SOCIETY OF COUNTY TREASURERSSEPTEMBER 2020 UPDATE REPORT

REPORT OF THE TECHNICAL SUPPORT TEAM

INTRODUCTION

The purpose of this report is to update the Society on recent developments in local government finance and on the work of the Technical Support Team on behalf of the Society whilst the absence of formal meetings continues due to Covid-19. The SCT website has a Covid-19 webpage with the latest updates and further information.

CONTENTS

1. The Local Government Coronavirus Timeline2. Public Finance3. Local Government Finance4. Estimating the cost of COVID-195. Fair Funding Review and the Review of Business Rates6. Changes to Business Rates7. COVID-19 Support for Business8. Council Tax9. Health and Social Care10.Schools and Children’s Services11.Transport12.PWLB13.Fire & Rescue14.AOB & Society Business

1. THE LOCAL GOVERNMENT CORONAVIRUS TIMELINE (events in grey appeared in last report)

11 th March - the Chancellor, Rishi Sunak delivered the 2020 Spring Budget. At the time the UK had only 373 confirmed cases of coronavirus and 6 deaths; the impact of the virus on the UK was not expected to be significant. The Chancellor said that to “support the NHS and other public services, I am also setting aside a £5bn emergency response fund – and will go further if necessary” More detail can be found below in the Public Health section (below), but headlines include:

o £500m hardship fund - distributed to billing authorities to support vulnerable people in their area. The fund is expected to take the form of council tax relief. (see Council Tax section).

o Coronavirus Business Interruption Loans of up to £1.2m for small and medium sized businesses (see Business Support section)

o Extended Retail Discount – later extended further by removing the £51,000 RV cap

o Those businesses will also be eligible for grants of £3,000 – later increased to £10,000

o Temporary Discount for pubs on their business rates bill increased from £1,000 to £5,000

12 th March – Health Secretary, Matt Hancock promised that Government will ensure the ASC system gets “everything that it needs” to respond to the coronavirus crisis – adding that social care was at the “frontline” of the Government’s response to the virus.

12 th March - the risk to the UK was raised from ‘moderate’ to ‘high’ by the chief medical officer. This was also the day that contact tracing of new COVID-19 cases stopped.

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13 th March – Elections, including English LAs and Police & Crime Commissioners, due to take place in May are officially postponed until 2021.

17 th March - £330bn of Government-backed loans for businesses announced as well as £3.2m for homelessness to help rough sleepers self-isolate.

17 th March – In a teleconference with local government leaders, Local Government Secretary Robert Jenrick urged councils not to put off decisions because of money in their response to the coronavirus pandemic.

18 th March – Government announces that all schools will close, except for the care of vulnerable children and those of key workers from Friday 20th March.

19 th March – Bank of England cuts base rate from 0.25% to just 0.1% - the lowest rate in the Bank’s 325-year history

19 th March – the Government announced the first tranche of £1.6bn of additional funding to support local authorities in responding to the COVID-19 pandemic. (£1.39bn distributed via the ASC RNF and the remaining £0.29bn via the Settlement Funding Assessment (SFA)). The un-ringfenced funding was intended to help local authorities “address any pressures they are facing in response to the COVID-19 pandemic, across all service areas”. Government expected that this funding would be spent on social care in councils and would complement the £1.3bn allocated to the NHS to help support discharges from hospital. SCT members received £679m – 42% of the total.

20 th March – Chancellor announces the Furlough scheme where the Government will pay 80% of workers’ wages up to £2,500 a month. The scheme would be backdated until the 1st March and run for 3 months.

20 th March – Pubs, cafes and restaurants told to close immediately and leisure centres, gyms, cinemas and nightclubs to close “as soon as they reasonably can”.

23 rd March – Prime Minister Johnson announces a UK-wide partial lockdown, requiring the British public to stay at home except in certain very limited purposes from the 26 th

March. 24 th March - The Local Government Secretary confirmed that, to ease cashflow problems, the

Government is bringing forward the payment of the £3.4bn of grants that were due to be paid to local authorities through 2020-21. The £3.4bn consists of the already announced £1.6bn of support for local authorities for COVID-19 pressures, and the initial £1.8bn grant for business rates reliefs measures.

25 th March – Coronavirus Bill receives Royal Ascent26 th March – Pre-DELTA SCT Survey on cost pressures due to Coronavirus. This survey

attempted to capture the areas/headings which were under pressures financially, and whether they were costs/reduced savings etc rather than capture cost estimates.

15 th April – Deadline for first MHCLG DELTA return. The TST analysed the SCT responses; indicating that SCT members were facing a net budget pressure of £2.06bn in 2020-21, £1.38bn more than the current £679m allocated to members thus far. Using the same distribution, the Government would need to triple the emergency funding allocated thus far and would likely need to provide further support for some LAs. See DELTA I section, below

16 th April – To help with cashflow; councils are allowed to defer £2.6bn of Business Rates payments to Central Government and £850m in Social Care Grants will be paid up front.

18 th April – a second tranche of £1.6bn funding for local authorities is announced. Allocations were not published until the 28th April and this time the grant was distributed on a per head basis, which was then split 65:35 between upper and lower tiers (with 3% for fire & rescue). The press release states, “we are backing local district councils and a clear majority will receive at least £1million in additional funding”. SCT members receive just 33% of the total (£525m). Much lower than the previous tranche where member received 42%. The TST understand that the MHCLG had originally requested a greater sum from HMT.

28th April - The government confirms that the Review of Relative Needs and Resource and 75% Business Rates Retention will no longer be implemented in 2021 to 2022. 

30 th April – Robert Jenrick writes to council leaders indicating that the second tranche of funding is based on the Government’s assessment of where pressures are, despite then

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going on to stress the importance of ASC. Mr Jenrick also suggests some ways in which LAs can support the ASC sector – including paying additional fees up front and reconciling later.

1 st May – Additional £6.1m of funding for Business Improvement Districts announced. 2 nd May - £617m in grants made available to certain small business previously outside

the scope of the business grant funds scheme with fixed property-related costs – billing authorities may choose to make payments to other businesses based on local economic need. Allocations of funding will be at the discretion of local authorities.

4 th May – Robert Jenrick tells the Commons’ Housing, Communities and Local Government that local authorities should not “labour under the false impression” that COVID-19-related costs above and beyond what had been expected of them will be reimbursed. He went on to say that he thinks that the funding provided is sufficient so far to support councils in the weeks and months ahead, he also warned that government will not be able to make a judgement on compensation for loss of council tax and business rates income “for some time”.

5 th May – The SCT writes to the Secretary of State highlighting the current £831m funding shortfall and going on to explain where these pressures are coming from; namely foregone income, additional costs, unachieved savings and reduced business rates/council tax yield. The letter requests greater clarity on what will be done regarding lost income as well as highlighting additional costs not yet captured in the formal DELTA return.

