09 December 2005
The government's £1.1bn funding boost for local government, announced alongside the Pre-Budget Report, might have mollified council chiefs, but the goal of making high council tax rises 'a thing of the past' remains a problem.
Local authority leaders were quick to warn that councils still face tricky decisions and might have to scale back services.
The provisional local government finance settlement – covering two years for the first time – was announced by local government minister Phil Woolas on December 5.
It included a £305m increase in formula grant for 2006/07 as well as £800m new money to fund additional legislative burdens, such as the European Union's recycling directive, new licensing duties and changes to asylum seeker provision. In 2007/08, formula grant is set to increase by £508m over and above planned levels.
The offer marks the initial step towards three-year settlements, which will begin in 2008/09. Following a three-year formula freeze, the Formula Spending Shares approach is being replaced with a new Relative Needs Formula, based on the six main service areas, and a capital finance allocation.
The Local Government Association hailed the settlement as 'better than expected'. But Sarah Wood, director of policy, warned: 'There are a large number [70 out of 150] of upper-tier authorities on the funding floor, so they'll have difficult decisions to make. But the fact that there was additional money, however little, was helpful. It was a welcome relief.'
LGA chair Sir Sandy Bruce-Lockhart was adamant that councils were doing everything in their power to keep council tax low. He told Public Finance: 'What the settlement doesn't even attempt to do is pick up the demographic and demand changes, such as the increasing number of elderly people and more people with mental and physical disabilities requiring care.'
The threat of capping continues to cloud the horizon. Woolas said: 'We expect to see average council tax increases in each of the next two years of less than 5%. Local government should be under no illusions; if there are excessive increases, we will take capping action as we have done over the past two years.'