Councils count their £188m boost

1 Feb 01
A last-minute £188m cash injection into this week's local government finance settlement may not be enough to head off mounting pay and service pressures, warn councils.

02 February 2001

In what was widely interpreted as a pre-election attempt to limit major council tax rises, ministers outlined three extra pots of cash on top of the 7.2% grant increase for England in 2001/02. The cash boost follows last week's additional £100m for the Neighbourhood Renewal Fund.

Around 120 councils will benefit from an extra £52m to bolster education budgets, while £25m has been set aside to ease the pressure of housing the homeless and asylum seekers. The Environment Agency will also receive an additional £11.6m to cap its rising levies on flood-hit councils.

The Local Government Association welcomed the extra finance, and the Association of London Government hailed it as the best settlement for eight years. But authorities warned that it might not be enough to keep council tax rises below the 6% indicated by the government.

The LGA has already written to Health Secretary Alan Milburn requesting an immediate cash injection for the current financial year, after a £205m overspend by social services.

London is facing a tight squeeze, with Mayor Ken Livingstone demanding a 31% increase in the Greater London Authority precept, which could add 5% to council tax bills before the boroughs have even added in other pressures.

The teachers' pay settlement is also expected to cause difficulties, with speculation of an inflation-busting rise plus a major increase in London weighting. 'The situation in London could be significant enough to affect, in average terms, national council tax rates,' warned Neil Kinghan, director of finance at the LGA.

Both associations also questioned the political motives behind the sudden funding boost.

The Department for Education and Employment said distribution was based on three factors, with authorities which hadn't benefited from the extra Neighbourhood Renewal Fund instantly qualifying for an extra £100,000 – despite very little correlation between the NRF, used to counter deprivation, and education budgets.

The bulk of the extra £52m, around £44m, was then divided between authorities that will lose cash from the transfer of adult education to the new Learning and Skills Councils and those with low SSA increases and recruitment and retention problems.

But sources close to the DfEE suggested that much of the distribution had actually been at the discretion of Education Secretary David Blunkett, who was anxious to limit the damage to authorities in the North and Midlands after technical data changes.

Birmingham, for example, which was set to lose around £5m under the Area Cost Adjustment, will take the lion's share of the education cash with £3.6m plus £5.5m from the NRF. Bradford also benefited from the NRF and the DfEE to the tune of £4.5m.

Yet Inner London authorities with particular teaching recruitment pressures were not included in the education bonanza. Kinghan said: 'It is clear that the NRF is just for deprivation.'


Did you enjoy this article?