LGA demands Spending Review action to fill £10bn funding hole

1 Sep 15

The November Spending Review must set out plans to deal with a £10bn funding hole facing councils, the Local Government Association has said.

In its submission to the Treasury ahead of publication of the four-year spending plan on 25 November, the LGA said policies already announced would cost authorities a total of £6.3bn by 2020.

These include the £3bn cost of exempting house builders from Section 106 and Community Infrastructure Levy payments for 200,000 new “starter homes”. In addition, Chancellor George Osborne’s plan to cut social housing rents by 1% a year will cost councils £2.6bn, while roll out of Universal Credit will make it difficult for councils to collect overpayment debts worth up to £1bn.

Furthermore, the new National Living Wage will cost councils £834m a year by 2019/20, while the end of “contracting out” for public sector pension providers will cost almost £800m

Councils also need to set aside more than £1.7bn to cover the high volume of business rate appeals expected when the 2017 revaluation is introduced, while there was a £630m gap in the payments authorities made to care home providers.

The LGA said these demands on authorities took no account of the separate pressures exerted by demographic changes and inflation. These are estimated by the LGA to total £3.6bn in the Spending Review period.

LGA chair Gary Porter said the funding round would be critical for the future of public services over the next decade.

“Our new analysis shows the significant spending pressures facing councils over the next few years even before the possibility of further funding reductions,” he added.

“Leaving councils to pick up the bill for new national policies while being handed further spending reductions cannot be an option. We need the decisions in the Spending Review to be guided by the fundamental principle that local people will know best how to spend money on services in their area.”

In particular, he said councils need both fairer funding and greater freedom to raise revenue through devolution, which would lead to smarter spending.

“Enormous pressure will be heaped on already stretched local services if the government fails to fully assess the impact of these unfunded cost burdens when making its spending decisions for the next five years,” he added.

“Only radical reform of the way public money is spent and widespread devolution of transport, housing, skills and health and social care across England in the Spending Review can protect the services which bind our communities together and protect our most vulnerable.”

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