6th May – In his final question at PMQs the Prime Minister stated that it was "absolutely right, as anybody knows, to draw attention to the difficulties, the straitened circumstances, the pressures that local councils have been under. That is why we put the extra £3.2 billion in immediately to help them cope, and... certainly, that is by no means the last of the support that we will be giving to our fantastic front-line council workers, who… have borne so much of the brunt of this crisis."

6 th May – In the daily Downing Street press conference, Secretary of State Robert Jenrick claimed that “councils are currently getting more money … for their COVID-19 response than they say they need”. He went on to say that Whitehall would “take into consideration” extra costs faced by councils as the result of actions they have been required to take by the Government.

7 th May – Business Rates Revaluation will no longer take place in 2021 to help reduce uncertainty for firms affected by the coronavirus.

13 th May - A new £600 million Infection Control Fund is announced to tackle the spread of coronavirus in care homes. The funding, whilst allocated to local authorities (based on the number of care home beds adjusted by the ACA as a share of the national number of care home beds), is to be passed directly to care homes. However, administration of the scheme is problematic due to grant conditions and European state aid considerations.

18 th May – MHCLG DELTA II returns deadline. The SCT & CCN had previously engaged Grant Thornton to work to help improve the consistency of returns and prepare analysis of DELTA I & II for lobbying Government. SCT DELTA II responses are analysed by the TST – headlines indicated (based on a return to normal by July) that additional costs plus non-collection fund losses in 2020-21 will be almost £2.0bn – of which just 60% is covered by the SCT shares of the £3.2bn. Estimates of collection fund loses range from £500m to £2bn and are in addition to the costs quoted. The survey also ascertained that LAs do not have the reserves to be able to meet these additional costs. Emergency funding allocations need to more than double just to cover the know costs and predicted lost income in SCT’s unitary members. For further details see DELTA II section, below.

22 nd May – £300m announced for local authorities to implement Track and Trace. Allocations were eventually published on 11th June and are based on the 2020-21 Public Health Grant allocations. This means that despite representing 47% of the English population, SCT members receive just 35% of the total funding.

24 th May - £50m is given from the European Regional Development Fund (ERDF) to support the safe re-opening of high streets. Allocations to billing authorities are calculated

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on a per-head basis (as a proxy for high street footfall) with a minimum grant of £30,000.

26 th May – Government publishes its Recovery Plan.11 th June - £63m announced for local authorities in England to help those who are struggling

to afford food and other essentials due to coronavirus. At the time of writing allocations are yet to be announced.

11 th June – CIPFA issues new guidance to Treasurers considering S114 (see body of report)

12 th June – Furlough rules change – from 1st July previously furloughed employees can be brought back to work part time whilst their wages remain topped up by HMT to the 80% cap. From 1st August business will need to contribute towards the wage cost of their furloughed employees until the scheme ends of 31st October.

15 th June – Simon Clarke, the minister for Local Government, hints at further funding to come for the sector, saying that the MHCLG are working with the Treasury on a package for local government. (See section on Public Finance below).

17 th June – Grant Thornton Report published – highlighting that after years of austerity local government is not in a good position to absorb any additional costs and that much of their current funding was already uncertain. The returns to DELTA II indicated a more consistent approach to collecting cost information – with the average cost equivalent to 8.3% of gross spend (excluding education).

19 th June – Prime Minister announces £1bn of funding to help children catch up on their education

19 th June – DELTA III deadline21 st June – MHCLG publish a summary of the DELTA I and II returns by class of authority. See

Section 4 – Estimating the Cost of COVID-19.23 rd June – Prime Minister announces further lifting of the lockdown from 4th July30 th June – First full local lockdown implemented in Leicester as coronavirus cases rise, but no

additional funding is announced.1 st July – LGA estimate that the funding gap for local government is £7.4bn.1 st July – Ministers reject calls to review statutory duties2 nd July – Robert Jenrick unveils the “comprehensive support package” originally announced in

June. £500m additional funding, support for lost sales, fees and charges income and ability to spread collection fund losses over 3 years. Jenrick adds that he will lobby Treasury if more funding is needed this year.

2 nd July – Government publish plan to re-open schools safely in September2 nd July – Central and Local Government at odds regarding the sharing of postcode level

data of positive cases of coronavirus2 nd July – Fears for the future of the High Street as 6,000 jobs cut in one day3 rd July – According to the LGC a third of senior officers expect their authority to be forced to

issue a Section 114 notice4 th July – Libraries allowed to re-open but customers will not be allowed to browse the shelves.4 th July – Pubs, Restaurants, Hairdressers and Cinemas allowed to re-open6 th July – Government announces additional £1.57bn funding for Art Venues8 th July – Chancellor announces his three-part “plan for jobs” in Summer Budget which

includes the “eat out to help out” scheme. 16 th July – Distribution of the £500m funding announced on 2nd July finally announced.16 th July – Prime Minister commits to a review into the UK’s response to the coronavirus

pandemic17 th July – NHS given additional £3bn to cope with potential second wave of COVID19 and to

ease winter pressures18 th July – Local councils given more powers in local lockdowns – to close specific premises,

shut public outdoor spaces and cancel events 21 st July – Chancellor launches the Comprehensive Spending Review – covering 2021-22 to

2023-24 (2024-25 for capital)24 th July – It becomes mandatory to wear a face covering in shops and supermarkets in

England.25 th July – Holiday makers returning from Spain now required to quarantine for 14 days on

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29 th Jul y – Labour publishes data showing UK tourist hot spots have borne the brunt of the job losses during the coronavirus pandemic.

30 th July – The Minister for Regional Growth and Local Government Simon Clarke announces £20m in new grants to support the recovery of small businesses, allowing access to grants of between £1,000 and £5,000, to fund new technology, equipment and professional advice.

30 th July – Alok Sharma gives local authorities until 28th August to spend their allocations of the small business grant fund or risk having to repay any unspent amounts to Treasury.

30 th July – UK sees highest daily cases of Coronavirus for over a month. Arrivals from Luxemburg required to quarantine on arrival.

31 st July – Local lockdown restrictions come into effect in Greater Manchester and parts of Lancashire and Yorkshire preventing people meeting people from other households.

3 rd August – Number 10 says pubs likely to be spared restrictions if cases begin to rise again.

4 th August – English councils with the highest number of cases launch their own track and trace system

4 th August – Ministers warn local government “don’t rely on more funding”. Robert Jenrick also pledged to “very strongly” urge the chancellor to ensure councils have sustainable finances in this autumn's CSR.

4 th August – Research commissioned by the CCN indicates that half of the workforce in county areas is “at risk” from Coronavirus.

6 th August – The Bank of England reports that the hit on the UK economy will be less severe than expected, but the recovery will also take longer. It expects the economy to shrink by 9.5% this year, less than the Bank's initial estimate of a 14% contraction.

