Debate on the Final Police Settlement 2017-18

10 February 2017

Article by Sarah Hatherley and Owen Holzinger, National Assembly for Wales Research Service

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Image from Flikr by Jon Candy Licensed under the Creative Commons

Policing policy is not devolved to Wales; however, the Welsh Government delivers an element of the annual funding as part of a three-way system that also involves the Home Office and council tax. Police forces also have access to special and specific grants and other income sources.

Under the Police Reform and Social Responsibility Act 2011 Police and Crime Commissioners (PCCs) replaced police authorities in each police force area (outside of London), with the first elections held in November 2012. More recently, PCC elections were held alongside the Assembly Elections in May 2016. PCCs appoint the chief constable, set local policing priorities and set the budget and council tax precept.

The Police settlement is derived in a two-stage process with a provisional settlement released in line with the Welsh Government’s draft budget and a final settlement in line with the final budget. The four Welsh police forces are consulted on the provisional police settlement, before agreeing the final settlement. The National Assembly for Wales must then approve this funding. As part of this process, the settlement will be debated in plenary on Tuesday 14 February 2017.

Final Police Settlement 2017-18

For 2017-18, the overall funding allocated to PCCs in Wales has been set at £349.9 million. This represents a 1.4% reduction from the 2016-17 settlement and is a 1.4% reduction for each of the four PCCs. The overall funding is outlined in table 1 below:

Table 1: Police Revenue Funding – Total Central Support

2014-15 2015-16 2016-17 2017-18
Dyfed-Powys 53.0 50.3 50.0 49.3
Gwent 76.8 72.9 72.5 71.5
North Wales 77.1 73.2 72.7 71.7
South Wales 169.2 160.6 159.6 157.4
Total   376.2   356.9   354.9   349.9

Within the £349.9 million allocation, the Welsh Government’s element is £138.7 million. This can be broken down further and comprises funding from the Revenue Support Grant (£85.8 million) and Non-domestic rates (£53 million). The remaining £211.2 million funding is provided through the Home Office. The sources of Police funding are outlined below:

Home Office Police Grant

In England and Wales, the main source of income for police forces is the central UK government grant made available through the annual Home Office Police Grant Report. The Home Office Police Grant is general revenue funding and is not ring-fenced. It is paid directly to PCCs. The Police Allocation Formula determines the allocation of central government funds between the 43 police force areas of England and Wales. This is based on the estimated workload of each police force area, including crime related activity, policing special events, policing sparsely-populated areas and population and socio-economic factors. The Home Office has recently reviewed its funding formula for police forces, which will continue to be a needs-based formula. As has been the case in recent years, the Home Office has again decided to overlay its needs-based formula with a floor mechanism. This ensures all police forces in England and Wales can expect to receive the same percentage reduction, this year this is 1.4%.

Funding from the main grant is subject to “damping”, which in 2017-18 will redistribute £12.2 million from South Wales and £417k from Gwent to Dyfed Powys (an additional £5.1 million) and North Wales (an additional £7.4 million). The PCCs for Dyfed-Powys (£3.6 million) and North Wales (£2.4 million) also receive top-up grant.

Welsh Government formula grant/ Police Revenue Settlement

In Wales, the equivalent funding previously provided by the UK’s Department for Communities and Local Government in England is devolved to the Welsh Government. The Welsh Government funding to PCCs still forms part of the local government finance settlement and is paid under provisions of the Local Government Finance Act 1988 and must be approved by the National Assembly for Wales.

Council tax precept

Each police force can also raise additional revenue funding through council tax precepts. The elected PCC in each police force area determines the annual level of the police precept, which is added to residential council tax bills. A greater proportion of police funding comes from council tax in Wales than in England; 37% compared with an average of 24% in England in 2015-16. There is also much less variation between the Welsh police forces than in England. PCCs are known as major precepting authorities. Whilst they set the precept, the funds are collected on their behalf by local authorities. In 2016-17 the Police element of council tax amounted to approximately 16% of the total, average, council tax bill in Wales.

