, Minister, that those reserves may not want to be used for day-to-day spend, but there must be ways in which those councils, working with you in Government, can see how best to ensure that those reserves are not being sat on, but are being used to support those communities and keep the pressure on our hard-working local taxpayers as minimal as possible. 

These points, in my view, certainly lead to the second issue on the local government settlement, which is the funding formula that you're using to allocate funding to local authorities, which I believe needs to be reviewed. I'm sure you'd agree with me, Minister, and with many residents from across Wales, that it simply can't be right that we see councils sitting on these huge reserves while council tax rises continue to go against people who are certainly working through the cost-of-living challenge.

I find it puzzling that some councils are able to only increase council tax by, say, 1 per cent this next financial year while other councils are having to raise it by nearly 10 per cent. Surely that points to a discrepancy in the funding formula, where one council is able to raise it by 1 per cent while other councils have to raise it by nearly 10 per cent. Something cannot be right in a funding formula that forces councils to have a 10-times difference in the percentage of council tax that they're looking to increase by. As you'll know, Minister, more and more council leaders from across Wales are joining calls for the funding formula to be reviewed, and I'll be interested to hear from you as to how satisfied you are with the fairness of the current funding formula and what discussions you may or may not be having with the Welsh Local Government Association as to how that funding formula can be reviewed in the future as well. 

A final concern on this, with the local government settlement, and its impact on councils, Minister, is the housing support grant, which has already been mentioned in this Chamber this afternoon and is something that I've raised in the past as well. You will know that homelessness and housing support services, who went above and beyond during the pandemic, are facing a 10 per cent increase in costs through the next financial year, and along with this around 30 per cent of housing support staff are currently paid below the national living wage and real living wage— wages that your Government is committing to ensuring the public sector are paid, but is not now enabling others to receive the same types of pay. 

As we know, over the past decade, the housing support grant has been reduced in real terms by £14 million, and this is during a time of increased demand and pressure—demand and pressure our councils are facing in terms of housing and homelessness more than ever. Fifty-six per cent of staff working in the sector say they're struggling to pay their bills, with some describing the situation as 'horrendous'. So, I would call on you to urgently rectify the situation, Minister. I'm disappointed this settlement will not enable councils and councillors to pay and provide that funding to those housing support services sufficiently enough. 

To conclude, Deputy Presiding Officer, on this side of the benches, we continue to regret the unfair nature of the local government settlement and the funding formula in particular, along with the key areas that I've identified here today. So, in light of this, we will be voting against this motion. Thank you.

Thank you very much for the opportunity to contribute to this debate. Saying that it is a very difficult and challenging situation for local authorities is a serious understatement, I would think, and the Minister referred earlier to the current 12-month settlement—9.4 per cent. Twelve months ago, it was announced by the Minister, much better at the time than anyone had imagined, to be fair, but, of course, there was a recognition at that time that years 2 and 3 would be challenging. Of course, in the meantime, we've seen what's happened to inflation and it has shown that settlement in a very different light by now. And yet again, this year, 7.9 per cent, many would say is better than expected, but we are in a very, very, very different context. There is a background of 12 years of cuts, meaning that there is no slack left for local authorities to make cuts—nothing left other than to make cuts to the bone—and nobody would underappreciate the very difficult decisions that local authorities have to make across the country.

The Welsh Government evidently is framing this as a positive settlement and in the context that we find ourselves in, there's something in that, perhaps, but the reality of the situation tells a possibly more challenging story, because the funding gap does mean that not only are we going to see an increase in taxes, as has been referred to, at very significant levels, but, at the same time, we're going to see extreme levels of cuts in certain situations. So, it doesn't look like a very prosperous situation. And this is coming at a time when people are less able to pay a council tax that will have increased significantly, but also when those services that will be cut will be needed more than ever.

The settlement of every local authority is lower than inflation, so I think that tells its own story, and every indication from the UK Government does suggest that austerity 2.0 will continue, and might intensify, and so the situation could be exacerbated before it gets better. And there is great pressure from several directions on local authority budgets. We know about social care in the context of children and adults, which is a great burden. There is a duty, in that sense, on the Senedd to help local authorities as much as we can, not only financially, but in terms of tackling some of the systemic problems that exist in the relationship, particularly between social care and health. And, of course, there is work happening in that context, and it's important that that work does progress urgently.

