14 November 2003
Councils are threatening to cut services in the expectation of receiving an average 4.9% grant increase when the provisional finance settlement is announced next week.
A local government source told Public Finance that, although this increase would be more than councils feared, it remained a tight settlement and many authorities would prefer to cut services than further feed the current chorus of protest with new increases in council tax.
Local government leaders have spent the week issuing a series of warnings and pleas to ministers in a bid to secure an acceptable funding settlement.
In a letter to Deputy Prime Minister John Prescott, issued on November 11, the Local Government Association warned that councils faced an £800m funding black hole.
LGA chair Sir Jeremy Beecham said: 'The problem for this coming year is the perception that council tax levels have already reached the heights of acceptability, but most councils have nowhere else to go to raise income.
'We are working closely with the government to find a long-term solution to this problem, through the Balance of Funding review. But this won't fix next year's council tax levels and spending needs.'
The LGA also urged the government to reduce the amount of money that is ring-fenced for specific projects and ensure that non-education services, such as social care and waste collection, were adequately funded.
The Special Interest Group of Metropolitan Authorities reiterated this view. Principal research officer Ciaran Guilfoyle told PF that the group was particularly concerned by the new education funding mechanism announced by Charles Clarke last month, which will see schools receiving a per-pupil increase of 4%.
'It might be well intentioned, but the "minimum funding guarantee" will tend to distort the underlying local government finance system, which recognises important differences in local need and council tax resources.
'Without additional funding injected in the system, this mechanism could actually result in below-inflation increases in non-education funding for many Sigoma members, as well as making the finance system even more complex,' Guilfoyle said.
Sir Robin Wales, chair of the Association of London Government, also warned that an unsatisfactory settlement might see the capital's authorities scaling back services.
'Unless the government gives the capital's councils our fair share of funding next year, we won't be able to continue to improve services – instead we will be forced to make cuts,' he said.
'Following a tough financial settlement from the government this year, council budgets are stretched to the very limit.'<
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