Business Ratepayer Consultation 2021/22

Page 1 of 8

Closes 1 Feb 2021

Section 1: Background

1. Background

1.1    The council is responsible for a wide range of services funded through different mechanisms. The main ones are:

  • General Fund – discussed further below
  • Schools Funding – funded by dedicated grant
  • Housing Revenue Account – funded by rent
  • Housing Benefit – funded by the Department for Works and Pensions
  • Aspects of Social Care and Public Health – funded through grant e.g. Better Care Fund, Social Care Grant, Public Health Grant
  • Capital Programme – funded through a combination of receipts, grant, and borrowing.

1.2    In the context of the General Fund, local authorities continue to face challenging and uncertain times in relation to public sector funding. From 2010/11 to 2019/20, the Government reduced the council’s spending power by 26% in real terms. The decade-long austerity means the council has had to make budget cuts every year in order to balance its budget.

1.3     In the ten years the council has agreed budget cuts of £190m. Despite this, there is still a long way to go for the council. Based on the Medium Term Financial Strategy (MFTS), it is forecasting a budget gap of £55m and £40m of this gap needs to be addressed in the next three years. The council is exploring all possible options to ensure that the impact of such cuts is least felt by those affected.

1.4    A comparison of the year-on-year budget cuts made by the council along with what its budget would have been had the council not taken steps to make these cuts can be seen from the graph below.

Budget Cuts 2010 - 2021

1.5    The much-needed long-term financial certainty continues to elude local governments because the government has abandoned the comprehensive spending review, suggesting that it is focusing entirely on protecting jobs. The consequence of this is that it makes it extremely difficult for the council to have any sense of what its spending power is likely to be in the near future; thus affecting the vital medium-term decisions the council needs to take. The spending review 2020 in November only covered the next financial year. Beyond this, there continues to be uncertainty in the council’s funding.

1.6    For 2021/22, the Government announced a provisional settlement funding assessment (SFA) for Lewisham of £123.30m. Lewisham is again required to make budget cuts in order to balance its budget in 2021/22. The 2021/22 proposed budget cuts amount to £28m. Further information is provided in section 4 below.

1.7    The council’s budget is funded mainly through Business Rates, Government Grants, and Council Tax. This is detailed in section 4 below. Prior to 2013/14, councils handed business rates they collected for the government and received a share back as part of its overall government grant. In 2013/14, the government implemented reforms which allows councils and the Greater London Authority (GLA) to retain a proportion of the business rates they collect in exchange for a reduction in their grant funding. The government’s intention is to consult on a fair funding review to establish a better way of distributing the funding, however, this has been further delayed and the outcome remains unclear. The current split is 30% retained by Lewisham, 37% by the GLA and 33% handed back to the Government. London authorities are currently in a Business Rates Pool, and this process will be handled by the Pool.

1.8    The council's strategy and priorities drive the way the council allocates its budget with changes in resource allocation determined in accordance with policies and strategy. The council’s corporate priorities are detailed in section 2.