8 th August - £40m funding announced to help school transport9 th August – UK officially enters recession this week after tumbling by a record 20% in the

second quarter.10 th August - Local coronavirus test and trace teams are to be rolled out to all upper-tier

English councils.15 th August – Casinos, theatres and bowling alleys are allowed to reopen. 15 th August – Matt Hancock announces that Public Health England is to be scrapped and

replaced by a new body designed to protect the county in the face of a pandemic. 15 th August – Holiday makers returning from France, Netherlands, Monaco and Malta are now

required to quarantine for 14 days on their return.18 th August – SAGE advises local authorities to avoid using the term “lockdown” as it can

be seen as punitive. 19 th August – The IFS, in research commissioned by the LGA, say that local government is

facing a £2bn “black hole” due to the pandemic. 21 st August – Eviction ban extended until 20th September amid fears it could lead to a rise

in homelessness. 26 th August – CBI warns of “ghost towns” if office workers do not return to the office, harming

thousands of small businesses that rely on the passing trade. 26 th August – Primary pupils’ learning gap widens for the first time since 2007.27 th August - Workers on low incomes in parts of England where there are high rates of

coronavirus will be able to claim up to £182 if they have to self-isolate.27 th August – LGPS given greater flexibility to review contribution rates following the

impact of COVID-1928 th August – Highest number of daily cases (1,522 in past 24 hours) of COVID19 since mid-

June29 th August – Matt Hancock warned that England could face nationwide restrictions and

very extensive local lockdowns in the event of a second wave of coronavirus this winter.

2 nd September – Sir Kier Starmer calls on the Government to extend the furlough scheme – citing examples in Europe where schemes have been extended into 2021.

3 rd September – Institute for Government report says that central Government was too slow to involve local government in its coronavirus testing.

4 th September – DELTA 5 deadline.

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7 th September – The Scottish Government impose tighter restrictions on people living in Glasgow and the East Dunbartonshire Council area.

8 th September – Caerphilly residents face restrictions on leaving their homes after a steep rise in cases.

9 th September – Holiday makers returning from 7 of the Greek islands will now also have to quarantine on their return to the UK.

14 th September – following a steep rise in COVID-19 cases, especially amongst young people, gatherings of more than 6 people will be banned – enforceable with a £100 fine. This does not affect school, colleges, workplaces, weddings, funerals, pubs, restaurants or sport.

2. PUBLIC FINANCE

SPRING BUDGET 2020

On 11th March 2020, at the start of the Coronavirus outbreak, the newly appointed Chancellor of the Exchequer Rishi Sunak delivered his first Budget announcement. The Budget included several measures aimed at protecting the UK economy from any longer-term damage due to lower economic activity expected over the following months. These measures included further reductions and exemptions from business rates which the government will fund through section 31 grants but in the view of SCT President Gary Fielding “provides further evidence of the increasing fragility of business rates as a nationally set tax to fund local services”.

The Government had already announced the Business Rates retail discount would be increased to 50% in 2020-21. Given the recent outbreak of COVID-19, the Budget increased this to 100% rates relief. This relief would also be expanded to include leisure and hospitality sectors (and was later extended again to remove the £51,000 RV cap). Additionally, the planned £1,000 rates relief for pubs with a rateable value below £100,000 would be temporarily increased to £5,000 from 1st April 2020. The £1,500 business rates discount for office space used by local newspapers in England will be extended until 31st March 2025.

On the morning of the Budget, the Bank of England announced an emergency cut in interest rates to protect the economy from any potential shock caused by the Coronavirus outbreak. Interest rates were reduced from 0.75% to 0.25%, the joint lowest rate that has been seen in the UK in recent history. Rates have since been lowered further ; to just 0.1% - the lowest in the bank’s 325-year history.

SUMMER BUDGETUsually, the Chancellor saves fiscal announcements for the autumn budget and spring statement; however, given the unprecedented economic circumstances, on the 8 th July, the Chancellor unveiled a range of schemes to support the UK economy and protect jobs. This “Plan for Jobs” announcement followed figures from the ONS showing the UK economy shrunk by 20.4% in April alone with the OECD [Organisation for Economic Cooperation and Development] predicting that the UK’s unemployment rate could rise to as much as 11.7% by the end of the year, assuming a second wave of Covid-19 can be avoided.

The policies announced included: a new Job Retention Bonus to encourage firms to keep on furloughed workers supporting jobseekers with direct help to find work and to gain the skills people need to

get a job protecting jobs in the hard-hit hospitality and accommodation sectors and at attractions

by supporting demand for these businesses, giving them confidence to reopen - the start of the “Eat out to Help Out” scheme

creating jobs by getting the property market moving, increasing and bringing forward infrastructure investment, and to make homes greener, warmer and cheaper to heat.

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The next phase (phase 3) of the recovery plan will be announced in the Autumn Budget.

AUTUMN BUDGETAt the time of writing the date of the Autumn budget is yet to be announced.

Reports in the press suggest discussions are ongoing within Government as to the future level of taxes, with rumours that the rate of corporation tax could rise from the current 19% to 24%. Other Ministers have suggested that taxes should be cut in order to stimulate the British economy.

There are also suggestions that the living wage, which had been expected to rise from £8.72 to £9.21 per hour from April 2021 may be delayed or halted following affordability concerns.

SPENDING REVIEWThe Spending Review was originally announced in March with an intention to conclude in July 2020 – covering a 3-year period to 2023-24 for revenue funding and 2024-25 for capital. However, in April the Government announced that, due to the pandemic, the Spending Review publication would be delayed until the late summer/autumn. The CSR was formally launched on 21st July, the deadline for submissions is the 24th September.

The TST understands that the Chancellor remains keen to carry out a 3-year Spending Review, but that he is keeping his options open to just doing a single year if there is a second peak of cases in 2020.

The Chancellor had previously indicated (in the March Budget) that departmental spending would rise by an average of 2.8% (including commitments already made for Health and Education). Although realistically, a real-terms freeze was expected for the rest of public services – backed up by IFS analysis .

However, the coronavirus has impacted significantly on public finances. In mid-May a leaked Treasury document indicated that the UK’s deficit is likely to reach £337bn this year – more than 6 times the £55bn predicted in the March budget and the highest since the Second World War. Officials believe the deficit could rise above £500bn in the worst-case scenario.

On 19th June the Chancellor confirmed that the UK’s debt was now larger than its economy after having to borrow £55.5bn in May – nine times higher than was borrowed in May 2019.

An IFS (Institute of Fiscal Studies) paper commissioned by the LGA estimated that local government faced a ‘black hole’ and that many “face a difficult choice between depleting reserves to low and potentially risky levels or cutting spending on important services…even if more funding or flexibilities are forthcoming this year, council will still not be out of the Covid-19 woods…financial pressures will continue into next year and beyond, not least because shortfalls in council tax and business rates collections will have to be reflected In councils’ main accounts.”

