London leads push for more cash

18 Oct 01
English local authorities are demanding a substantial increase in next year's finance settlement if they are to avert major service cuts and huge hikes in council tax.

19 October 2001

As the annual round of lobbying and negotiations began for the revenue support grant, London struck the first blow, warning that the capital's boroughs are likely to lose £131m in 2002/03. The Association of London Government said an 'unexplained' change to the area cost adjustment could hurt the most deprived boroughs.

According to ALG figures, the loss would add an average of £40 per head to Band D council tax. This would rise to an extra £132 in Tower Hamlets, £109 in Hackney and £97 in Southwark.

The association has written to the Treasury and local government minister Nick Raynsford demanding an explanation for the loss. 'It is essential that the government take significant steps to provide additional resources to London local authorities so that they can continue to improve services while keeping council taxes to a reasonable level,' said ALG chair Robin Wales.

It has drawn up a shopping list of demands, including an extension of the specific grants used to bail out the capital's boroughs in 2001/02.

The metropolitan authorities have drawn up a similar list and will be pressing for continued Neighbourhood Renewal Funds and an extension of the education budget support grant (£52m last year). They also want the funding gap between London and the North, which they claim is £2bn a year, to be closed.

These demands are likely to place Raynsford in a difficult position. Last year's specific grants were given as a 'one-off' in an attempt to smooth the growing row over regional funding. But both northern and southern authorities claim they now need these grants to ensure continuity of funding and services.

A source told Public Finance that the government had effectively 'painted itself into a corner' and, despite last week's extra funding for social services, would be expected to find substantial resources over and above those outlined in the government's Spending Review if services were to be maintained.

London could become the funding flashpoint this year with Mayor Ken Livingstone entering the fray and lobbying for extra cash for the boroughs.

The Metropolitan Police Authority's finance committee has already proposed a 7.2% increase in its budget to £2.15bn, excluding extra terrorism costs, which will also put pressure on council tax.


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