The Welsh Government has the power to cap excessive council tax rises (generally considered to be anything over 5%).

Specific and special grants

There are also a smaller number of special and specific grants that are ring-fenced for national policing priorities. The Home Office provides a series of specific and special grants in addition to the Police Main Grant. This funding comes from the Home Office resource departmental expenditure limit crime and policing group. Some of the grants are funded by top-slicing the Police Main Grant, that is reducing the funding available for general revenue funding through the Police Main Grant to pay for some specific grants. The largest element of this is the Counter Terrorism Police Grant; other grants include the Police Special Grant and the Police Innovation Fund.

Other income

Police forces can also charge for some of their services. The main source of income from fees and charges is through charging for special police services. These are police services provided over and above core policing at the request of a person or organisations, such as football matches and music concerts. The basic powers to charge for services are set out in the Police Act 1996. Police forces are prevented from making a profit on special police services and for some types of event are prevented from recouping 100% of costs.

More information regarding how each element of police funding is calculated can be found in the Local Government Finance Report (No. 2) 2017-18 (Final Settlement – Police and Crime Commissioners). Welsh Government has published the financial tables and other information regarding the police settlement on their website.

Final local government settlement 2017-18 published

21 December 2016

Article by Martin Jennings and David Millett, National Assembly for Wales Research Service

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Following the Welsh Government Final Budget for 2017-18 (released on Tuesday 20 December 2016) the Cabinet Secretary for Finance and Local Government has today published the Final Local Government Settlement 2017-18, this outlines funding for each of Wales’ twenty-two local authorities.

The total settlement is £4.113 billion, which is an increase of £10 million (0.2%) when compared to the Final Settlement in 2016-17. This is the first increase in the local government settlement since 2013-14.

The provisional settlement includes increases and decreases in funding for different local authorities. The largest increase is 1.1% in Gwynedd and the largest decrease is -0.5% for three local authorities (Wrexham, Powys and Merthyr Tydfil).

The full breakdown of percentage change in funding by local authority is outlined in the below infographic.

draft-budget-2017-18-local-government-settlement-01

This year no authority will experience a decrease more than -0.5%. Of the three authorities where the funding change equates to -0.5%, two have received top-up funding totalling £1.6 million to ensure they do not experience a reduction beyond -0.5%, allocated as below:

  • Powys – £1,237,000
  • Merthyr Tydfil – £391,000

General Capital Funding for local authorities in 2017-18 is £143 million.

The Cabinet Secretary’s letter to local authorities, the Local Government Finance Report 2017-18 and the Local Government Revenue and Capital Settlement 2017-18: All Wales – Tables, can be found on the Welsh Government website.

New publication: Local Authority Farms in Wales

22 June 2016

National Assembly for Wales Research Service

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Local authority farms have been a way of entering the farming industry for young people for over a century, since the Small Holdings and Allotments Act (1908). This briefing explores the current numbers of local authority farms in Wales and provides a summary of stakeholder views on the issue.

Local Authority Farms in Wales (PDF, 1,018KB)

This is an image of the cover of the publication: Local Authority Farms in Wales

Funding local government

27 May 2016

Article by Owen Holzinger, National Assembly for Wales Research Service

The Fourth Assembly saw significant reductions to local government budgets. With the potential for financial pressure to increase in the Fifth Assembly, will there be changes to the financial model?

From 2010-11 to 2014-15 local authority revenue funding fell by £461 million in real terms. This pressure has led to questions about how finances are distributed and, more fundamentally, whether the current financial model is robust enough to manage further strain.

Local government cuts

The Welsh Government provides around 80% of the funding for local authorities. During the Fourth Assembly, this funding reduced significantly as the decrease in the Welsh block grant (estimated to be £1.2 billion lower in real terms in 2014-15 than 2010-11) impacted on local government.

Demographic changes

While funding has been decreasing, pressure on local services is increasing. Wales’s population is growing, with Welsh Government projections forecasting a proportional increase in the most dependent age groups (0-15 and 65+) compared to the working age population.