3. LOCAL GOVERNMENT FINANCE

SUPPORT FOR LOCAL GOVERNMENT

To date the Government have provided local government with the following tranches of funding:

Two lots of £1.6bn – each distributed in different ways £500m Infection Control Grant – to be passed directly to social care providers £300m Test and Trace funding – a new burden

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£500m in a third tranche of funding (see paragraph below) – distributed through a new formula intended to replicate the pattern of pressures reported in the DELTA returns.

In June, Simon Clarke indicated that the MHCLG and Treasury were working on a “comprehensive spending settlement for the sector”. This eventually emerged as the 3rd

tranche of funding (£500m), a compensation scheme for losses of Sales, Fees and Charges (SFC) income and the ability to spread collection fund losses over 3 years rather than just 1.

The SFC compensation scheme aims to reimburse local authorities for up to 75p in the pound of losses after the first 5% loss. Research by the IFS (backed up by TST research) indicate that approximately 50% of losses will be recoverable through this scheme.

Meanwhile, many local authorities of all classes and in all regions are raising serious concerns about whether they need to begin cutting vital services or even consider issuing Section 114 notices. MHCLG are requesting that local authorities facing this kind of situation should contact them directly in the first instance.

The Society of County Treasurers had previously called on the Government to underwrite the potential losses of council tax and business rates. Whilst the funding so far has eased cashflow issues, the longer-term sustainability of councils is at risk if they cannot collect council tax and business rates in a post-COVID recession.

The IFS had also called on the Government to loosen the rules around borrowing for everyday COVID-related spending, which could then be reimbursed in the future by central Government. It is understood that the Treasury have previously ruled out capitalisation options on the grounds that not all LAs have the capital receipts to do so as well as reasons of affordability. Removing or relaxing the current council tax referendum principles will also be unpopular in an election year for local government.

PROVISIONAL SETTLEMENT

It remains a statutory requirement for the MHCLG to consult on the Provisional Local Government Settlement. As such, the TST still expects the Provisional 2021-22 Settlement to be published in December 2020, prior to the Christmas recess (tbc, but usually ~20 th

December)

Whilst we understand that the settlement team at MHCLG are now beginning to think about the settlement and how it might work, there are still many unknowns – not least of which is the outcome of the 2020 Spending Review and any reset of business rates and measures put in place to help local government respond to the coronavirus.

DEVOLUTION

The Conservative Manifesto committed to publishing a White Paper on devolution if they won the 2019 General Election. Simon Clarke, who took over the role of Minister for Devolution in March, but who has since resigned his post (8th September) had confirmed his support for devolution, saying he hoped the white paper will be a “genuinely seminal document” which will “help the process of unlocking devolution everywhere and empowering communities on a scale never seen before”.

At the time of writing, the White Paper had been expected to be published by the beginning of October, however the departure of Simon Clarke (for personal reasons) could indicate a further delay. The role is passing to Luke Hall who previously held the role of under-secretary of state at the MHCLG.

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There has been much in the sector press (see SCT website news) regarding bids and counter bids for unitarisation in two-tier areas and even the possibility of smaller unitary authorities being subsumed into larger ones.

In June, whilst giving evidence to the House of Lords’ Public Services Committee, the CCN Chairman argued that England had too many councils and called for reforms on the way local government is organised. The District Council Network responded that their members are “flat out dealing with COVID issues” and “reorganisation on top of that is the last thing [they] need at the moment”.

The PWC report commissioned by CCN estimated that £3bn nationally could be saved by replacing two-tier areas with single tier unitary authorities. However, the cost associated with splitting Social Care teams to create more than one unitary in a county area would be expensive – estimated to be in the region of £74m for a medium sized authority – or £1.9bn nationally (over 5 years).

In July, at the LGA conference, Simon Clarke indicated that authorities that adopt elected mayors will get the “most generous” devolution deals. He went on to say that the Government did not yet have a fixed view on the minimum size of a new unitary, despite suggesting in an earlier written parliamentary response that they were considering a minimum population size of between 300,000 and 400,000.

The Liberal Democrats have formally expressed that they are not supportive of reorganisation at this time saying in a letter that it is “an extremely resource-intensive and unwelcome distraction at a time when we should be completely focused on responding to the recovery needs of our communities… partnership work throughout the COVID pandemic has shown how well councils and local partners are working together within existing structures”

4. ESTIMATING THE COSTS OF COVID-19

Since the start of the COVID-19 crisis there have been many attempts to quantify the costs of the crisis for local government, and our members. The most wide-ranging and consistently returned survey has been MHCLG’s monthly “DELTA” return attempting to capture both the costs-to-date as well as an estimate for the rest of the 2020-21 financial year. Smaller scale, society wide, service-specific surveys were issued early in the crisis however, most of these have since been resolved or are now a feature of the DELTA returns.

There were initial frustrations at the start of the outbreak that Ministers and civil servants didn’t understand where the cost pressures were arising (i.e. not just additional costs, but missed savings, foregone income and reduced Council Tax & Business Rate yield) but there does now seems to be a wider understanding within MHCLG.

SCT results of earlier DELTA surveys have been published on the COVID-19 page of the SCT website At the time of writing the most recent survey to have been analysed was DELTA 4 – capturing costs until July. DELTA 5 had a deadline of 4th September and is currently being analysed. Results will be shared when available.

The collection of spend data and specifically estimates for the 2020-21 financial year remain uncertain. SCT members forwarded their responses to the Technical Support Team for detailed analysis. Responses from the rest of local government have not been published by MHCLG – other than in summary format.

DELTA I (capturing costs up until April)

The initial DELTA survey concluded that SCT members were estimated to be facing additional costs in 2020-21 of £1.2bn with lost income worth £873m. This, when netted off against the £679m SCT allocation from the first tranche of £1.6bn funding left a gap of £1.4bn.Technical Support TeamSociety of County Treasurers (SCT) 9

DELTA II (capturing costs up until May)

There was significant work undertaken by Grant Thornton and CCN ahead of DELTA II to improve the consistency of responses. It worked and there were fewer outliers, however many treasurers remained cautious about the accuracy of their estimates.

Billing authorities were the only authorities asked about collection fund losses – which for the SCT unitary members came to £504m. It is difficult to extrapolate this to all members, but it could be as high as £2.2bn. Non-collection fund losses were estimated to be £454m

Taking the additional costs (£1.5bn) and the non-collection fund losses (£454m) together and netting them off against the SCT’s share of the £3.2bn (£1.2bn) leaves a shortfall funding gap of £750m. Combining this with the collection fund losses of somewhere between £504m and £2.2bn and the gap is even wider.

The number of SCT members facing imminent cash flow problems fell from 9 in DELTA I to just 4 in this second survey.

DELTA III (capturing costs up until June)

Based on the updated figures provided in DELTA III and assumptions made by the Technical Support Team on CCG funding (where funding had not yet been agreed), the gap remained at £768m, excluding council tax and business rates losses.

DELTA IV (capturing costs up until July)

The 4th DELTA survey included the Test & Trace Funding and Infection Control Funding (of which SCT members received £444m) as well as the 3rd (£500m) tranche of funding for local government.

