Ribble Valley Council’s increased spending power to deliver services in the new financial year could be so small that it will not cover inflation costs, councillors are being told.

Disappointment is expressed about the government’s recent draft financial settlement to the borough for the next 12 months in a report for councillors on the Policy & Finance Committee.

There is also disappointment about the government’s tendency to only make short-term financial arrangements with councils, rather than long-term plans.

Ribble Valley Council is preparing its draft budget which will be debated and voted-on in a few weeks.  A report for this month’s Policy & Finance Committee highlights a range of financial elements.

One section looks at the provisional local government finance settlement for the new financial year, beginning in the spring. This is the government’s deal to councils which is approved by Parliament.

Ribble Valley’s draft share was indicated in late December and Michael Gove, the government’s levelling-up secretary, then held a consultation period in January.  The final deal could change, the council report stresses, but the information is based on what was known recently.

The report states: “The financial settlement is for two years, 2023-24 and 2024-25. However, in essence, it is only a one-year settlement with finance reforms pushed back again.”

CORE SPENDING POWER

The report highlights what is called the council’s core spending power. This  is a measure of the resources available to fund delivery of services.

It states: “The government stated that core spending power will rise by an average 9.2 per cent in 2023-24. They have announced a new one-off funding guarantee to ensure no council sees an increase of less than three per cent in  core spending power next year, before any local decisions are made on council tax. Our core spending power will increase by 4.8 per cent.”

Between 2015 and last year, Ribble Valley’s annual core spending power has ranged from  around £6.3million to just over £7million.  This year’s draft figure is just under £7.3million, core spending power has risen by just over £900,000 since 2015.

The report adds: “Our spending power, if we increase our council tax by the maximum allowed, will increase by £332,000. This will not cover the cost of inflation.”

Government funding to councils includes a payment called the Revenue Support Grant. This will increase by 10 per cent, based on the inflation rate in September. This can be used for council services

Other finance items include a one-off government grant for services and Ribble Valley Council will receive £52,600.

The council report is pleased that a rural services delivery grant will continue. It adds: “Over the years we have lobbied the government and supported various groups to point-out the significant extra costs of providing services in rural areas. Next year we will receive the same amount as the current year, just over £113,000.”

DEPENDENCY ON NEW HOMES PAYMENTS

Another source of government funds is the New Homes Bonus. This is paid to local councils as an incentive for new homes, conversions or bringing empty homes back into use. It is based on  the amount of extra council tax raised by a council each year. There is also a payment for affordable homes.

Ribble Valley Council is to get £506,000 this financial year. New home bonuses peaked for Ribble Valley Council around 2020, at just below £1.8million.  Since then payments have fallen.

But the report says the council is relying on £1.1milion of the homes bonus to fund its day-to-day-revenue budget each year. And the government has said the new homes bonus will be reviewed and could end next year.

BUSINESS RATES, COUNCIL TAX & BIG CAPITAL PROJECTS

Business rates and council tax are increasingly important for council income, as traditional government funding has fallen over the years.

Ribble Valley Council works with other Lancashire councils in a pool system to collect business rates. Councils benefit by being able to retain more business rates which are above their base allowances, instead of passing the cash to central government for further redistribution, which is the standard arrangement.

Business rates are expected to remain frozen and could bring in over £2million next year. Some of the rates could be used for the council’s day-to-day needs or larger capital programmes.

Business rates have been the subject of national debate for years. Critics say a new system is needed to allow councils more influence on how locally-collected rates are actually used. For example, on town centre enhancements or other business-focused activity.

Under the current pool system, Lancashire County Council will receive 10 per cent of the total retained business rates. In addition, Ribble Valley, as the lead authority in the arrangement, will receive £20,000 and act as a channel for all payments to and from the government’s Department for Levelling-Up.

Regarding the proposed new council tax, a Ribble Valley household in a band D property is currently charged just over £160 for Ribble Valley services. If councillors agree a £5 increase to £165 a year, this would bring an extra £193,000 from just under 25,000 local households. A total of over £4million would be raised in council tax. Lancashire County Council, police and fire services will all add their own charges to council tax bills too.

Other Ribble Valley budget items include larger capital projects. These are separate to day-to-day revenue costs and come from various sources including major grants. Around £4.6million is earmarked for work at Clitheroe Castle, playing fields, changing rooms at Longridge, council vehicles, Clitheroe market and townscape works,  council computer systems and buildings.