Rebecca Evans MS, Minister for Finance and Local Government
In 2024-25, local authorities will receive £5.7bn from the Welsh Government Revenue Support Grant (RSG) and non-domestic rates (NDR) to spend on delivering key services. This means the core revenue funding for local government in 2024-25 will increase by 3.1% on a like-for-like basis compared to the current year.
Additional funding of £1.3m is being provided to ensure no authority will receive less than a 2.0% increase.
The Welsh Government’s budget is worth up to £1.3bn less in real terms than when it was set in 2021. Our settlement, which comes largely from the UK Government in the form of a block grant, is not sufficient to meet all pressures public services face as a result of persistently-high inflation and rising demand. As we have developed the draft Budget 2024-25, which was published yesterday, we have prioritised protecting core frontline public services as far as possible; supporting the hardest hit households and prioritising jobs, where we can.
We have therefore protected the indicative rise of 3.1% in the local government settlement, and in line with our focus on supporting households, this also continues to protect vulnerable and low-income households from any reduction in support through the Council Tax Reduction Scheme (CTRS). We will continue to maintain full entitlements in 2024-25 by providing £244m in the settlement.
In addition to the core settlement, I am publishing indicative information on specific revenue and capital grants planned for 2024-25, which amount to more than £1.3bn for revenue and more than £960m for capital at this provisional stage.
We have worked closely with local government throughout the year, and understand the pressures local government is facing. I am proud of the working relationship Welsh Government and local government share in Wales and we will continue to engage closely through the WLGA.
Demand for services, alongside cost pressures, caused by persistently-high inflation, means local authorities will need to make difficult decisions about services, efficiencies, and council tax as they set their budgets. It is important they engage meaningfully with their local communities as they consider priorities for the forthcoming year.
It is not appropriate for the Welsh Government to set an arbitrary level of council tax increase. Local authorities will need to take account of the full range of funding sources available to them, as well as the pressures they face. I encourage them to continue to carefully balance the impact of increases on household finances with the loss of support and services. I know that across Wales, leaders, elected members and officers alike will be striving to find ways to make the best use of their resources to make the most difference for their communities.
I am providing a package of non-domestic rates support which will benefit every ratepayer in Wales. I set this package out as part of the draft Budget yesterday. We will cap the increase to the non-domestic rates multiplier for 2024-25 to 5%, at a recurring annual cost of £18m. This is lower than the 6.7% increase that would otherwise apply. We will also be investing an additional £78m to provide a fifth successive year of support for retail, leisure and hospitality businesses with their non-domestic rates bills. We also continue to support ratepayers with increased liabilities following the 2023 non-domestic rates revaluation. Our transitional relief scheme continues to phase in changes for eligible ratepayers at a cost of £38m in 2024‑25.
I set out the position on capital funding as part of the draft Budget. I have maintained the general capital funding for local authorities at £180m, the indicative level that was set last year. With soaring inflationary costs in the construction sector, I know this will mean local authorities will have to look carefully at and prioritise their capital programmes to continue to invest to best effect in the provision of public services. I have also continued to provide £20m in each year to enable authorities to respond to our joint priority of decarbonisation, to continue the focus on contributing to the Net Zero Wales plan.
Attached to this statement is a summary table setting out the settlement allocations (Aggregate External Finance (AEF)) by authority. They are derived using the formula agreed with local government.
As part of our Programme of Government we are committed to ensuring that local authorities are not hampered by unnecessary bureaucracy. In our discussions, local authorities overwhelmingly highlighted grants management and administration as the most burdensome administrative overhead, and the area with the greatest opportunity for change to achieve mutual benefit.
A programme of work is underway to reduce the number of separate grants paid to local authorities from 2024-25 and to consider moving grants into the de-hypothecated settlement if the wider context makes this appropriate. Some areas have already been identified for change and the draft budget sets out how we are rationalising and refocusing education specific grants. Where changes have already been worked through, these are set out in the grant tables published as part of the settlement. This work continues and I expect more changes to be presented at part of the final settlement. I am committed to complete transparency about the movements so local authorities and others can clearly see any changes in funding.
This Statement is being issued during recess in order to keep Members informed. Should Members wish me to make a further statement or to answer questions on this when the Senedd returns, I would be happy to do so.