Spending review leaves local government facing cuts of 26%
Author: Local Government Chronicle |
The worst fears of local government were narrowly avoided in this week’s spending review, but councils were still left to absorb some of the biggest cuts in the public sector.
Chancellor George Osborne’s announcement confirmed central government funding to councils would fall by 26% over the next four years. Many in the sector had predicted cuts of more than 30%.
According to supporting documents, 29.7bn will be spent on local government in 2010-11, falling to 24.2bn in 2014-15. However, hopes that the cuts would be phased in over the spending review period were dashed. The cuts will be front-loaded, with 2.2bn being cut in 2011-12, followed by 1.2bn, 0.8bn and 1.3bn.
The documents suggest the funding cuts will translate into a 14% reduction in spending for councils, although capital funding will also decrease by about 45%.
The Local Government Association described the cuts as ?some of the biggest in the public sector? and warned they would inevitably translate into cuts to frontline services.
Apart from the Department for Communities & Local Government, whose revenue budget was savaged by 51% after transfers to councils were taken into account, of the spending departments only the Department for Environment, Food and Rural Affairs suffered a bigger percentage decrease in funding.
There was, however, an extra 2bn made available for social care – an additional 1bn by 2014-15 for pooled NHS/local authority budgets, and 1bn contributed to the 2.4bn personal social services grant rolled into formula grant.
In a wider package of measures, the Treasury confirmed a further 4bn in specific grants would be un-ringfenced and put in formula grant. However, the LGA was unsuccessful in its attempt to get the ring-fence removed from funding for public health as well as a range of grants from the Department for Education.
The government revealed council tax benefit would be ?reduced by 10% and localised?. Details on how this will work are expected to be unveiled, along with details of how Tax Increment Financing and the New Homes Bonus will work, in a ?local growth? white paper expected to be published in the next few weeks.
The full range of costs to local government from the changes announced this week will likely reveal themselves over the next few days.
However, a decision to raise interest rates on loans to councils from the Public Works Loan Board to 1% above UK government grants looked set to reap the Treasury almost 1.3bn over the next four years.
Managing director of Local Government Improvement & Development, Rob Whiteman, said: ?The reduction in grant and the front-loading [of the cuts] means councils will have to work very hard to deliver the savings.
?It will be very challenging. But the de-ring fencing of grants and community budgets programme is very welcome news,? he added.
Communities secretary Eric Pickles described local government’s settlement as ?fair though challenging?. But he was immediately attacked by the LGA’s vice-chair Richard Kemp (Lib Dem), who claimed he had not fought hard enough for councils.