Welsh councils face 1.4% grant cut next year

23 Nov 10
Welsh councils will have to grapple with a 1.4% cut in grant funding next year, after the three-year local government settlement was announced today.

By Vivienne Russell

23 November 2010

Welsh councils will have to grapple with a 1.4% cut in grant funding next year, after the three-year local government settlement was announced today.

But Wales’ 22 local authorities can look forward to small cash increases in years two and three of the settlement.

 
Setting out details of revenue support grant allocations, Welsh local government minister Carl Sargeant said: ‘I am increasing the cash funding of local authorities over the three-year period. This is in stark contrast to the position in England where local government core funding shows a decrease of 2.3% on a like-for-like basis.’
 
The 1.4% decrease next year means the grant settlement will be just over £4bn. But over the next two years it will rise by 0.2% and 1.3% respectively in cash terms.
 
But the Welsh Local Government Association pointed out that grant funding is set to fall by 6.7% in real terms over the three-year period, despite small cash increases. The 1.4% cash cut for next year is equivalent to 3.3% in real terms. The WLGA also highlighted cuts to capital spending, set to fall by 14% next year, with further reductions expected to follow.
 
WLGA leader John Davies said: ‘There is no doubt that councils will struggle to bridge the gap between the budget cut and their rising costs and increasing demands for services.’
 
Within the three-year settlement, £32m is being made available to help councils fund council tax freezes should they wish. This is equivalent to the amount the UK government has set aside to fund a council tax freeze in England.
 
Sargeant said: ‘Whilst I am providing equivalent funding, I will be allowing local authorities to determine themselves whether they wish to use this funding for the purposes of freezing council tax or whether they will spend this on services. It will be for each local authority to justify their decision on this to their citizens.
 
In addition, the settlement provided extra protection for schools and social services, in line with commitments given by Welsh First Minister Carwyn Jones.
 
Education funding in Wales will increase by around £61m over the three-year settlement period. An additional £35m will help local government meet the extra pressures on social services for children and older people.
 
The local government minister also announced that he has commissioned a review to examine the best configuration for service provision in Wales. Initial findings will be reported early next year.
 
Sargeant said: ‘The challenge of delivering good quality services for less money continues. Whilst there is heartening evidence of increasing cross-service and cross-authority collaboration, local authorities need to be more ambitious in the scale and pace of change if they are to meet the financial challenges that face them.
 
‘The settlement is a catalyst for further improvement.’
 
On council tax, the WLGA said Welsh councils were ‘hugely conscious’ of the struggle people faced to make ends meet. ‘Councils will do their utmost to bear down on costs and seek efficiencies, showing the same responsibility which last year led to the lowest average council tax rises since [the tax’s] inception in 1993,’ Davies said.
 
WLGA finance spokesman Rodney Berman added: ‘Although this is probably as good an outcome as we could have expected in the current climate, it remains the most difficult settlement for local government in many years. Councils will be particularly concerned about the impact of capital cuts on infrastructure plans.’

He added that the cuts would affect the extensive contracts councils had with the private sector, hurting firms just as they were beginning to emerge from the recession.

Local government commentator Tony Travers said the settlement would make life easier for Welsh councils compared to their English counterparts. This was primarily down to their decision not to ring-fence the Welsh NHS budget.

Travers said there was ‘no doubt’ that the Welsh Government’s decision not to protect NHS funding meant the outcome for local government was ‘vastly better than anything that will happen in England’.

‘This just shows you how, in England, if they’d gone for something more across the board, it would have been so much more easy to manage,' he said.

‘It makes the whole thing look so much more sensible.'
 
He added that the cuts would provoke less public hostility than those in England. ‘As a piece of politics, the Welsh government will get far, far less response out of this.’ 

Additional reporting by David Williams

 

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