By David Williams
October 21 2010
Local authorities are preparing for profound changes in the way they provide
services and run themselves after council spending emerged as one of the
worst-hit areas in this week’s Comprehensive Spending Review.
The October 20 review cut overall departmental spending by an average of 19%, well below the previously trailed 25%, but local government was particularly hard hit.
Total council income from central government grants is to fall by 26% –
including a 28% cut in Department for Communities and Local Government grants.
Capital grants to local authorities are expected to be reduced by 30%, while
the DCLG’s own running costs are planned to halve over the four years of the
review period.
But councils are to be given more control over their finances. Chancellor
George Osborne said the number of ring-fences on local authority spending is to
be reduced from more than 90 to around 10. Additional funding worth £4bn is to
be rolled into the general revenue support grant.
Osborne announced a ‘fully funded council tax freeze’, setting aside £650m to
enable councils to keep their bills flat for the next four financial years. The
cash will fund the real-terms loss to their tax take at a rate of 2.5%.
The review calculates that this additional funding will mean a 14% fall in
total council budgets by 2014.
The budget for council tax benefit spending is to be cut by 10% from 2013/14,
saving £490m – but control over the reduced budget will then be devolved to
local authorities.
Rob Whiteman, chief executive of the Local Government Improvement and
Development agency, said it was a ‘mean figure – in two senses’ as only the
average figures have been published, and councils will not know how deeply they
will be affected until individual allocations are released.
But, he added, councils will have been surprised to find out the cuts are
‘top-loaded’, with the greatest reductions to be made in the first years of the
CSR period. ‘Many will have been expecting a straight line – this is going to
give them a tougher first year.’
Richard Kemp, vice chair of the Local Government Association, said the
government had set councils a ‘very difficult’ target.
‘We will be fighting to make sure that anything local government does is done
fairly – and keeping the most disadvantaged from as many of the cuts as
possible,’ he said.
He told Public Finance he was concerned that some smaller second-tier
authorities would not be able to cope, particularly those that have not started
sharing services or back-office functions.
The settlement for local government could ‘massively accelerate’ a series of
mergers between smaller councils, he added.
Kemp said the quality of future services was dependent on to what extent
government kept its word on allowing councils more freedom with their money. He
added that councils could ‘approach’ the planned reductions more freely if they
were allowed to share resources and pool budgets with other public bodies.
Osborne’s announcement of 16 ‘community budget’ areas – following on from last
year’s Total Place trials – met a mixed reaction.
Although detail is scant, the CSR document says that in 2011/12, public bodies
in each pilot area will pool resources to support families with ‘complex needs’
– and that all areas could be given similar flexibility from 2013/14.
Whiteman said it was ‘good progress’, and that this was only ‘phase one’ in a
bigger project.
John Tizard, director of the Centre for Public Sector Partnerships and leader
of a Total Place project in Worcestershire in 2009/10, described the
announcement as a ‘very small step’ and a ‘long way short’ of the opportunity
offered by Total Place.
‘It would appear that it has not been possible to get agreement across
Whitehall for a Total Place approach,’ he said.
But Simon Parker, director of the New Local Government Network, said: ‘It’s a
first step and clearly we want to explore the potential of this approach.
‘There’s a lot of scope to go further with area-based budgeting. We don’t know
if this is the full extent of it yet – I hope it’s not.’
He welcomed the new financial flexibility for councils, but added: ‘I don’t
think any amount of ring-fencing is going to make up for the fact that budgets
are going to shrink very considerably.’
He said the cuts would make the coming years a ‘profoundly challenging’ time
for local government, as council spending on its current scale would become
unsustainable.
Parker said councils would increasingly share functions, while the first service cuts would be in ‘discretionary’ services such as leisure centres and libraries. ‘What I hope then happens is that councils start looking at more radical long-term things like more preventative work, particularly in social care,’ he added.
