Local government settlement is 'neither fair nor progressive'

14 Dec 10
Government claims that yesterday's local government finance settlement was 'progressive' and 'fair' have been forcefully disputed
By Lucy Phillips

14 December 2010

Government claims that yesterday’s local government finance settlement was ‘progressive’ and ‘fair’ have been forcefully disputed.

Local Government Secretary Eric Pickles announced average cuts of 4.4% to the formula grant for councils in England for 2011/12 and 2012/13 on December 13. No authority would experience a reduction of more than 8.9% next year and funding had been weighted to areas that are deprived and most reliant on central government grants, he said.

But an analysis of the settlement by the New Local Government Network, setting the cuts against multiple indexes of deprivation, painted a different picture.

Labour authorities in poor areas such as Hackney, Rochdale, Knowsley, Liverpool and Tyneside all take the maximum hit of 8.9%, while Conservative authorities in relatively better-off areas such as Windsor & Maidenhead, Buckingham and Richmond-upon-Thames receive cuts of less than 1%.

Anna Turley, NLGN deputy director, told Public Finance: ‘I think it’s pretty shocking. The data speaks for itself. Particularly in London the co-relation is there.’

She added: ‘Councils will have to take radical steps to transform the way they deliver services in the years ahead to meet this unprecedented challenge.’

Andy Sawford, chief executive of the Local Government Information Unit, said the settlement was much tougher than the headline figures portrayed. Councils were still in line for the 26.8% reduction in formula grant announced in the Comprehensive Spending Review and ‘substantial amounts’ of NHS money had been included, which came with constraints. 

Sawford said the settlement had been presented ‘quite cleverly’ by Pickles.  ‘What [the government] has cottoned on to between the Spending Review and yesterday is there’s a much better way of positioning it if you keep council tax in the picture, you throw in the health money and do fancy footwork around a transitional grant. You can then position it much better,’ he told PF.

He added that ‘all councils are going to be facing a really tough time’.

In response to concerns about front-loading the cuts, Pickles pledged £85m in ‘transitional funding’ for 2011/12 and £14m in 2012/13, to support moves towards shared services and other forms of ‘modernisation’. He also assigned £650m to fund a one-year freeze on council tax.

The finance settlement was branded the ‘toughest in living memory’ by the Local Government Association. LGA chair Baroness Margaret Eaton warned that councils faced a total funding shortfall of £6.5bn over the next year with a few councils experiencing a cut of 17% in 2011/12. 

The biggest cuts over the four-year Spending Review period would still take place in the first year, Eaton said. ‘Councils now face incredibly tough choices about the services they continue to provide and those they will have to cut,’ she added.

Speaking to PF shortly before the settlement was published, local government minister Bob Neill said the government had sought to ‘make sure there is as fair a deal’ as possible, while ‘accepting that there has to be a reduction in total public spend to get the deficit down’.

He said the settlement helped areas that were disproportionately dependent on the central government grant, such as the Northeast, through new bands with floors to limit the reductions they would face.

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