16 July 2004
Gordon Brown unveiled his Spending Review this week and immediately unleashed another battle over council tax, as town hall leaders said their allocation would force up bills next year.
The warning came after the chancellor delivered his much-anticipated statement to Parliament on July 12, in which he laid out the government's spending plans for 2005 to 2008.
Brown revealed the annual budget allocations for each Whitehall department, the devolved administrations and local government. He also demanded £6.45bn savings from local government by 2008, and Lewisham chief executive Barry Quirk was appointed to lead the efficiency drive.
Quirk told Public Finance he would ensure there were no smoke and mirrors employed to measure the savings, but conceded there were problems in quantifying improved productivity. 'This has got to be done so that local government can have confidence that the efficiency gains are real and sensible and they stack up.'
Quirk said the sector would benefit from a renewed focus on efficiency. 'Efficiency has been underplayed in the public sector since the advent of Best Value, so it is a chance to put a greater emphasis on it. Local government needs to focus on efficiency while improving effectiveness.'
Earlier, council leaders reacted with dismay at the news that their allocation will rise from £43.7bn in 2004/05 to £51bn in 2007/08, an annual real-terms increase of 2.6%, and demanded an urgent meeting with Brown and John Prescott.
Sarah Wood, director of economic and environmental policy at the Local Government Association, warned of a £1bn black hole. It comprises £700m to keep council tax rises below 5%, and £300m to fund inescapable pressures, such as responsibilities on waste.
She said that, on the government's own figures, authorities would have to raise council tax by 6.7% to protect services. The shortfall threatens efforts to keep council tax within ministerial prescription of 'low single figures', setting the ball rolling for another bitter fight over the issue next year.
'They cannot have their cake and eat it,' Wood said. 'They have made their decision on the Spending Review, which is fine, but they must understand the consequences. The settlement is less than we had lobbied for and leaves a real possibility of cuts to services or council tax increases.'
Local government minister Nick Raynsford, speaking to PF after the Spending Review, said he was not surprised by the reaction but insisted that local authorities had been given the resources they need.
'I would expect nothing less, but if they take themselves back eight years, they should remember how they coped then,' he said. 'This is another good settlement, giving guaranteed above-inflation rises of 2.6% for each of the three years.'
Raynsford guaranteed that individual councils would keep all the savings they achieved and said the demands made on them would be realistic.
But Wood said the efficiency agenda must be transparent and authentic. 'These savings should not be at the expense of council tax levels or services, because that would be illogical and unfair.'
PFjul2004
