Latest Public Sector News

18.02.16

Councils warn of cutting services despite devolution promises

Councils anticipate having to increase charging for services, dip into reserves and cut frontline services in the next financial year and want the government to go further on its commitment to financial devolution, new research shows.

The 2016 State of Local Government Finance survey, conducted by think tank the Local Government Information Unit (LGiU), found that 89% of the 132 councils surveyed say they will have to increase charging in 2016-17.

The number saying they will have to dip into their reserves has risen sharply, from 55% in 2012 to 82%. And nearly 40% say cuts in their frontline services will be evident to the public.

Jonathan Carr-West, chief executive of LGiU, said: “Local government finance is a mess. Our research shows that right now councils are cobbling together their finances by using reserves and increasing charging wherever they can.

“The government has shown a genuine and radical commitment to changing the way Britain is governed. But the path to devolution has been encumbered by decades of central government ducking crucial questions about how local government is financed.

“The system we have now is one which no one would design. Central government and local authorities both want to see a sustainable independent funding model. But until we answer fundamental questions about how to make this work, devolution will be a process rather than a revolution.”

Overall, six out of ten councils have said that they are confident that they can become financially self-sufficient by 2020, when they will be granted full control over business rates income, but only if further financial powers are devolved.

In particular, 56% want increased power over charging and trading and 37% want more control over rebanding council tax and raising specific local taxes.

Yesterday, PSE reported that business rates income is predicted to reach £23.5bn in 2016-17, of which councils will receive £11.75bn.

Another devolutionary initiative is a discretionary 2% council tax precept to pay for social care, which 88% of respondents said it was likely they would use, although 75% said this would not be sufficient to close the funding gap in adult social care.

In the past, the government has offered local authorities funding to freeze council tax, but last year PSE reported that 36% of them refused it. However, with the coalition government’s council tax freeze grant lifted 86% of councils now plan to raise council tax, according to the new research.

 

 

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