Local councils face new spending cuts

Published on Wednesday, 18 December 2013 15:09
Written by Daniel Mason

Responsible councils must stay focused on delivering sensible savings so they can modernise local services and keep Council Tax down, Local Government Secretary Eric Pickles said today as he published the provisional 2014 to 2015 local government settlement.

This year's settlement is fair to all parts of the country - rural or urban, district or county, city or shire - meaning councils can deliver sensible savings while protecting frontline services. Opinion polling suggests that satisfaction with local government is either constant or improved compared to 2010, despite the need for councils to make savings to tackle that deficit.

Today's fair funding deal arms councils with a significant average spending power of £2,089 per household. The Autumn Statement protected local authorities from further spending reductions for 2014 to 2015 and 2015 to 2016. Overall the average spending power reduction for councils in 2014 to 2015 is expected to be limited to just 2.9% per household.

Every bit of the public sector needs to do their bit to pay off the inherited deficit including local government which accounts for a quarter of all public spending. With English councils spending £117 billion this year ministers believe councils must continue to focus on cutting waste and making sensible savings.

There is significant scope for councils to merge back office services or do more joint working; get more for less from their £60 billion a year procurement budget; tackle the £2.4 billion of local fraud; reduce the £2 billion lost in Council Tax arrears; or use their £19 billion of reserves and £2.3 billion of surplus property assets to keep Council Tax down and modernise public services.

Local authorities should be looking to protect their residents and give them help with the cost of living. Extra funding is on offer to councils to freeze Council Tax for a fourth year in a row. The government has provided up to £550 million for the next 2 years. A fourth year of freeze could be worth up to £718 for the average bill payer with more savings to come next year. Between 1997 and 2010 Council Tax bills more than doubled.

From April next year funding for previous 2011-12 and 2013-14 freezes will now be in the main local government settlement total for future years. Ministers have agreed that funding for the next 2 freeze years will also be built into the spending review baseline. This will give maximum possible certainty for councils that the extra funding for freezing Council Tax will remain available without a 'cliff edge' effect on freeze grant. With this help, councils should now play their part by helping hard-working people with the cost of living and freeze their Council Tax.

Council Tax referendum threshold principles will be published in the New Year. Ministers today indicated they are particularly open to representations suggesting that some lower threshold be applied to councils, given the strong need to protect taxpayers wherever possible from unreasonable increases in bills.

Eric Pickles said: "Every bit of the public sector needs to do their bit to pay off the budget deficit, including local government which accounts for a quarter of all public spending. This year, councils should continue to focus on cutting waste and making sensible savings to protect frontline services and keep Council Tax down. Extra funding is on offer to councils to freeze Council Tax for a fourth year in a row.

"Opinion polling suggests that satisfaction with local government is either constant or improved compared to 2010, helped by the fact that Council Tax bills have been cut by 10% in real terms. This is in contrast to the last administration when Council Tax bills more than doubled and went through the roof.

"The coalition government has tried to be fair to every part of the country – north and south, rural and urban, metropolitan and shire. Unlike the old funding system which encouraged councils to talk down their local areas to win more funding, the decentralisation of local government finance now puts councils in the driving seat, rewarding them for supporting local enterprise, building more homes and backing local jobs."

This is effectively the second year of the 2-year settlement that was published last year, and represents the second year of the new decentralised system of local government finance following the Local Government Finance Act 2012.

The coalition government has sought to deliver a fair settlement to every part of the country – north and south, rural and urban, metropolitan and shire. Councils facing the highest demand for serves continue to receive substantially more funding through the settlement. For example, Newcastle has a spending power per household of £2,406 which is nearly £900 more than the £1,518 per household in Windsor and Maidenhead.

Rural councils with more dispersed populations often find service delivery to be more expensive and difficult so this year they will receive an increased grant worth £9.5million to help drive efficiency.

This government's carefully considered reforms are helping councils achieve greater financial independence and deliver sensible savings and help modernise public services.

Last year the government published a practical guide of sensible savings, called 50 Ways To Save, that local government can make to save more of taxpayers' money.

This government rewards those councils that aim for growth. Councils now generate more than 70% of their income locally compared to just 56% under the old "begging bowl" system.

Unlike the old system which encouraged councils to talk down their local areas to win more funding, the decentralisation of local government finance puts councils in the driving seat: by supporting local enterprise, more homes and local jobs. This means they will receive more funding as a direct consequence of their actions, which could potentially add £10 billion to the economy by 2020.

For the second year, councils who have attracted more businesses to their area will be rewarded by retaining the extra business rates they've generated. Similarly the New Homes Bonus rewards those councils who build more homes or bring empty homes back into use and in 2014 to 2015 the New Homes Bonus is worth £916 million to councils.

Unite the Union response:

Mass scale cuts to council budgets will lead to the death of local government and heaps punishment on the most vulnerable, as the government announces a further 2.9 per cent cut in funding for 2014/15, warns Unite.

Many of the country's most deprived councils will bear the brunt, with Liverpool City council facing a 62 per cent cut in funding between 2010 and 2017. Local government workers, who have already suffered a £3,544 cut in pay since 2010, will be pushed deeper into poverty as they are forced into a jobs versus wages tussle.

Unite, Britain's biggest union, fears that by 2015 there will be little local government left after a 43 per cent real terms cut in funding in the five years since 2010. Cuts of this scale will lead to the complete demolition of services including care for the frail and elderly, children services, support for vulnerable families and youth services.

Despite the huge pressures faced by councils, Unite appeals to councils not to slash before thinking, but to work with unions to find savings and to protect service quality.

Responding to the government's provisional local government financial settlement, published today, Fiona Farmer, Unite national officer, said: "This government is presiding over the complete meltdown of local services. Ordinary hardworking people are, again, the ones being battered by the loss of the services they rely on to educate and care for their families.

"This is a shamelessly political settlement which rewards wealthy Tory councils and punishes the less well off.

"In some of the country's most deprived areas, including the prime minister's Oxfordshire constituency, services such as care for the frail and elderly, support for vulnerable families, children's centres, sexual health services around teenage pregnancy and Connexions services, have already been shut or are threatened with closure. The wealthy Tory shires continue to escape relatively unscathed.

"The government will be gambling on the public blaming local councils for service cuts, but it is wrong; the public understand where the real blame lies – at the door of the communities and local government secretary, Eric Pickles."

Sources: DCLG, Unite

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