The reductions have fallen disproportionately on particular services. The Welsh Local Government Association (WLGA) estimates that libraries, cultural services and transport services (among other areas) have faced cuts of between 20% and 50%, leading to significant change in how these services are delivered. Other services, such as social care and schools, have been protected.

Local authorities have reacted to the budget reductions by generating internal efficiencies, or by cutting, commercialising or limiting services. All 22 local authorities have raised council tax year on year since 2011 (between 2010-11 and 2015-2016, average council tax rose 18% across Wales).

Local authorities have also been exploring the use of alternative delivery models (ADMs) and community asset transfers (CATs) to operate some or all aspects of services. The Welsh Government has consulted on a national framework to support decision-making for ADMs and produced best practice guidance for CATs. The Fifth Assembly may see more of these cost-saving methods.

In 2014-15 local authorities held £832 million in earmarked reserves and £196 million in general reserves. If future funding reductions fall at the more extreme end of the scale, there could be further scrutiny of how these reserves are used.

Recommendations from the Fourth Assembly

In reviewing the 2016-17 budget and local government settlement, the Finance Committee recommended the Welsh Government should review the funding formula.

Maintaining the formula

Reduced budgets have led many to question the method used by the Welsh Government to distribute funding to local authorities. The ‘distribution formula’ is maintained by the Distribution Sub-Group and it contains 68 different indicators. For example, there are indicators that relate to:

  • population;
  • numbers of children and older adults;
  • road lengths;
  • deprivation; and
  • rurality and sparsity.

Elements of the formula are updated each year, with the formula last fully reviewed ahead of the 2001-02 settlement. Some of the calculations use data from the 1991 and 2001 censuses and this has been raised as a concern.

Historically, funding floors, caps and top-ups have been used to limit reductions, when necessary. Most recently in 2016-17 the three authorities with the largest reductions received a top-up grant, meaning no reduction was more than 3%. This required an additional £2.5 million allocation from Welsh Government reserves.

Rural authorities have argued that the formula does not adequately account for the additional cost of providing services across sparsely populated areas. Of the total indicators, only 6% relate to sparsity, while 69% are based on clients (e.g. population, pupil numbers) and 25% on deprivation.

A step-change in data could mean very different funding situations for authorities from one year to the next, and any review would need to consider how to moderate large drops in funding.

Flexibility and localism

Alongside other reforms, the previous Welsh Government acknowledged a need to review the local government finance system, seeing the current system as complex. The last Welsh Government said it would aim to produce a system that, among other things, allowed greater freedom to make local decisions.

Local government itself has also called for changes, requesting more fiscal autonomy and more flexibility to decide how authorities spend their money. This would allow local solutions and more accountability, and the WLGA sees this as complementing the efficiencies and innovation required by the current financial climate. The Independent Commission on Local Government Finance Wales (2016) has echoed this call for more flexibility.

The draft Wales Bill could give powers to the Assembly to design its own budget process and potentially implement some of these recommendations. A redesigned budget could include such things as multi-year funding strategies, as recommended by the Fourth Assembly’s Finance Committee’s inquiry into Best Budget Practice, and as requested by local authorities.

Following the UK Government’s announcement in October 2015 that English councils will retain 100% of business rates collected by 2020, the Welsh Government could potentially allow Welsh local authorities to retain rates as well. Further de-hypothecation of grants could be another option that would allow local authorities more control over how they manage the money they are allocated.

Pressure in the Fifth Assembly

The UK Government’s Spending Review in 2015 outlined that the Welsh block grant will continue to decrease in real terms going into the Fifth Assembly. In line with this, local authorities may have to anticipate similar budget reductions to those they experienced in the Fourth Assembly, at least in the near future.

Structural changes such as mergers provide a potential solution (see article on local government reform) but will come at a cost and saving levels are not guaranteed. With mounting pressure, Welsh Government decisions on changes to the financial model will be pivotal in defining the long term future of local authorities.

