Core funding increase confirmed for all local authorities in 2020-21

Published 27/02/2020   |   Last Updated 27/05/2021   |   Reading Time minutes

The Final Local Government Settlement 2020-21 is an increase of 4.3% compared to 2019-20 and allocations remain unchanged from the Provisional Settlement published in December.

Final Settlement 2020-21

The local government settlement is the main source of Welsh Government funding for local authorities. It includes details of capital and grant funding. The main element – Aggregate External Finance (AEF) – made up over half of the revenue financing available to local authorities in 2019-20.

Total AEF for 2020-21 is £4.5bn, an increase of £184m (or 4.3%) compared to 2019-20. AEF consists of two elements:

  1. Revenue Support Grant (RSG) - a general grant (£3.4bn); and
  2. Non-domestic rates – also known as ‘business rates’ (£1.1bn).

The two-stage settlement process reflects the way the Welsh Government publishes its budget. A Provisional Settlement is released around the same time as the Draft Budget and a Final Settlement is published around the Final Budget (25 February).

The Welsh Local Government Association (WLGA) welcomed the Provisional Settlement. It noted that 2020-21 will see local authorities receive “the first significant increase in their core grant funding in over 12 years”. However, it warned that the financial outlook remained “very challenging” and that local authorities will have to continue to make tough decisions to prioritise services.

Provisional to Final – what’s changed?

Nothing – the revenue allocations (AEF) in the Final Settlement are the same as in the Provisional Settlement published in December.

Our blog post on the Provisional Settlement 2020-21 noted a trend over the last couple of years for additional funding in the Final Settlement, compared to the provisional. Last year the increase was £23.6m (just over half a percent).

In its report ‘Austerity is over – for now’(PDF, 316KB), Wales Fiscal Analysis noted that the Provisional Settlement represented “by far the fastest growth in funding for Welsh local authorities in over a decade”. The Minister for Housing and Local Government, Julie James AM, outlined in her statement on the Final Settlement that responses to the Welsh Government’s consultation on the Provisional Settlement “did not identify any matters which required a change of approach for the final settlement”.

What about individual local authorities?

While the Final Settlement is a 4.3% overall increase compared to 2019-20, there is variation amongst local authorities. The highest increase is 5.4% in Newport, while the lowest is 3.0% in Monmouthshire. The settlement provides a real terms increase for all local authorities.

Our infographic below shows the changes for all local authorities:

Total budget
Total budget
Total budget per capita
Percentage change in AEF relative to adjusted 2019-20
Percentage change in AEF relative to adjusted 2019-20
Total budget per capita

The Assembly’s Equality, Local Government and Communities (ELGC) Committee scrutinises local government aspects of the draft budget annually. In its report (PDF, 459KB) on this years’ draft budget, it said it was “pleased” that the budget provides an increase for local authorities, but that “one year cannot reverse the impact of a decade of austerity”.

What next?

3 March is a big day for the budget. The Assembly is set to debate the Final Local Government Settlement, the Final Budget, Welsh Rates of Income Tax 2020-21 and the Second Supplementary Budget 2019-20 (see our blog on here).

You can watch all the debates live on SeneddTV.

The UK Government will also be announcing its budget on 11 March (as confirmed by the new Chancellor earlier this month). This could have implications for the amount of money available to the Welsh Government in 2020-21. Any changes will be reflected by the Welsh Government in future supplementary budgets.

Article by Owen Holzinger and Joe Wilkes, Senedd Research, National Assembly for Wales