19 December 2003
Christmas has come two weeks early for local government and, in an unlikely turn of events, Gordon Brown has been transformed from Scrooge to Santa Claus.
The chancellor used his Pre-Budget report on December 10 to announce an extra £406m funding for authorities, of which £340m has been earmarked for England. A welcome gift, indeed.
But it is not the ghost of Christmas past that is haunting Brown. It is the very real threat of a backlash from voters fed up with the relentless increase in council tax that has prompted his act of generosity.
When the provisional finance settlement for local government was announced in November, district councils were shocked to learn that they would receive a minimum grant increase of just 2.2% and a maximum of 2.8%. Warnings of big hikes in council tax swiftly followed.
Ministers were already aware that on this issue the temperature of the country was rising. After this year's average increase of 12.9%, it was apparent that further big increases next year would not be tolerated.
So when local government minister Nick Raynsford announced on December 11 how the extra money would be allocated, he made clear that the cash was being provided to stop that from happening.
'This is a substantial investment which will further help councils to improve public services without imposing unreasonable demands on their taxpayers,' he said. 'This means local authorities must aim to deliver council tax increases in low single figures next year. Unreasonably large council tax increases will neither be justified nor acceptable.'
The Office of the Deputy Prime Minister has distributed the money by revising the floors and ceilings outlined in November's provisional settlement. The floor for districts has been increased to 3% and there will be no ceiling.
Top-tier authorities have also benefited – their new floor is 4% instead of 3.5%, and the ceiling is 7.5%, up from 5.8%.
Even so, most of the additional money has been directed to those districts warning of serious problems and big council tax increases. One in four has seen its allocation in the provisional settlement for 2004/05 increase by at least a further 2%. Among top-tier authorities, none will get that much.
The biggest winners are shire districts in the Midlands: top of the pile was Oadby & Wigston in Leicestershire, which can now count on a further 9.1% boost to its budget.
Other notable gainers include Blaby, also in Leicestershire, with 7.1%; South Staffordshire, with 5.8%; and Congleton in Cheshire, with 5.4%.
The Local Government Association is, naturally, pleased with the new money. The latest £340m, together with the extra £420m announced in the provisional settlement, means that the £800m funding gap for 2004/05 it identified in November has almost been closed. LGA chair Sir Jeremy Beecham declared that 'local government is getting its message heard'.
But he was rather less certain about whether the money would achieve ministers' principal aim: avoiding next year's council tax increases being set at a politically damaging level. 'It will certainly help,' was all he would say.
Others, however, are already crying 'bah, humbug' and warning that, even if it does work in 2004/05, it is merely a reprieve.
Unison, the largest union in local government, is adamant that the extra money for next year will not deal with the underlying financial pressures facing councils.
'This is a way of defusing what was becoming an unmanageable political problem,' a spokeswoman says. 'But this one-off payment is not going to answer the long-term recruitment, retention and equality issues in local government.'
The Local Government Information Unit sees the money, although welcome, as 'buying time' for the government. Chief executive Dennis Reed is urging ministers to use the Balance of Funding review, due to report in 2004, to get to grips with the underlying difficulties.
'The recent problems will only be overcome once and for all by giving local government a broader tax base, whereby councils raise more than half of their revenue locally. This would take pressure off the council tax,' he says.
The chancellor's last-minute cash injection, combined with loud threats to cap authorities that set 'unreasonable' council tax increases, will probably ensure that most authorities exercise restraint in 2004/05.
But, in years to come, only a genuine effort to tackle councils' forced reliance on council tax will ensure Brown is not visited by the ghost of Christmas past.
PFdec2003