Key sources

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Reforming local government

27 May 2016

Article by Rhys Iorwerth, National Assembly for Wales Research Service

Throughout the Fourth Assembly, there was much debate about restructuring Welsh local government. Will the new Welsh Government finally press ahead with such plans?

Since 1996, Wales has had 22 county or county borough councils (or ‘local authorities’ as they are also often called). As financial pressures mount, politicians have increasingly discussed whether we need them all. They have also debated the best alternative if 22 is too many. Whether we will still have this number by the end of the Fifth Assembly is therefore very much in doubt.

Local Authority Boundary-08

How eight authorities could look

The last Welsh Government’s plans

In 2013, the Welsh Government set up the Williams Commission to look across the board at how public services were delivered in Wales. The Commission’s report was wide-ranging, but one of its headline conclusions was that many local authorities were too small to perform effectively. It suggested that the Welsh Government should merge the 22 county and county borough councils to form between 10 and 12 authorities, and to do so ‘swiftly and decisively’.

The last Welsh Government initially responded by saying it preferred a 12-authority model. This changed in June 2015 when Leighton Andrews, the then Minister for Public Services, published a map showing the Welsh Government was now in favour of either eight or nine authorities instead.

In November 2015 the Welsh Government published the draft Local Government (Wales) Bill. This contained provisions to enable mergers, as well as other major reforms to how Welsh local government works. According to the Minister, ‘severe and unsustainable financial pressures’ on public services meant that ‘inaction [was] not an option’. While the Welsh Government acknowledged that the mergers could cost up to £254 million, it also claimed that they could result in savings of up to £915 million over 10 years, if completed by 2020-21.

A consultation on the draft Bill closed in February 2016, and the then Minister announced in March 2016 that he was analysing the responses. After being appointed First Minister in May 2016, Carwyn Jones suggested in media reports that the eight or nine-council model could be difficult to take forward, but that he would continue to seek reform of some kind.

The response to the merger plans

Local Authority Boundary-09

How nine authorities could look

The Williams Commission recommended merging the 22 authorities along their current boundaries, rather than redrawing the local government map from scratch. The last Welsh Government agreed with this approach, claiming it would achieve the benefits of having larger authorities without the bigger disruption of more fundamental boundary changes.

Others, such as the Fourth Assembly’s Communities, Equality and Local Government Committee, claimed that form should follow function. This means that, before restructuring, it is necessary to assess what type of services local government should be delivering in a devolved Wales. The Committee suggested that only then can it be possible to come up with a sensible map and an optimum number of authorities. It also claimed that this would be more sustainable in the long term than simply grouping together the current council blocks.

Local accountability

Some critics are concerned that having eight or nine large authorities could risk undermining local accountability and the relationship between the councils and the communities they serve. In its draft Bill, the last Welsh Government proposed creating ‘area committees’ to give localities a voice within the larger councils, but there are doubts about how effective this might be.

In a 2014 discussion document, the Welsh Local Government Association (WLGA) proposed a different approach. It suggested retaining the 22 authorities to preserve a sense of place and localism, while creating four regional bodies to deliver major services. These regional bodies could be modelled on the combined authorities approach adopted in England, and could allow certain services to be delivered more effectively on a larger scale without impacting on local links.

Others have suggested that reforming and empowering community councils – the lowest tier of local government in Wales – could solve issues around localism if there are to be fewer and larger county and county borough councils.

The relationship between central and local government

While structural and geographical issues have often grabbed the headlines, local government itself has called for a more fundamental shift in the relationship between it and the Welsh Government. Devolution has changed the way Wales is governed, so the councils see a need to re-evaluate and redefine local government’s role in delivering services.

In its In Defence of Localism document, the WLGA criticised the last Welsh Government for ‘developing a more centralised and assertive approach’ to public services. It suggested that local government should be given more ‘freedom and flexibility to deliver services according to local circumstances’, and there is no doubt that these calls will continue.

The new Welsh Government will therefore have major decisions to make on the number and size of our local authorities. But it is also going to face ongoing pressure from the sector for more far-reaching change.

Key sources

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