There is pressure on housing and homelessness budgets, with waiting lists increasing. I've heard, for example, that the Wrexham waiting lists have doubled to 4,000 just in the last two years, but, of course, the resources available to the local authorities aren't close to being adequate to respond to that challenge. And the blow that the Welsh Government is receiving in terms of capital budgets is evidently going to have an impact on the capital budgets available to local authorities. That's going to place more pressure on them to borrow, and we know what's happening to interest rates. The Public Works Loan Board is 4.2 per cent now, I think, for a one-year loan, whereas two years ago it was just 1 per cent. So, these challenges that local authorities are facing are coming from every direction that you can imagine.

So, the important message from me, in looking at the broader settlement, is flexibility. I do feel that we do need to ensure that local authorities have the greatest flexibility possible to respond. In a period of austerity, local authorities know how best to make the best use of the scarce resources that they have. So, empowering local authorities instead of being too restrictive in terms of how those scarce resources can be used.

You know how important I believe local government is, and you've heard me talk for the best part of 12 years now about the importance of local government, the importance of supporting local government. I'm not going to say anything different to that today.

I welcome the Minister's intention of setting local government core revenue funding for 2023-24 at £5.5 billion. This means, after adjusting for transfers, overall core funding for local government in 2023-24 will increase by 7.9 per cent on a like-for-like basis compared to the current year. No authority will receive less than a 6.5 per cent increase. The indicative Wales-level core revenue funding for 2024-25 has also increased, as additional funding for the revenue support grant in 2023-24 is now put into the baseline.

This of course was an excellent settlement when we heard it, when it was first proposed, but we've had inflation, including increased costs of energy, which can be very eyewatering for schools, for example. The increased wage costs, including teachers, unless additionally supported by the Government, cause budget pressures on local authorities. As a result of spending decisions made in relation to education in England, Wales received a consequential of £117 million a year in the autumn statement. This is being provided in full to local government. I very much welcome that decision to provide all the available funding upfront.

Authorities will have to make prudent assumptions as part of their budget planning on this, as well as for other staff, but good job they've got, in many cases, fairly substantial reserves, if it becomes more expensive than they thought it was going to be. Discussions continue with the teaching unions over agreement on the 2022-23 academic year pay negotiations. This means that, depending upon the final agreement, some local authorities could face a shortfall in the money needed for education. Good job we've got those reserves, isn't it?

I will start by discussing the standard spending assessment. For each local authority, it'll discuss the additional external finance, finishing with the ability of local authorities to raise money from council tax fees and charges. The standard spending assessment, known as the SSA, is the mechanism for the distribution of resources to local authorities. The SSA is the Government's mechanism for allocating grants, based on a calculation of what each local authority needs to spend to deliver a standard level of service at a common rate of council tax. For the purpose of calculating individual SSA allocations, local government is broken down to 55 notional service areas.

It is very important to remember, however, that authorities' elements for the individual service areas are unhypothecated. Their notional figures serve as the building blocks for the total SSA. They do not represent spending targets for individual services, and are not meant to be prescriptive. But it does mean that if you're serving on a local authority or a Member here and you want to look at how a local authority is doing, you can see what their education SSA is, how much they're spending, and whether they're spending above or below that. If they're spending below that, you might want to ask why.

When I was involved in highway maintenance, we went from 52 per cent population and 48 per cent road length to 50 per cent for each. That moved £700,000 from large urban areas like Swansea and Cardiff to rural areas like Powys and Gwynedd. Small changes can have a substantial effect on the overall standard spending assessment. The increase in the standard spending assessment for 2022-23 varies between 5.6 per cent in Rhondda Cynon Taf and 7.1 per cent in Newport. The standard spending assessment per head for each council varies between £2,520 in Blaenau Gwent to £2,049 in Monmouth.

A separate method of distribution exists for each service element in order to distribute the total across the authorities. This method falls into two categories: a formula based on indicators of need, and distribution based on actual expenditure or estimates of expenditure. Formula based is the one that is best, and the one that people want to see being used more. I'm sure Welsh Government Ministers are fed up with me asking for this, but why cannot they publish their workings? Why can they not publish how they calculated each element of the standard spending assessment for each local authority? You'll always have people saying they've been underfunded, because all you end up with is a number at the end, and when you end up with a number at the end and you don't like that number, you say it's wrong. But why can you not publish those workings? You've got them, they're there; you couldn't be producing the standard spending assessments if you didn't have them. So, please, please publish them.

