By Richard Johnstone | 16 January 2014
The impact of local government funding cuts are set to be compounded due to ‘unfair’ changes to how councils are financed, authorities in the northeast of England have warned ministers.
In a submission to the Department for Communities and Local Government’s consultation on the provisional local government finance settlement for 2014/15, the Association of North East Councils said planned reductions were inequitable.
The settlement, which was published by ministers on December 18, imposed an average 2.9% cut on local authorities in England, and the consultation ended yesterday.
An analysis by ANEC highlighted that cuts in the portion of settlement funding from Whitehall to councils intended to equalise council tax revenue would compound the impact of cuts in future years. The reduction in spending power in the northeast from 2010/11 to 2015/16 will amount to 19.3%, compared to 14% across England and only 5% in the southeast, according to the analysis by Newcastle City Council's director of resources Paul Woods. Equalisation funding for 2014/15 will be reduced by 12%, followed by a further 25% in 2015/16 and 15% in 2016/17, he added.
Simon Henig, the leader of Durham County Council and vice-chair of ANEC, said the government was effectively abolishing the council tax equalisation process, which has been in place since the tax was created in 1993/4 to match spending power across the country.
This was ‘a massive change in public policy’ that has been introduced in the last few months, he said.
‘I think the government knows exactly what it’s doing. I do believe they understand fully the impact of some of these changes, but they’re often quite coy in coming out and saying publicly that the equalisation part of the formula is going to be abolished.
‘I don’t think they’ve ever said that, but clearly that’s the intention, and I think this needs to be brought out. How can it be right to run any country with these massive differences in resources from one part to the other, quite apart from the fact that’s unrelated to need?’
In addition, ANEC stated that the amount of money being held back or top-sliced from local government funding – for example to fund the safety net for the government’s business rates localisation – was now a major concern for town halls.
The submission to DCLG highlighted that the holdback for Middlesbrough is £7.97 a dwelling, compared to £2.27 a dwelling for Windsor & Maidenhead.
Funding reductions would accelerate the time when councils would have to stop providing some statutory services, the group warned.
‘We will reach that end game pretty quickly within the next few years if this keeps going,’ Henig said.
