30 November 2007
English councils outside the capital are set to clash with their London counterparts as local authorities scrabble for resources in a tight fiscal climate.
Ministers are expected to set out the detail of the provisional three-year local government finance settlement next week. The Comprehensive Spending Review gave authorities a
real-terms increase of 1.5% next year and 0.8% and 0.7% in the two following years. But councils are warning that they face tough choices and that some services might have to be cut back.
The major battle will be over social services, as ministers reveal whether they will continue to soften the impact of new formulas on some councils. Whatever ministers decide is likely to displease a significant element of local government.
Revised needs-based formulas for personal social services were set for implementation in 2006/07. But London Councils objected, saying these did not reflect the level of need in the capital and would deprive them of £300m.
In response to this lobbying and in an attempt to maintain some financial stability, the formulas' effects have been 'damped' for the past two years.
A funding floor for the children and younger adults service blocks means authorities judged to have reduced needs in those areas have still been guaranteed increases of at least 2.7%.
But that has meant other authorities losing out and councils are sharply divided over whether this protection should continue.
The Special Interest Group of Metropolitan Authorities maintains that the authorities which benefited have had two years to adjust. It is urging the government to remove the damping and implement the formulas in full.
Frances Foster, chief policy and research officer at Sigoma, told Public Finance that metropolitan authorities were losing £240m a year because of the effects of the damping and were looking to ministers to rectify the anomaly.
She said: 'Anything that happens now is locked in for three years so our main concern is to get the distribution more in line with the actual needs assessment.
'We're looking at the removal of the social services damping as a priority because we feel that it is perverse.'
Foster said damping meant that some authorities missed out on vital funding, despite having a high level of need.
'If you have a system that identifies a need, you need to resource that need: it's as simple as that,' she said.
But London Councils insisted the capital faced a gloomy future if ministers pressed ahead with the implementation of the new formulas, and could potentially lose up to £420m in funding.
'If the government took out the damping of the [social services] formulas and left in overall damping, all of London, bar five authorities, would be on the grant floor,' said Nicola Morton, chief statistician at London Councils.
'It's still an issue. We've been campaigning quite hard that they should retain that damping. The need for social services in London is actually going up.'
But councils were united in agreement that the next three years would be tough for all authorities. There was little hope that, as in previous years, ministers would find an extra pot of money to fund additional pressures.
The Local Government Association has identified care of elderly people and waste collection and disposal as the two budget areas that will face most pressure over the spending review period.
The number of elderly people is projected to increase by 400,000 over the next three years and the LGA is warning that, without adequate resources, local authorities will struggle to meet their social care needs and might have to cut back on low-level services, such as meals on wheels.
Mike Heiser, senior policy consultant at the LGA, told PF that, despite the ongoing debate on the funding of social care, pressures were immediate and money had to be found from formula grant and council tax, which would exert pressure on eligibility criteria.
The same was true of waste, where local government had to face up to European Union landfill targets as well as coping with the higher costs of recycling and waste treatment facilities.
Heiser said: 'Local government is working with central government on [waste and recycling] and we do welcome the introduction of pilots which may allow authorities to charge, but it's early days and the pressures are going to be here and now. It's another pressure on formula grant and council tax.'
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