Additional costs had risen to £1.67bn, non-collection fund losses had increased to £472m. CCG reimbursements were estimated to be worth £243m for SCT members.

The result, after extrapolating the impact on collection fund for precepting SCT members, showed the gap for members at just over £1bn. This estimate did not include any impact of the Sales, Fees and Charges compensation scheme as the necessary figures were not yet collected.

DELTA IV follow-up questions

Following the analysis of the 4th set of DELTA returns the Technical Support Team circulated a number of additional questions, to which they received 35 responses from members. Headlines from the additional questions are:

18 out of the 25 responses are not revising their 2020-21 budget due to COVID-19 – some are using reserves and others indicated that they have received sufficient grant funding. Others have said that they were awaiting the implementation of the SFC income guarantee scheme before making any budget decisions.

The average estimated loss from SFC income in 2020-21 was £10m but results ranged from £1m to £102m. Based on information provided, the SCT Technical Support Team estimated SFC income protection to offer an average of £5m – approximately 50%. This supports the findings of the IFS.

The additional questions also asked respondents whether they had included gross costs of Test and Trace and Infection Control Grant funding. The majority had done so, and it was requested that future returns continue to include gross costs.

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DELTA V (capturing costs up until August) – currently being analysedDELTA VI – will be issued 25th September with a 2nd October deadlineDELTA VII – will be issued 23rd October with a 30th October deadline

ENGLAND-WIDE RESULTS

On 21st June the MHCLG published the results, by class of authority for DELTA I & DELTA II. These have since been added to and now include summary information up to DELTA IV. The data is not published for individual authorities, so it is not possible to draw comparisons between the CCN/SCT and others. However, the headlines are:

National additional spending in 2020-21 is forecast to be £5.0bn (up from £4.4bn in DELTA III) with Shire Counties still seeing the largest additional costs at £1.4bn.

Adult Social Care accounts for 43% of the total costs, followed by “other” at 19% - the majority of which is attributable to “costs associated with foregone savings/delayed projects”.

38% of ASC costs fell in Shire Counties, 28% in unitary authorities and 21% in Met Districts.

With regards to lost income (including council tax, business rates, SFC etc); the national total for 2020-21 is forecast to be £6.2bn (a reduction on the £6.5bn in DELTA III) with Shire Counties seeing by far the lowest share of the lost income (due to council tax and business rates reductions only being shown as a billing authority cost on the DELTA returns).

33% of lost income was due to reduction in sales, fees and charges (SFC) income, 27% for both business rates and council tax and 9% commercial income.

From March to July the additional costs, nationally, are £2.5bn. The lost income (excluding council tax and business rates), nationally, is £1.8bn. The IFS estimate that approximately half of the SFC income lost will attract compensation – which would reduce the income losses to £1.1bn. Assuming the IFS estimate is correct, then the sum of costs plus losses is £3.6bn.

Funding so far nationally totals £3.9bn, if you include the Track and Trace Funding and Infection Control Grant. Clearly the pattern at local authority level will be far more varied.

5. FAIR FUNDING REVIEW AND THE REFORM OF BUSINESS RATES RETENTION

WORKING GROUPS

As covered in the last SCT update report, following the coronavirus outbreak in the UK the Government announced that meetings of the Steering Group and the Working Groups would pause to allow local authorities to focus on their response to the pandemic. Please refer to the last report for an update on the progress to date.

Despite the Fair Funding Review Technical Working Group not having met since June 2019, and no consultation on the propoosed formula as had been expected (pre-COVID). The SCT were supportive of the delay, with implementation now being planned for 2022-23, as there remain many areas still to be examined; including transitional arrangements, treatment of resources, the area cost adjustment, how the foundation formula quantum will be set, the detail of the Children’s formula, and the actual allocations from the ASC formula.

However, in the third tranche of funding (£500m) the MHCLG decided to use a new formula to distribute the funding to councils based on population, the Index of Multiple Deprivation (IMD), Technical Support TeamSociety of County Treasurers (SCT) 11

tier splits and the new Area Cost Adjustment (ACA). The formula appeared to have been developed using the previous DELTA returns as the dependent variable. Disappointingly the MHCLG did not consult, either with the Technical Working Group or wider with other stakeholders, ahead of the announcement.

This was local authorities’ first look at the results of the revised ACA and a rare use of the IMD in non-ringfenced funding.

6. CHANGES TO BUSINESS RATES

REVALUATION

In May, the government announced that the planned revaluation of business rates will no longer take place next year (2021) to give businesses more certainty about their costs at this time.

BUSINESS RATE RESET

Local authorities had originally been expecting a business rates reset ahead of the 2021-22 financial year. Ordinarily a reset would be an opportunity to set needs and resources at a similar level whilst ensuring that the incentives in the system were not lost. However, a statement from the MHCLG in April said that they “..would like to keep open the option of looking at how we treat accumulated BR growth from next year…we’ll of course be reflecting on what the sector is telling us about what might happen to BR income next year”. This would imply that the reset may be a way for the MHCLG to smooth the turbulence or address issues caused by the coronavirus pandemic.

CASHFLOW SUPPORT

On 16th April, following the first tranche of funding for local authorities which many in the sector said was not enough, the Government announced that it was allowing billing authorities to defer making payments to central government. It was accompanied by the news that £850m of Social Care grants would be made early this year. These measures were intended to assist with immediate cash flow problems but did not represent any additional funding.

COLLECTION FUND LOSSES

Later, on 2nd July, the Government announced that local authorities would be able to spread their collection fund losses over 3 years, rather than the usual 1 year. Despite this there remains a concern that a large drop in income from business rates and council tax would push some local authorities close to collapse. Some, including the SCT and CCN have called on the Government to underwrite potential losses – indeed there have been rumors that MHCLG ministers are considering an income guarantee scheme similar to that of the Sales, Fees and Charges Scheme but there has been nothing official released.

While the funding decisions so far have eased cashflow issues, the longer-term financial stability for councils is at risk if they cannot collect council tax and business rates in a post-COVID recession.

BUSINESS RATES – CALL FOR EVIDENCE

The Treasury published the call for evidence on 21st July – the review is split into two with the earlier deadline, of 18th September, covering areas of greater concern for counties. Final Technical Support TeamSociety of County Treasurers (SCT) 12

conclusions are expected to be published in the Spring 2021 but some more minor changes to the multiplier or reliefs may be possible for implementation in 2021-22.

The review’s aims are to reduce the burden on businesses, improve the current business rates system and consider more fundamental changes in the medium to long term. Council tax or the structure of local government funding are out of scope for the review.

Treasury are keen to retain at least an element of the tax being tied directly to property but are considering the introduction of an additional tax – potentially an on-line sales tax to address the perception that the high street is paying more than their fair share.

The SCT are responding to the consultation and a draft response has been circulated to members.

