Final Local Government Revenue and Capital Settlements 2005-06

Today I am announcing the details of the final revenue and capital settlements for the 22 unitary authorities in Wales for 2005-06.

The Overall Settlement

Next year, after adjusting for transfers, and the provision of some additional resources, local authorities in Wales will receive an average increase of 5.3% on the previous year’s revenue support settlement.

In preparing the final settlement I have taken into account the responses I received through the consultation on the provisional settlement and the additional £7.4 million that Wales will receive as a result of the Chancellors Pre Budget Announcement. In the light of this and transfers into the settlement identified in the final budget also published last month there is an increase of 0.3% on the amount announced in the provisional settlement. In addition I have increased the funding for the deprivation grant which provides additional non-hypothecated revenue support for the more deprived authorities by 5%; and increased the Performance Incentive Grant by 2.5%. Finally I have been able to secure an increase of £0.4 million in the new funding announced at the time of the provisional settlement announcement for the Local Authority Business Growth Incentive Scheme and I am announcing the distribution of that additional non-hypothecated support for the first time.

In total this means I am announcing the distribution today of an additional £14 million for local government over and above what was announced in the provisional settlement.

Local Authority Business Growth Incentive Scheme

I am also pleased to provide further details today of the Local Authority Business Growth Incentive Scheme. For the first time I am publishing the distribution of the £13.4 million funding for LABGI that is available in 2005-2006.

This scheme aims to reward the contribution made by local authorities to economic development. Through this scheme over £60 million is being provided over the next 3 years, outside of the Assembly’s normal budget to increase the resources available to Welsh local authorities. Because we can only estimate how much growth local authorities will generate based on a trend analysis over the last few years, the total of the extra resources available are classed as Annually Managed Expenditure and subject to twice yearly review. This scheme rewards and incentivises Welsh local authorities for their success in economic development and provides the resources to local authorities to sustain further growth.

Distribution is based on a model which reflects growth trends over an eight year period. The model designates three growth categories under the Welsh sub-regional model which was favoured by the WLGA in response to consultation.

Specific Grants

As with the provisional settlement, I am also providing local authorities with details of the other specific grants they can expect to receive next year. This will provide authorities with the comprehensive picture of the funding the Assembly will provide in 2005-06, to allow them to budget effectively, The information I am making available shows that, in addition to the £3.3 billion authorities will receive through the settlement, they will also receive over £500 million in specific grants.

Distribution between Authorities

The additional money combined with the introduction of actual taxbase figures provided by authorities and other data updates have resulted in some changes to the allocations for individual authorities.

Local Government has welcomed the proposal that I set out at the time of the provisional settlement to introduce a minimum increase guarantee that all authorities will receive a minimum guaranteed increase in their revenue support grant for next year. This remains at 3.5%, in line with our estimate of general pay and price inflation within local government as set out in the provisional settlement. This is a sensible innovation in the circumstances of the current turbulence.

The total standard spending assessment for each authority is derived from an assessment of the major service areas including education and social services. To improve transparency in local government funding I am also publishing these service assessments.

This year’s settlement is set against the background of the first council tax revaluation for twelve years.   It is a legal requirement that we carry out such revaluations to ensure that the distribution of liability for council tax remains fair over time. Given this settlement and reasonable budget setting by local authorities, the majority of council tax payers in Wales should see very little change in their council tax.

For those who do move up a band, a transitional relief scheme, fully funded by the Assembly Government, will limit the impact on householders’ council tax bills in the coming year.

In addition, the Welsh Assembly Government is concerned that all those in Wales who are entitled to Council Tax Benefit should receive it. Although it is not a devolved matter, I am committed to working with the Department for Work and Pensions and local authorities in Wales to ensure that everything possible is done to achieve this.

The Welsh Assembly Government policy statement, “Making the Connections”, sets out the commitment to ensure that the growth in resources is increasingly focused on improving the quality of service and that substantial efficiencies are achieved in the means of service delivery. We have set a target of £600 million efficiency savings in the next 5 years. In budgeting to meet cost pressures in each part of the Welsh public sector including local government for next year I have assumed that there will be a 1% saving next year and in each succeeding year.   Any efficiency gains which authorities make over and above this will create the capacity to introduce additional public services.  

I am convinced that local government has the ability and ambition to make major innovations in delivery.  The Welsh Assembly Government is supporting local government in this through new funding for the Excellence Wales scheme to promote and transfer good practice, through increased funding to support improvement in individual authorities and through   “Value Wales”, a cross-public sector source of expertise on procurement and shared services




Capital Settlement

With regard to the capital settlement, the capital allocation for 2005-06, including specific capital grants has increased to £596.9 million, an increase of 16.4%.

I have increased the General Capital Fund by £15.7 million (8%) in 2005-2006. This now totals some £212.8 million. This is unhypothecated capital funding of which £48.7 million is paid as capital grant, the remainder, some £164.1 million, is provided as support for borrowing (formerly credit approvals).

In respect of specific capital grants these have increase by 21.7% to £384.1 million.


In conclusion I believe this to be a fair and reasonable settlement for local authorities. It has been prepared following careful consideration of the responses to the consultation on the provisional settlement and the views of the Local Government and Public Services Committee.

I have also made available information on specific grants so as to give authorities as much information as possible on which to base their own budget plans, knowing what they can expect to receive from the Welsh Assembly Government.   I fully expect authorities to act with similar careful consideration in setting their budgets for next year.

I believe that a reasonable budget increase for local authorities next year. In these circumstance the large majority of council tax payers in Wales would benefit from the revaluation by having little increase or a decrease in their council tax. There is a responsibility on local authorities to seek to control the rate of increase in tax for households moving up a band and therefore to set their objective of keeping their budget increase within reasonable limits.