Council cuts to be more evenly distributed to 2020, IFS finds

21 Dec 15

Local government funding cuts are to ease in the years to 2019/20 compared to the last parliament and will be more evenly distributed across authorities, an analysis by the Institute for Fiscal Studies has found.

An analysis published by the think-tank following the local government settlement found cuts to council spending power over the review period would be around 8% on average, compared to 25% reduction in the last parliament.

The IFS found that spending power cuts amounted to nearly 40% for authorities most dependent on grants since 2010, while those least reliant on Whitehall support have seen only around 15% cuts.

However the analysis found that the cuts would be more evenly spread to 2019/20, with spending power cuts to councils who are least reliant on grants averaging at 6.8% and that of councils who are most reliant averaging at 9.2%.

This is due to a change in the way the Department for Communities and Local Government allocates cuts to grants, the IFS stated. It now accounts for the differing extent to which councils rely on grants, making smaller cuts to those that rely a lot on the grant than to authorities able to raise more of their own revenue from council tax.

The analysis also highlighted that spending on adult social care is likely to be protected in the next four years due to both the expansion of the Better Care Fund and the ability of town halls to raise a 2% council tax precept to fund services.

Assuming that this funding is used to maintain services for social care in real terms, the cuts to other areas of local authority spending will amount to around 12%, on average, by 2019/20.

The think-tank also highlighted that the settlement included an offer of four-year spending deals to prepare local government for full local retention of business rate revenue.

This “genuinely revolutionary” change, planned to take place by 2020, means councils’ spending power in future will be more directly linked to the performance of the local economy, the IFS highlighted. This creates both additional incentives and greater risks when things go wrong, the analysis concluded.

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