Final Local Government Revenue and Capital Settlements 2006-07

Today I am announcing the details of the final revenue and capital settlements for the 22 unitary authorities in Wales for 2006-07.

The Overall Settlement

Next year, after adjusting for transfers, local authorities in Wales will receive an average increase of 5.1% on the previous year’s revenue settlement.

In preparing the final settlement I have taken into account the responses I received through the consultation on the provisional settlement.

Compared with the provisional settlement, the final settlement includes an additional £47.921 million. This is primarily transfers into the settlement of existing specific grants to local government.


Local Authority Business Growth Incentive Scheme (LABGI)

The initial indications I have received from local authorities on the introduction  of the LABGI scheme are very promising. However, in order to guarantee the impetus of the scheme, I have decided not to increase the floors that local authorities have to reach in the second year of the scheme. This is a very bold step and unlike the English scheme will allow Welsh Local Authorities to benefit from maintaining growth achieved in the first year of the scheme, as well as new growth obtained in the second year. I will also maintain a watchful eye on the scheme to ensure it continues to best meet the needs of Wales.

Due to the  nature of the scheme it is  difficult to estimate the amount of LABGI money to be paid to local authorities. However, I will have a better idea of second and third year estimates early in the New Year and I hope to be able to say more about the distribution between local authorities in the Plenary debate.

Specific Revenue 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 a more comprehensive picture of the funding the Assembly will provide in 2006-07, to allow them to budget effectively. The information I am making available shows that, in addition to the £3.5 billion authorities will receive through the settlement, they will also receive almost £400 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.

Council Tax Relief

In addition I am providing funding so that all pensioner households who will have moved up a second band on 1 April 2006 as a result of revaluation will be able to claim £100.

For those householders who moved up three or more bands as a result of the revaluation of properties, they will continue to benefit from a transitional relief scheme, fully funded by the Assembly Government, which will limit their increase to one further tax band 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 have committed £1.5 million in the Budget agreed yesterday to ensure that everything possible is done to achieve this.

Capital Settlement

With regard to the capital settlement, the capital allocation for 2006-07, including specific capital grants has increased to £618.8 million, an increase of 4.2%.

The General Capital Fund remains close to last year’s level. The Fund now totals some £211.9 million. This is unhypothecated capital funding of which £48.5 million is paid as capital grant, the remainder, some £163.4 million, is provided as support for borrowing (formerly credit approvals). Whilst overall this has remained broadly at the level of last years settlement it should be noted that this follows on from a large injection of capital resource last year. Additionally, the increase in revenue support grant, the majority of which is un-hypothecated, allows for the possibility of additional borrowing for capital purposes under the prudential borrowing framework.

In respect of specific capital grants these have increased by 5.8% to £403 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 fully expect authorities to act with similar careful consideration in setting their budgets for next year.

I will now proceed to lay the local government finance report for 2006-07 and amending reports for 2004-05 and 2005-06 for approval by the Assembly early in January.