07 December 2001
As predicted in Public Finance, spending for English councils will increase by 7.4% in 2002/03.
Announcing the package on December 4, Local Government Secretary Stephen Byers pledged that all authorities would receive increases that at least match inflation.
Ministers made their political priorities clear with education due for an overall 8.7% increase, and personal social services 6.5%. The Neighbourhood Renewal Fund, used to dampen losses in northern councils last year, will increase by 50% to £300m.
London local authorities breathed a sigh of relief after the Office for National Statistics hastily reviewed its new earnings survey. The office, which has been accused of a major 'cock-up', had managed to leave out a large earnings group including senior financiers.
The survey, which feeds directly into the Area Cost Adjustment, would have removed around £131m from the capital's boroughs. But they will now receive a 5.2% increase or £402m. Metropolitan boroughs, however, are likely to suffer slightly as a result of the adjustment.
The system of floors and ceilings has not only been maintained but extended to shire districts, police and fire authorities and the Greater London Authority. For education and social services authorities, the floor is 4% and the ceiling 7%.
The City of London and Wandsworth will be the largest beneficiaries from the floor, gaining £8.6m and £6.5m respectively. However, Kensington & Chelsea will lose out for the second year running, contributing £8.5m, while Westminster will give up £4.7m.
'Westminster is funding other authorities to the tune of almost £5m even though the money belongs to the city council,' said Kit Malthouse, Westminster's deputy leader.
Byers, conscious of the annual spat over distribution, announced an extra £41m to mitigate the effect of floors on 'middle' funded authorities.
Local authorities largely welcomed the settlement, but warned of 'major difficulties' with the absence of any new money for personal social services and concern over the hike in specific grants.
The Local Government Association complained that the allocation for social services had not increased from that outlined in the 2000 Spending Review, despite public pleas for more cash.
'Our members will be extremely disappointed that there is no new money for personal social services despite the significant and highly publicised pressure that services for the elderly and children are under,' said Sir Jeremy Beecham, LGA chair.
Surrey County Council is already warning of a council tax increase of around 10% to fund its social services.
Specific grants have also increased by 15.3%, a record level, compared to a 9% rise this year.
This will be the last year funding will be allocated using the existing system, with Byers pledging a more 'open and transparent' regime for 2003/04. But the LGA warned that any distribution changes would have to include extra resources to dampen any losses in funding.
PFdec2001