7. COVID-19 SUPPORT FOR BUSINESSES

Since the start of the Coronavirus outbreak there have been numerous measures put in place to support businesses, some of which have come in the form of business rate relief. Based on published NNDR1s (estimates) this rate relief support is worth almost £10bn. The MHCLG said “it means that those which may be the hardest hit by the pandemic, such as eligible shops, restaurants, cafes and pubs will pay no business rates whatsoever this financial year”.

Other, non-business rate, support for businesses is also listed below for completeness.

Expanded Retail Discount (announced in the March budget). Eligible retail businesses received 100% discount for 2020-21. The scheme was extended to include hospitality and leisure properties. On 25th March the scheme was further expanded to include some businesses that were previously excluded such as estate agents, letting agents, betting shops and bingo halls. The Government also confirmed that, following discussions in Europe and given the sectors effected by COVID-19, Expanded Retail Discount was not considered to be state aid.

Pub discount increased to £5,000 for pubs with an RV of less than £100,000.

Grants for small businesses. Those in receipt of Small Business Rate Relief or Rural Rate Relief would be eligible for grants of £3,000 – later [17 th March] increased to £10,000. The Retail, Hospitality and Leisure Grant would be paid to those businesses that would have been eligible for the expanded retail discount with an RV of less than £51,000.

On 3rd April 2020 the department for Business, Energy and Industrial Strategy (BEIS) announced Business Grants to be issued by billing authorities. All grants were to be paid to the ratepayer with costs being monitored through DELTA. New burdens as well as the costs of the grants will be funded by BEIS.

However, reports in mid-August suggested that there remained a significant sum of business grant funding unallocated – almost £1.5bn of the £12bn total, with businesses reporting diffciulties accessing the funding.

The Nursery Discount: the government announced that many non-local authority childcare providers would pay no business rates at all in 2020-21. The relief applies to providers on Ofsted’s Early Years Register where the hereditament is used wholly or mainly for the provision of the Early Years Foundation Stage.

The Furlough Scheme – announced on 23rd March the Government would pay 80% of salaries (up to £2,500 a month) for workers not able to work due to the coronavirus.

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The initial scheme ran from 1st March (backdated) for three months (i.e. the end of June). On 12th May the Chancellor announced an extension to the scheme for a further 4 months but that from July it will be available for workers going back to work part-time in a bid to “wean” business off the scheme.

As of 7th June 2020, approximately 8.9 million jobs, from 1.1 million different employers, were furloughed. On 2nd September, Sir Keir Starmer called on the Government to extend the scheme, in line with other European countries, some of whom have extended their schemes into 2021.

Other packages of support for businesses included: Statutory sick pay relief for SMEs Coronavirus Business Interruption Local Scheme – loans of up to £5m for

companies with an annual turnover of up to £45m. The government guarantees 80% of the finance to the lender and pays interest and any fees for the first 12 months.

The Coronavirus Large Business Interruption Loan Scheme where the Government guarantees 80% of the finance to the lender. The scheme allows firms with a turnover of more than £250m to borrow up to 25% of their turnover, up to a maximum of £200m.

Bounce Back Loans – offering small and medium sized companies a 100% guaranteed loan of up to £50,000. Billed as being easy to apply for, with a 2.5% interest rate.

The HMRC “Time to Pay” Scheme – allowing some VAT and self-assessment tax payments to be deferred without penalty

Self Employed Income Support Scheme – announced on 27th March by the Chancellor – gives self-employed subsidies of up to 80% of profits up to £2,500 per month. Available to self-employed people who posted profits of less than £50,000 for the last financial year, or if their average trading profit for the last three years, is less than £50,000.

KICKSTART SCHEME

Announced in July as part of the Government’s Plan for Jobs, and launched on 2nd September, the £2bn Kickstart Scheme funds employers to pay 16-24-year-olds (at the relevant minimum wage for their age) for up to 25 hours per week. Payments will also cover the associated employer national insurance contributions and employer minimum auto-enrolment pension contributions.

The 6-month placements are open to those who are claiming Universal Credit and at risk of long-term unemployment. Extra funding will also be made available to help young people find employment after the scheme ends.

8. COUNCIL TAX

As highlighted earlier in this report the Government have now announced that local authorities will be able to spread the cost of collection fund losses over three years rather than the usual one year.

There have been no further announcements on support for council tax payers. Details of the previously announed Hardship Fund and SCT-wide surveys on Council Tax holidays/reliefs can be found in the previous SCT report.

9. HEALTH AND SOCIAL CARE

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Undoubtedly Social Care has been one of the services under the greatest pressure from the coronavirus pandemic.

SOCIAL CARE GREEN PAPER

Originally expected by the end of 2017, the social care green paper remains unpublished. The Technical Support Team does not expect this to be published in the near future. In a January 2020 answer to a Parliamentary Question (PQ) on when the Government plans to publish the social care Green Paper, the Government stated that it “will seek to build cross-party consensus and will outline next steps shortly”, this may well be postponed due to COVID-19.

There are now many voices highlighting how urgent reform of the sector has become, not least the House of Lords Economic Affairs Committee who, in a letter to the Chancellor, highlighted the need for reform. Mr Sunak, giving evidence to the committee cited the absence of a consensus over funding as a significant barrier to care reform, along with the expense.

In the absence of the Green Paper, the Centre for Policy Studies has suggested that a pension-style system is the most viable and sustainable way of reforming elderly social care – increasing supply and better protecting people’s assets. The report co-author, Jethro Elsden, said “it is now urgent that we reform the social care system. The coronavirus crisis has underlines how precarious the current funding situation is. We cannot continue to go on talking about reforming the system but never getting round to actually doing it”.

TEST & TRACE FUNDING

On 11th June the Government announced £300m for upper tier local authorities to support the new NHS Test and Trace service. The funding is to support local areas to “develop and action plans to reduce the spread of Coronavirus in their area”.

Allocations were made according to need, “with additional funding provided for communities with lower incomes and higher demand for healthcare settings” using the Public Health Grant formula. Allocations can be found here.

ABOLITION OF PUBLIC HEALTH ENGLAND

On 15th August the Government announced that it was scrapping Public Health England in a move seen as “blame-shifting” by the Labour party.

Public Health England would now be “brought together” with the NHS Test & Trace programme and the UK’s Joint Biosecurity Centre. The new body would be known as the National Institute for Health Protection and will be charged with preventing future outbreaks of infectious diseases. Despite the perceived poor performance1 of the NHS Test & Trace scheme, the NIHP will be headed up by Conservative peer and current head of the Test and Trace system, Dido Harding.

Health leaders have been quick to warn over the abolition of PHE citing the damage that will be done to the fight against obesity, smoking and alcohol misuse.

£588m FUNDING TO SUPPORT PEOPLE RETURNING FROM HOSPITAL

1 For example – less than half of close contacts contacted in areas where there is a local outbreak, issues with sharing data with local authorities, Technical Support TeamSociety of County Treasurers (SCT) 15

In August the Government announced a further £588m which the NHS could access from 1st

September to fund up to 6 weeks of any additional support needed for people being discharged from hospital, so that they can receive ongoing help with their recovery or rehabilitation.