The aggregate external finance is calculated from the standard spending assessment and councils' nominal council tax receipts. These vary per capita between £2,049 in Blaenau Gwent and £1,300 in Monmouth. Again, these figures are published but the calculations, again, are not. Please publish them. Comparing Blaenau Gwent with Monmouth, Blaenau Gwent's properties are almost all in the lower two bands, whilst most properties in Monmouth are band E and above, meaning Monmouthshire has a greater capacity to raise money with the same percentage increase in council tax. So, what I'm trying to say is: can you publish the calculations, not just the end results?

I have to say, I agree with my colleague Mike Hedges over there that there has to be more transparency in the way that this budget is put across. Now, whether you like it or not in this Chamber—there aren't many Members here to actually remind them—it is as a result of the UK Government's autumn budget that the Welsh Government will receive an additional £1.2 billion over the next two years. This comes after an autumn budget in 2021 that pledged £18 billion a year for Wales, the largest annual funding settlement for Wales since devolution began. 

Now, for me in Aberconwy, it's vital that our rural communities are given the support they need. It was very disappointing last week that Conwy County Borough Council had to raise their council tax precept by 9.9 per cent, and they actually put it down—. One of the excuses was—and it has Plaid Cymru, Labour and independent members leading it—they put it down to them not receiving their fair share from this Welsh Government.

Will you take an intervention?

Yes, sure.

Thank you. One of the reasons that I've been told that Conwy are facing such a steep increase is because previous leaders of the council were reticent to actually raise it as it should have been. They dipped into reserves, they left the council without the resilience that other local authorities have, and they have no option but to do it now because they've got years of catching up to do.

I think if you actually cast your mind back further, I can remember when Ronnie Hughes was the leader, and he did that kind of tactic. What I can tell you is that the previous leader of Conwy County Borough Council actually fought for five years of their being in Cabinet to actually try and be more prudent, and actually I supported absolutely the fact that they were able to not fleece our residents like Plaid Cymru, Labour and the independents are doing. 

Monmouthshire has seen a 9.3 per cent increase and both the Vale of Glamorgan and Newport 8.9 per cent. This is a fair share from the Welsh Government. And then Conwy had just 7.3 per cent. So it will come as no surprise to see that the Plaid Cymru, Labour and independent council in Conwy have now actually implemented the highest council tax increase in England and Wales. So I say shame on them. It's the steepest increase of anywhere and this now presents a worrying burden on many hard-pressed working families. The cold, hard reality is that council tax for a band D property will rise to £1,580. And on point that Mike Hedges has also made, they often quote band D, don't they? Well, I have to be honest, in the ward that I live in and I represent on Conwy council, I have to say that there are many properties in bands E, F and G. So, when we're actually looking at how much extra, it actually looks pretty bad. 

Growth in regular pay among employees in Great Britain was at 6.4 per cent in September, so there is absolutely no reason to justify a 9.9 per cent rise, and while inflation has hit all levels of Government, it has also resulted in an escalating cost-of-living crisis for local residents across the local authority area. Wales Fiscal Analysis estimated that council tax funded approximately 20.4 per cent of revenue expenditure in 2019-20, up from 13.8 per cent in 2009-10. So rather than taking action on wasteful spending or management, the council expects local council tax payers to foot this bill.

A full review of the funding formula is what we raised when I was shadow Minister for local government for seven years here. You take somewhere like Aberconwy; we are disproportionately affected now because, obviously, we have an older population, and with that comes the social care needs. And I always remember being told, 'Oh, well no other council leaders want this funding formula to be looked at'. It was actually introduced in 1991, we're now in 2023, and I actually do think, Minister, at some stage it is worth that effort. It will be hard work and effort, and you won't please everybody, but I do think you need to make the funding formula much more fair. 

The other thing that Councillor Sam Rowlands has mentioned today is the huge surpluses and balances that some local authorities are able to actually hold on to. There's a 7 per cent increase for social care in Aberconwy, and yet—. I don't know if it's Rhondda Cynon Taf or Torfaen, but one of them is 25 per cent. We cannot have these inconsistencies. We talk a lot here about social responsibility and equality, and I would just say now: look at the £2 billion that's in reserves in those local authorities, and where they are not proving that they can spend it on an annual basis, I think you should be looking at clawing it back and redistributing it. Thank you. Diolch. 

I call on the Minister to reply to the debate. 

