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Finance Settlement brings new risks for councils, says CIPFA

By Vivienne Russell | 20 December 2012

The Local Government Finance Settlement heralds a ‘very challenging’ phase in the austerity programme, CIPFA has warned, while the Local Government Association called it ‘bad news for services’.

Following yesterday’s settlement announcement, the institute urged authorities to finalise their 2013/14 budgets prudently and in a way that safeguards both essential services and the financial health of their organisations.

CIPFA chief executive Steve Freer said: ‘It is important to see these figures in the broader context of the year-on-year funding reductions which local government has been asked to manage. 

‘In overall terms, councils' performance in managing with reducing resources since the 2010 general election has been remarkably positive. But this is another risk-laden step in the process.’

New complexities were also on the way, with the partial localisation of business rates and local administration of council tax benefit, CIPFA added. It was therefore important to monitor spending and revenues with ‘extra vigilance’ and be ready to make any necessary in-year adjustments.

The Local Government Association warned that the settlement undermined the role councils could play in promoting economic recovery and said it was ‘bad news’ for services.

Chair Sir Merrick Cockell said: ‘Local government has borne the brunt of cuts to public spending and [the settlement] announcement confirms that this will continue to be the case until 2015.

‘What was scheduled to be an extremely challenging 28% reduction in council funding will now exceed 33% and, for some councils, may go much higher.’

He added that, by way of comparison, Whitehall departments’ budgets were being cut by an average 8%.

‘This pattern cannot be repeated into the next Spending Review period. Councils are one of the few parts of the public sector which actively promote economic growth. Curtailing that role hampers Britain’s economic recovery,’ Cockell said.

The settlement reduces councils’ spending power by 1.7% next year, although some authorities will have to contend with cuts of up to 8.8%. But Local Government Secretary Eric Pickles called it a ‘bargain’ for local authorities.

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