Contentious settlement aims to soften the blow of losing grants
0Communities secretary Greg Clark this week pulled a £525m rabbit out of the hat to soften the impact of proposed cuts to local authority grants. Meanwhile the settlement faces claims of political bias as well as questions over where the extra funding has come from.
In its first four-year settlement for councils, Clark announced a series of extra cash and tax raising freedoms in response to complaints about the speed of cuts outlined in December’s provisional settlement.
The package includes £150m transition fund aimed directed at county councils and rural districts whose revenue support grant had been earmarked for the sharpest initial reductions under the provisional proposals.
Communities secretary Greg Clark said: “Today’s settlement means every council will have, for the financial year ahead, at least the resources allocated by the provisional settlement.
“In addition, we will provide transitional funding for the first 2 years of the Spending Review period for councils as they move from dependence on central government grants to greater financial autonomy.”
The £525m funding increase over the provisional settlement is made up of:
- £150m in transitional funding each year for 2016/17 and 2017/18 (£300m in total)
- £25m in removing the tariff / top Up adjustment over 2017/18 and 2018/19
- £91m in additional Rural Services Delivery Grant over 2016/17 and 2017/18
- £109m in potential higher council tax increases for district councils over the four years
Calculations made show the biggest winners from the transition fund will be county councils in Surrey (£24m), Hampshire (£19m) Herts (£16m), Essex (£14m) and West Sussex (£12m).
The transition fund has provoked accusations of political bias from the Labour Party, with Labour’s local government spokesman Steve Reed saying that the government had engaged in a “blatant misuse of public money in a shameless attempt to buy votes and buy off Tory MPs”.
“The government is covering up where this money has come from and won’t explain why almost all of it is being handed to Tory councils just weeks before council elections across the country,” he said.
Labour analysis shows that £255 million of the transitional grant – 85% – has been allocated to Tory councils.
Lee Geraghty, deputy director of local government consultancy LG Futures said that the award was understandable.
He said: “The transition grant is a reflection that those councils did worst in the provisional settlement – they expected to be hit but not as hard.”
But Neil Benn, director of Pixel Financial Management, said: “In the original settlement, metropolitan and deprived areas were given shallower cuts than posher areas, but when you added in council tax, business rates and New Homes Bonus, everyone was positioned the same. However, now Clark has rowed half way back from his intention that everyone’s spending power should fall by the same amount.”
Local Government Association chairman Lord Porter said: “The LGA has been working hard with the Government on behalf of all councils – both publicly and privately – to highlight the financial challenges they face over the next few years.
“We are pleased it has listened to our fundamental call for new money to be found to smooth out funding reductions for some councils in 2016/17 and beyond without any other councils losing out further as a result.”
However, there was mystery over where the government had found the extra cash from, with Chartered Institute of Public Finance and Accountancy chief executive Rob Whiteman calling on ministers to “provide clarity over where the money is coming from to allay fears of more cuts elsewhere”.
Benn said that his calculations had identified a gap between the total awards to local authorities in the provisional settlement and figures in the Departmental Expenditure Limits announced in chancellor George Osborne’s Autumn Statement.
He said: “A cynical interpretation would be that they held a few million back and used money to give to mates after consultation.”
Geraghty also said that he had identified a gap in the original figures, but questioned whether this had been part of a political sleight of hand.
He said: “They got hammered on settlement day by the counties and shire districts. Now they are getting hammered by the metropolitan councils. It’s like a referee giving decisions against both sites – if Clark had just given the money from day one then neither side would have complained so much.”
Clark has given councils until 14 October to respond to the offer of a four-year settlement.
No other information on how the four-year offer would work was provided within the details of the final settlement.
There was no mention of any incentives or moves to mandate authorities to spend their reserves, which Clark has previously hinted would accompany a four year settlement.
Welcoming Clark’s announcement, Richard Harbord, former chief executive of Boston Borough Council, said: “The final settlement announced by the government will make the next two years a little less difficult.
“Many authorities will find it very difficult but overall local government should manage.”