The LGA responded to the new guidance by saying that “we are pleased to see this further injection of funding to ensure that people can leave hospital as soon as is safe and return home wherever possible.

“‘We are also reassured by the commitment that no one will go into a care home without having been tested for the virus. Local government has asked for these commitments and will continue to play a key role in making them happen.”

10. SCHOOLS AND CHILDREN’S SERVICES

£1bn FUNDING FOR PRIVATE TUITION

On 19th June the Prime Minister announced a £1bn investment in a “catch-up” package to tackle the impact of lost teaching time due to the Coronavirus. £650m will be shared across state primary and secondary schools over the 2020-21 academic year (i.e. from September 2020 onwards). Head teachers will be able to decide how the money is spent but the Government expects this to be spent on small group tuition for whoever needs it. The Government have asked the Education Endowment Foundation to develop a toolkit of effective strategies and interventions, to help ensure good value for money is achieved. This funding is one-off and will not be built into schools’ baselines.

Separately, a £350m National Tutoring Programme will increase access to high-quality tuition for the most disadvantaged young people over the 2020-21 academic year – specifically the autumn term. The aim of the scheme is to prevent the gap between them and their more affluent peers from widening.

The Government have also confirmed that the Year 7 Catch Up Premium will not be paid in 2020-21 but schools will continue to attract funding for pupils with low prior attainment throughout years 7-11 through the National Funding Formula.  

EARLY YEARS SUPPORT PACKAGE

On 24th August the DfE announced a £9m package targeted at Reception-age children to boost early language skills among young pupils whose development has been disrupted by COVID-19. The funding will provide schools with training and resources to help them deliver one-to-one and small-group support for 5-year olds.

Schools are invited to apply for the funding here (deadline 30th October) with participating schools able to access online training from the start of the 2021 spring term. All stat-funded schools with a reception class can apply but places are limited. In the event of places being oversubscribed then schools will be prioritised based on their percentage of FSM eligibility.

ADDITIONAL FUNDING FOR CORONAVIRUS COSTS

On 7th April the DfE published guidance on the financial support for exceptional costs in schools during the coronavirus crisis. The guidance was updated on 24th June and covers the period until the end of the summer term (July) 2020.

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The main changes to the guidance were 1. Update on the impact of schools’ financial reserves on eligibility for this funding.2. Detailed support that schools can access to cover the loss of self-generated income

which is not covered by this fund.3. Confirmed that schools should proceed with a phased wider opening and any measures

associated with it should some from within existing resources, as any costs incurred as part of that process cannot be claimed through this fund.

Funding is available to schools that were unable to meet additional costs from their existing resources, or which they could only meet by drawing down on reserves and undermining their long-term financial sustainability (including preventing a planned repayment of a historic deficit).

However, schools were not eligible for funding if they expect to finish the financial year with a higher level of reserves than they started with.

School were asked to make the necessary payments from their existing budgets and record these in line with local finance policies. The DfE would then reimburse the costs. Schools can claim varying amounts depending on the size of the school – ranging from £25,000 to £75,000 for mainstream schools. Special schools and alternative provision will be able to claim up to £50,000 regardless of size.

Regarding lost income from a service or operation that is wholly or significantly funded by private income; where the school has staff delivering these services, they should first consider redeployment or making necessary savings from their existing budget. Once these 2 options have been exhausted then the schools can consider using the Coronavirus Job Retention Scheme (aka the Furlough scheme)

HIGH NEEDS

The issue of growing deficits in high needs budgets remains a concern to treasurers despite The School and Early Years Finance (England) Regulations 2020 establishing a statutory requirement for any DSG deficit balance to be held within the local authority’s overall DSG, meaning that LAs cannot fund deficits from general funds without approval from the secretary of state.

The SCT has continued to press the DfE to come up with a sensible plan, with more funding and a definitive explanation on how the financial management of the high needs block will work.

The Department for Education announced a review of SEND last September but this has yet to be published.

HOME TO SCHOOL TRANSPORT

During the summer 2020 term, alongside discussions about schools opening and the likely need to continue practice social distancing in the medium-term, the issue of home to school transport rose up the agenda. In the absence of Government guidance on the requirements to be placed on local authorities cost estimates remained very much estimates with many assumptions subject to change.

Guidance for the provision of Home to School transport has now been published and can be found here.

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In early August the Education Secretary announced £40m of funding for local transport authorities ahead of the return to schools and colleges in the autumn term. The funding is intended to create extra capacity and allow hundreds of thousands more students to use alternatives to public transport, while social distancing measures remain in place.

According to the press release, local transport authorities will be allocated the funding to reflect the number of children and young people in the local area and how far they have to travel. This included students travelling to education or training as well and anyone supervising or escorting students to education provision.

UNACCOMPANIED ASSYLUM SEEKING CHILDREN

On the 8th June a letter was sent from the Home Office to all Council Leaders and Chief Executives outlining the “positive changes” being made to the funding for unaccompanied asylum-seeking children (UASC) and UASC care leavers. From April 2020 for the 2020-21 financial year:

The Home Office will increase their contribution (to all former UASC care leavers) to £240 per care leaver per week.

Remove the reduced rates for legacy case claims Remove the first 25 Care Leavers’ rule which prevented LAs from claiming for the first

25 care leavers in their care. For those authorities where the number of UASC is at least 0.07% of their child

population the funding contribution will increase to £143 per-person-per-night (pppn) (for those under the 0.07% threshold it will remain at £114 pppn)

A further letter was sent to all Chief Executives on 20th August 2020; co-signed by the Home Office, MHCLG, DfE, LGA and the ADCS. The letter came following the announcement that Kent County Council was no longer able to take in any more unaccompanied asylum-seeking children (UASC) and requested emergency assistance from other local authorities. This assistance was requested by 27th August.

IMPROVING SCHOOL BUILDINGSOn the 5th August the Secretary of State for Education, Gavin Williamson, announced £560m of funding to improve school buildings across England. The funding will be used to repair and upgrade 580 schools, academies, sixth form colleges and voluntary aided schools, as well as increasing school capacity at a small number of places.

The 580 building projects, many of which are hoped to be completed this financial year, will be supported by £180m from the DfE’s Condition Improvement Fund. The projects are selected based on bids submitted to the fund for the main funding round earlier this year.

The remainder of the £560m is being provided to local authorities, larger multi-academy trusts and large voluntary aided schools to spend on improving the condition of their schools.

11. TRANSPORT

AIR QUALITY

On the 2nd September a new round of funding from Defra and DfT opened for Local Authorities to apply for. The grant application process is competitive with the projects being encouraged to develop long term solutions to increase awareness and encourage a change in behaviour.

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The press statement goes on to say that “applicants in previous years have been awarded funding to test indoor air quality and the effectiveness of filter systems in schools, develop clean air village projects joining up several London boroughs, and raise awareness around domestic burning and the dangers of using harmful fuels such as coal and wet wood.”

