Further cuts to local government funding announced recently by ministers cannot be justified. There are options and alternatives that the government needs to consider
The technical consultation paper on local government finance for 2014/15 and 2015/16 seeks answers to six technical questions, but fails to consider or to ask questions about the really big issues.
The proposal over the next two years to make a cash cut of £5.5bn (21%) in the core revenue funding that councils are currently receiving to provide key services could have a profound impact on the ability of councils to continue to provide the statutory services that Parliament has approved and the public rely upon.
An important issue is governance and Parliament needs to truly understand the scale of the cuts that are being proposed over the next two years; it needs to ask the right questions and secure honest answers to get assurance about the impact of the cuts on the delivery of the statutory services to the public wherever they live in the country.
If there is a strong risk that the reduced funding is insufficient to provide the current range of statutory services, Parliament needs to understand this and have a say in the prioritisation of funding and consider any consequential changes in the nature and level of statutory services that can be provided. How fit for purpose is a funding system where the provision of statutory services in future years would rely on the level of economic growth in an area?
Local government needs to be properly and meaningfully consulted about decisions and options that affect the size of the cuts in its core funding and on any proposals to transfer or use funding for other purposes. This means that questions need to be asked and answered about each of the components of the extra £1bn of cuts now proposed for 2015/16.
There are real options and alternatives to several of the holdbacks for the safety net and capitalisation directives; additional top slices for New Homes Bonus; and transfer of funding for collaboration, efficiency and transformation funds that are currently being proposed. Genuinely alternative funding sources need to be found for social care new burden and pressures from the transfer of the independent living fund.
There are real options and alternatives that could reduce the overall size of the cuts and ease the impact of cuts in services to the public.
The way that cuts are distributed between councils also needs to be more fully considered and consulted upon, with alternative options being developed and presented to ensure that the cuts are allocated in as fair and as principled a way that is possible. Particularly if the intention is that ‘we are all in it together’.
How can huge variations in the percentage cut in spending power, where the most deprived councils with much higher spending pressures are forced to make six to eight times the percentage cut in spending power compared with the least deprived councils with lower spending pressures be justified or considered to be in any way fair?
The proposed cuts distribution is based on technical manipulations of a very complex grant system; as well as a few ad hoc decisions to protect some services areas. When the funding figures for 2014/15 and 2015/16 are compared with the grant for the current year and council tax is taken onto account, it is clear that there are huge variations in the percentage of cuts in grant and spending power between councils.
There is clear evidence that councils that face the largest percentage cuts are those with the highest proportions of pensioners; the highest numbers of children in need; the lowest levels of income and council tax income. Conversely, councils with the lowest proportion of cuts are generally the least deprived councils; in the wealthiest areas; with the lowest percentage of pensioners and looked after children.
The comparison of the percentage cuts for similar types of councils facing very different pressures is stark and revealing and, if in doubt, look at the dramatic difference in spending cuts and pressures between Hackney and Richmond; Torbay and Wokingham; Lincolnshire and Surrey; Great Yarmouth and Uttlesford.
It is difficult to justify such significant continued differences in the percentage of cuts being allocated between councils, at a time when stability is so important and fairness is supposed to be a priority.
Alternative simpler and fairer options exist, but have not yet been adequately considered or consulted upon. These include applying grant cuts to deliver an average percentage cut in grant or spending power; applying an average cut in funding per dwelling or per head of population. These and any other alternative options need to be urgently and actively developed consulted upon and considered.
A medium-term solution includes pursuing the Local Government Association’s big ideas for rewiring public services’ - e.g. ‘share money fairly around the UK by scrapping the outdated Barnett formula and replacing it with needs-based funding’; ‘share money fairly around England by taking financial distribution out of the hands of ministers and replacing it with an agreement across English local government’ and also ‘a multi-year funding settlement aligned to the end of the next parliament which will enable councils to invest in economic growth and prevention rather than cure’.
The bigger questions need to be asked and fairer alternatives need to be considered now in time for the better and fairer decisions to be made about funding cuts and services over the next two years.
Paul Woods is the director of resources at Newcastle City Council, financial adviser to the Association of North East Councils and a member of the Local Government Association’s Core Advisors Group