Diolch yn fawr. Thank you to colleagues for their comments in this debate. I'll just respond to some of the specific issues that were raised. Of course, the interest in reserves was raised this afternoon, and of course, the level of local authority reserves are a matter for those local elected members. They will of course reflect those longer term plans as well as their efforts to manage short-term pressures. Every local authority has reported increased useable reserves as at March 2022 compared to the previous March, but local authorities have now been drawing on those reserves within this financial year to try and respond to some of the pressures of inflation. I know that some are also planning to use some in the coming year as part of their medium-term financial planning.

There might be a range of reasons for the increases that we've seen; for example, local authorities have faced many challenges with capital programmes as a result of the interruptions and delays perpetuated by COVID. That means that some capital grants may be held in reserves, or self-generated funding earmarked for a specific project in the year not used in that particular year. Of course, grant terms and conditions were also loosened in 2020-21 and in 2021-22 for authorities to enable them to manage the uncertainty in the delivery of service-provision programmes because of lockdowns, and, also, because of the reallocation of staff to COVID support work. Of course, that means that some funding, again, was held in reserve to deliver on projects at a later date. Authorities' reserves might also be the result of a number of decisions that have been taken over a period of years around service delivery, council tax levels and, also, their appetite for risk. I don't think that it's fair to say that the level of reserves suggests that the formula is in any way unfair or broken.

I will respond as well on the point of housing support grants—I know that that came up quite a bit in our previous debate on the budget. I think it's important that we do recognise that in the difficult financial situation we've found ourselves in, we did, actually, increase the housing support grant by 30 per cent, or £40 million, in the first year of our three-year spending review. That funding was protected by the Minister in the budget round this year, so it wasn't subject to any of the reprioritisation that some of our other funding was subject to, to try to provide further funding for local government and for the NHS as a result of the pressures that they're facing at the moment. 

Whilst this settlement does build on improved allocations in recent years, I do recognise that it doesn't undo the years of austerity and the impact that that's had on public finances, nor does it match the impact of inflation on local authority costs that we've seen over recent months, and with those effects also still to come. Local authorities have had to make some really difficult decisions in setting their budgets and their council tax levels over recent weeks, and they will have taken into account the differing needs of their communities and worked to balance providing efficient services with, also, the impact of council tax rises on households. This would be a point at which I would ask colleagues to remind their local communities of our council tax reduction scheme, because we know that there are households that are eligible for that but are not yet making the most of that support that is available.

Authorities in Wales, of course, by setting their council tax levels, are responsible to their local electorate for their decisions. Unlike in England, we continue to respect their autonomy; we don't impose blanket limits or require costly local referenda. The flexibility to set their budgets and determine council tax levels to respond to local priorities is a really important feature of local democracy.

As is usual in these debates, and, indeed, in the discussions that I have with local authority leaders, the local government distribution formula has been raised. The core funding that we provide to local government is distributed through a well-established formula; it's created and developed in collaboration with local government and agreed annually with local government through the finance sub-group of the partnership council for Wales. That formula—[Interruption.] Mike, sorry, I didn't see you.

Will you publish the calculations of the 55 different areas of the standard spending assessment? It would prove that those who say it's wrong are correct or wrong. Until you publish that, everybody's going to say that they're being badly treated.

Mike Hedges raised this with me in committee scrutiny last week, when we were scrutinising the second supplementary budget. I have committed to go away and find out what more information we can be providing for those who are involved in what is quite a niche sport, I think, of looking at the underpinnings of local government settlements. But I will certainly go and have a look at what further information can be published.

As I said, the formula is data driven and free of political agenda, and it does balance the relative need and the relative ability to raise income so that authorities in Wales are treated fairly and even-handedly. There is that ongoing programme to maintain and update the formula, including how the formula needs to respond to our work to make council tax fairer in Wales and to other changing policies and circumstances. Again, that's a major piece of work and we are looking at possible transitionary support for local government as we undertake that work of local finance reform. This is not the time to introduce another potential upheaval through a wholesale review of the settlement.

This settlement, as we've heard, has included the latest data available from the 2021 census, so I commend this settlement to the Senedd. It does reflect our commitment to public services and it continues to support local government across Wales to deliver for the people of Wales.

Thank you, Minister. The proposal is to agree the motion. Does any Member object? [Objection.] Yes, there is objection. I will therefore defer voting under this item until voting time.

Voting deferred until voting time.

That brings us to voting time. Unless three Members wish for the bell to be rung, I will proceed directly to voting time.