‘Opaque’ settlement confirms harsh cuts

Councils in England will see an overall cut to their funding of 9.4 per cent and 13.2 per cent over the next two financial years, the government has confirmed.
The DCLG published the figures this week as part of its Local Government Finance Settlement for 2014-15 and 2015-16.
But the government said that councils’ “spending power”, which includes council tax receipts and pooled social care funding, will be reduced by much less: 2.9 per cent in the first year and 1.8 per cent in the second year.
Steve Bishop, director of strategic finance at South Oxfordshire Council said that the cut in grant would increase financial pressures on many councils, many of which he said had estimated a cut of up to ten per cent in medium financial forecasts.
He said: “It is accurate to say that our estimate of ten per cent was on the pessimistic side, and a lot will have been lower.
“To avoid publishing larger figures of predicted savings, lots of treasurers would have been under pressure to be optimistic about the level of the cuts.”
According to Bishop, the higher reduction will leave a number of councils facing the prospect of further cuts or being forced to consider shared services with neighbouring councils to avoid severe financial problems.
Local Government Association Chairman Sir Merrick Cockell said: “Councils have so far largely restricted the impact of the cuts on their residents. They have worked hard to save those services that people most value and have protected spending on social care for children and the elderly, but even these areas are now facing reductions. That impact will only increase over the next two years.”
Figures produced for CIPFA on behalf of Pixel Financial Consulting showed that Metropolitan areas outside London will take the biggest hit, with a 9.98 per cent grant reduction, followed by one of 14.28 per cent.
In London the figures are 8.52 per cent and 11.44 per cent, and for shire areas, the figures are 9.54 per cent and 13.38 per cent.
However, an unexpected £200 million has been added to the total pot being made available after councils qualified for less cash from the New Homes Bonus than previously expected.
The Government also confirmed that it will pay a grant to councils with large spending power reductions, which will keep them from going beyond a 6.9 per cent fall in this figure. Nice councils are eligible in 2014-15, with 14 eligible the following year.
In addition, grants which the Local Government Association estimates at £9.5 million will continue to be paid to the most sparsely populated authorities, who had lobbied the government for more funding.
In a written statement to Parliament outlining the settlement, local government minister Brandon Lewis also announced that, in the New Year, the government will announce the limits councils will be allowed to raise council tax by before triggering a local referendum.
He hinted that in some areas this could be lower than the 2 per cent originally mooted.
He said: “We are particularly open to representations suggesting that some lower threshold be applied to all or some categories of authorities, given the strong need to protect taxpayers wherever possible from unreasonable increases in bills, and given next year’s elections on 22 May across the country allow for referendums to be held at minimal cost.”
But a spokesman for the Local Government Association said: “Referendums on council tax are an unnecessary and a costly burden that will put growth generating investment at risk.”
Lewis added that funding for the incentives for councils to freeze council tax will now be included in the DCLG’s spending review baseline.
CIPFA chief executive Rob Whiteman criticised the “opaque nature” of the settlement figures, saying: “This provisional local government settlement is an unfortunate demonstration of how urgently we need an independent commission into local government funding.”