Osborne's Spending Review slashes council budgets by 10%

26 Jun 13
Local authorities face a further two years of the council tax freeze and a 10% budget cut in the Spending Review for 2015/16, Chancellor George Osborne has said.

By Mark Smulian | 26 June 2013

Local authorities face a further two years of the council tax freeze and a 10% budget cut in the Spending Review for 2015/16, Chancellor George Osborne has said. But he added that other changes would reduce the overall local government cut to 2%.

Osborne Spending Review 2013 PA

Despite this, the Local Government Association predicted that cuts could result in some council services being dropped entirely.

There will be grant funding for authorities that freeze council tax in the next two years, although the chancellor did not say how much this would be worth.

‘The council tax freeze is due to come to an end next April,’ he said. ‘I don’t want that to happen.

‘We will fund councils to freeze council tax for the next two years.’

Councils that choose to join the growing minority that do not freeze tax would forgo the grant and instead set an increase of up to 2%, above which authorisation from a local referendum would be required. No council has yet held such a vote.

‘Local government has already taken difficult decisions to reduce staff numbers, share services and make savings,’ the chancellor said.
‘We were told by the scaremongers that savings in local government would decimate local services. Instead, public satisfaction with local council services has gone up.’

He attributed this to the government’s localism reforms and said: ‘In return for these freedoms, we have to ask local government for the kind of sacrifices central government is making.

‘The local government resource budget will be reduced by 10% in 2015/16, but when all the changes affecting local government I will set out are taken into account – including local income and other central government funding – local government spending reduces by around 2%.’

There will be £2bn a year over five years for Local Enterprise Partnership bids to the Single Local Growth Fund. Such a pot was recommended by Lord Heseltine in his report on regional growth although Heseltine said it should be worth £49bn.  Exact details are due tomorrow.

Osborne also signalled an extension of the pan-public sector Community Budgets concept following four successful pilots.

He said these had ‘shown the potential to join up local authorities and other local public services for improved health and social care integration, children’s services and criminal justice systems, and improved working with troubled families that have complex needs’.

There would also be £3.8bn, pooled between the NHS and local authorities, to support integrated health and social care work in 2015/16, and £100m for a collaboration and efficiency fund for children’s services.

A further £335m will be spent to help councils prepare for social care funding reforms, including the introduction of a cap on users’ contributions to care costs from April 2016.

As reported at the start of the week, the Troubled Families programme will be expanded to work with 400,000 families – up from 120,000 at present – with a further £200m available in 2015/16.

There will also be a £45m capital fund for fire and rescue services and £30m to promote greater collaboration between the three ‘blue light’ services.

LGA chair Sir Merrick Cockell said essential services would be ‘stretched to breaking point in many areas’ by the fresh round of cuts.

‘While positive steps have been taken to target NHS funding at social care, the fact remains that some councils will simply not have enough money to meet all their statutory responsibilities,’ he said.

‘Today’s 10% cash cut comes on top of the 33% real terms cut already made to council budgets and confirms local government as the hardest hit part of the public sector.

‘No area of spending can be totally immune and some services will be wound down entirely.’

CIPFA chief executive Steve Freer said: 'Delivering more cuts and major change programmes when politicians are focused on the general election will be extraordinarily difficult.'

The institute added that another large cut to local government funding would be 'particularly challenging', while the two-year extension to the council tax freeze would only add to authorities' medium- to long-term financial pressures.

•    The chancellor also announced block grants for the devolved administrations, which then decide how they will allocate these resources across their responsibilities.

He said these would reduce by 2% through the Barnett Formula with Scotland getting a £25.7bn budget, together with new capital borrowing powers of almost £300m. Wales’ budget would be £13.6bn and Northern Ireland’s £9.6bn.


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