Councils face 33% funding cuts, the NLGN warns

6 Jul 10
Councils should brace themselves for central government funding cuts of up to a third, a report released today warns
By David Williams

7 July 2010

Councils should brace themselves for central government funding cuts of up to a third, a report released today warns.

Analysis of last month’s Budget by the New Local Government Network concludes that cuts of around £12bn a year are likely, amounting to around a third of the Department for Communities and Local Government formula grant.

The grant represents around 80% of local authority income, and a reduction on that scale would lead to cuts in frontline services or new charges being introduced, the think-tank says.

Nick Hope, author of Scanning financial horizons, recommends that councils be given more financial certainty from Whitehall, and complete freedom over raising council tax. He also argues for funding to be channelled through ‘place agreements’, along the lines of the Total Place pilots, pooling cash for councils, health trusts and police authorities.

Hope added that the £1.165bn cuts already imposed this financial year were ‘relatively small compared with the tsunami of funding cuts that will hit councils over the course of this Parliament’.

The formula grant has so far escaped any government reductions, but is expected to come under scrutiny in the autumn’s Comprehensive Spending Review.

Councils fear they will have to make big cuts. Most chief executives and finance directors surveyed for the research believed they would need to cut their budgets by 20%–25%, while a third expected an even tighter squeeze.

The survey also found that environmental services, such as street cleaning and waste collection, and cultural services like museums and libraries, would be first for the chop.

Responding to the report, local government minister Bob Neill did not contradict the £12bn figure.

‘This is an opportunity to both decentralise power, and to save taxpayers’ money through more joint working, professional procurement and greater transparency,’ Neill said.

‘The government will work with councils to defend frontline services such as bin collections, as evident by our reduction in the red tape of ring-fencing, and protecting the formula grant.’

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