By David Williams
13 December 2010
Some councils in England’s most affluent areas could see an increase in their funding from central government in today’s revenue support grant settlement, Public Finance has learnt.
Leading local government figures have said that the government’s decision to fund a council tax freeze worth 2.5% could mean that councils who raise a high proportion of their income through tax will get a funding boost.
Clive Betts, chair of the Commons communities and local government select committee, said: ‘Some councils will get enormous cuts. But initial calculations show that some authorities – such as the small districts in the south – will get an increase in grants.
‘They will not lose any specific grants, like the Working Neighbourhoods Fund or the area-based grants. If they have the same percentage cut in the revenue support grant as everybody else, it would be a relatively small percentage cut in their total resources. Then they would gain from the grant to compensate authorities for freezing council tax.’
He said that it would not be fair for councils to get a rise in funding, in the face of what is expected to be the harshest overall settlement in a generation.
‘I presume and I hope the government has been doing something to try and address those issues in a fairer way, to put in floors and ceilings and damping mechanisms.’
Betts said he suspected attempts to reduce grant variations between council was part of the reason that the settlement had been delayed.
Grahame Lucas, chair of the Society of District Council Treasurers, said the scenario was ‘perfectly possible on the assumption that some councils get a higher proportion of their income from council tax than from government grant… something odd might happen on the bottom line’.
A typical authority set to benefit could be one with high property values, and therefore high council tax income, and low perceived levels of need resulting in a lower reliance on central government grants.
Lucas said that ‘philosophically’ the cash to fund the tax freeze was going into residents’ pockets in the form of a real-terms council tax cut. But if a council was planning to freeze taxes anyway, regardless of whether the freeze was funded, this amounted to free money from central government.
‘It would look awful,’ he said, because people could ‘muddle up’ the overall revenue grant cut with ministers’ separate intention to freeze council tax.
Rob Whiteman, chief executive of the Local Government Improvement and Development agency, agreed that scenario was possible. He told Public Finance: ‘We’ll have to watch the detail… the sector will watch with great interests the mechanisms the government puts in place to deal with the transition [to a lower revenue grant].’