Applications for the grant close at 12pm on 14 October 2020. Further information can be found here.

12. PWLB

PUBLIC WORK LOANS BOARD: FUTURE LENDING TERMS CONSULTATION

Alongside the Budget, the government opened a consultation on the future terms of the PWLB which appears to send a very clear message to the sector. Its consultation summary states: “Local authorities invest billions of pounds of capital every year in their communities. The government supports this activity in part by offering low cost loans through the PWLB. However, in recent years a minority of councils have used this cheap finance to buy very significant amounts of commercial property for rental income, which reduces the availability of PWLB finance for core local authority activities.

To address this the government is consulting on revising the terms of PWLB lending to ensure that local authorities continue to invest in housing, infrastructure, and public services. To further enable high-quality investment by local authorities, the government is cutting the interest rates for investment in social housing by one percentage point and making available an extra £1.15 billion of discounted loans for local infrastructure projects.”

The SCT responded to the consultation – a copy of the response can be found on the SCT website here.

13. FIRE AND RESCUE

Fire authorities did relatively well from the second tranche of COVID funding from MHCLG securing 3% of the per head allocations, as well as the creation of a £6m Special Grant for the fire & rescue service. This Special Grant will be a Bellwin-type scheme which fire & rescue services will need to bid for where they can evidence that Tranche 1 & 2 of the COVID funding has been exhausted.

Fire authorities did not receive any of the third tranche of funding (£500m) but are eligible for assistance through the SFC income guarantee scheme and spreading collection fund losses over three years.

14. AUDITS & ACCOUNTS

ACCOUNTS DEADLINES

Early in the coronavirus pandemic there were calls to reduce the reporting requirements for 2019-20 but these were roundly rejected with auditors, regulators and the Treasury raising concerns about the plans.

On 22nd April 2020 it was decided that the publication date for final, audited, accounts will move from 31st July for Category 1 authorities and 30th September for Category 2 authorities to 30th November 2020 for all local authority bodies.

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To give local authorities more flexibility, the requirement for the public inspection period to include the first 10 working days of June (for Category 1 authorities) and July (for Category 2 authorities) has been removed. Instead local authorities must commence the public inspection period on or before the first working day of September 2020. This means that draft accounts must be approved by 31st August 2020 at the latest.

REDMOND REVIEWSir Tony Redmond published the result of his independent review into local authority financial reporting and external audit on 8th September. The review was originally commissioned in July 2019, under the former Communities Secretary, James Brokenshire.

Redmond found that there is a lack of coherence in local audit arrangements and in the approach to procuring audits. The review found that the cost of audit is 25% less than it should be and as a result the quality of auditors has fallen. Redmond noted that 40% of audits missed the deadline in 2018-19 and suggests that the deadline for audited accounts to be published be extended until 30th September.

The report also questions the effectiveness of audit committees and whether they have enough independent members. Redmond also considers the relationship between the audit committee and inspectors, and between the audit committee and full council.

Recommendations include the creation of a new local government audit body (“small and focused” rather than a recreation of the Audit Commission) and ministers changing the way they judge the financial sustainability of councils.

He also recommends that there is at least 1 independent member required on each Audit Committee, and that Audit Committee members and new S.151 officers need improved training on audit and final accounts. It is also recommended that 3 statutory officers meet External Audit annually and that the External Auditor presents an annual report to the first council meeting after the 30th September.

The review concludes that the current reporting arrangements do not allow the public to understand the accounts and more should be done to improve transparency. He recommends the introduction of a standardised Statement of Services and Costs to enable a comparison between budget setting and outturn. CIPFA will consult on this between September and December with a view to trialing the statement in 2020-21 year-end.

An SCT executive summary can be found on the SCT website.

15. LOCAL GOVERNMENT PAY & PENSIONS

LOCAL GOVERNMENT PAY

On the 24th August it was confirmed that Local Government had accepted a 2.75% pay increase, despite objections from the Unite union.

Unison staff in the local government sector voted two to one (66%) in favour of the 2020/21 pay award, which will apply to England, Wales and Northern Ireland. It comes after 76% of GMB members accepted the offer – while 70% of unite members rejected it. The union’s national joint council committee said the offer - which amounts to £1.83 a day – “fell far short” of the 10% claim and “did not properly reward key workers for their exceptional contributions throughout the pandemic”.

Under the agreement, staff with less than five years’ service will also see their holiday rise from 21 days a year to 22.Technical Support TeamSociety of County Treasurers (SCT) 20

LOCAL GOVERNMENT PENSION SCHEME

On 27th August the Government published its partial response to a consultation, following representations from administering authorities and employers on how the pandemic has affected LGPS funds. The Government proposes allowing Local Government Pension Schemes to be given greater flexibility to review contribution rates. They say that it “would enable administering authorities to respond to the full range of circumstances which may change between valuation, including potential impacts of COVID-19 and some other circumstances for example when local government re-organisation leads to a change in liabilities”.

The proposal has been welcomed by Pensions Advisors.

EXIT PAY

The MHCLG published a consultation entitled “reforming local government exit pay” on 7th

September. The deadline for responses is 9th November.

The consultation seeks views on proposed changes to the LGPS and compensation regulations in England and Wales to introduce the exit payment cap and further reform of exit payments.

The consultation document makes it clear that the consultation is not seeking views or representations on the government’s position regarding exit pay reform. The framework has already been produced following an exercise carried out by HM Treasury. Instead, the consultation is seeking views on the following.

1. The effect/s that the proposals for reform below will have on the regulations which currently govern exit payments (including both redundancy compensation pay and early access to pensions) in local government.

2. The impact that the proposals for reform outlined below will have on the local government workforce.

The reforms in questions are as follows: A maximum of three weeks’ pay per year of service; A maximum of 15 months on the amount of a redundancy payment; A maximum salary of £80,000 on which an exit payment can be based; Limiting publicly funded pension top-ups; A £95k cap on the total of all forms of compensation, including redundancy payments,

pension top-ups, compromise agreements and special severance payments.

It is worth noting that in 2015, the government had legislated a cap of £95,000 for all exit payments in the public sector in the Small Business Enterprise and Employment Act.

ALLOWANCES FOR HOME WORKING

Following a question regarding flat rate payments to staff working at home over the winter period (approximately £25 per month) to compensate for additional heating costs etc, the SCT carried out a short survey. The results revealed that none of the responders are offering any such payments although it is “under review” in a handful of authorities as winter approaches. Staff are being signposted towards the HMRC £6 a week tax relief for home workers and one member has given all staff an additional 3 days leave as a “thank you” for hard work during the crisis. Technical Support TeamSociety of County Treasurers (SCT) 21

Technical Support TeamSeptember 2020If you have any questions on the issues contained within this report please contact the Society of County Treasurers’ Technical Support Team, please call 07977 401 086, or e-mail technicalsupportteam@somerset.gov.uk

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