Revenue Grant (Hansard, 20 July 2001)

§ Mr. Raynsford

The Government's objective is to create a local government finance system that distributes grant fairly and effectively and gives councils greater financial autonomy to help them better meet the needs of their local communities.

In our Green Paper on local government finance, published last September, we consulted on whether to extend the moratorium on changes to the formula used to distribute revenue grant to local authorities by a further year, to include 2002–03. After considering the consultation responses, we have concluded that while reforming the revenue grant distribution system is an important priority, we must ensure that there is adequate time for preparation and consultation.

We know that there remain disparities in the education funding formula which are not justified by the education needs of children. We have been working with local government and other education interests on the best way to resolve these issues but there is not yet agreement on the way forward.

We have therefore decided to keep the existing grant formula stable for 2002–03. Over the coming year, we will work up proposals in partnership with local government for a reformed grant formula which we will introduce in 2003–04. The Government will work to the same timetable with local government and the wider education community on revising the education funding formula to focus on children's needs. I then expect to see the moratorium on formula changes re-introduced for 2004–05 and 2005–06.

Today's announcement will give local authorities some welcome financial stability and will allow them to plan ahead. Meanwhile we will enhance that financial stability and predictability by developing the floors and ceilings protection which we introduced for some authorities in 2001–02 so that all authorities get a reasonable increase in grant and no authority gets an unduly large increase. We intend to extend floors and ceilings to cover police and fire authorities for 2002–03; and to discuss how best to enhance grant stability in 2002–03 for shire district councils, who do not have education and social service responsibilities.

557W