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17.12.15

Four-year funding settlement for local government

The government has acceded to a key demand of local authorities and issued a four-year funding settlement available to "any council that wishes to plan ahead with confidence".

Total funding for councils will fall by 2.8% in 2016-17 as part of the government’s four-year local government financial settlement, announced by communities secretary Greg Clark MP in the Commons today (17 December), and funding will be flat in cash terms over the course of the Parliament. Funding in 2019-20 it will be “virtually unchanged” in cash terms from what it is today, he said – though this equates to a cut in real terms, once inflation is taken into account.

Opening his speech by praising local authorities for doing “their share” in cutting the deficit, Clark argued that public satisfaction with local public services has either remained the same or increased.

Aside from the budget settlement for 2016-17, Clark hit similar notes as before, reminding councils of the 2% social care precept – equivalent to £23 on an average Band D home – that could help them rise up to £2bn in social care funding by 2020.

This would be supported, he said, by the £1.5bn made available to councils through the Better Care Fund, as announced by the chancellor during his Spending Review last month.

Clark guaranteed that the New Homes Bonus will be retained and reformed to stimulate housebuilding, in addition to devolving 100% of business rates by the end of the decade.

And the extra costs of providing services in more sparsely populated areas will be supported through a “rising Rural Serviced Delivery Grant”, he said.

“This is an historic settlement for local government. It makes local councils fully responsible to local people for their financing – rather than central government – something that local government has been campaigning for over a number of decades,” the communities secretary said.

“The resources available, the funds for social care, and the long-term reform go beyond what council leaders dared hope for even a few months ago. It is a vote of confidence in the power of devolution.”

The LGA’s chair, Lord Porter of Spalding, a Conservative, embraced the government’s settlement, suggesting Whitehall has “listened to what councils said”.

“More independence to serve our communities, a fair financial settlement for all types of councils, more resources to help care for the elderly and the certainty of long-term budgets; things we have asked of successive governments,” he added.

“This settlement should mark the beginning of a new age of independence and responsibility for local councils. In local government, we will make a success of it, building on the hard work of the last five years.”

In what he described were “exciting times to be a councillor”, Lord Porter said councils will now have greater control over their own destiny, with a reform that gives authorities “the biggest chance for a generation to serve our residents in a way that we know best”.

Rob Whiteman, chief executive of the Chartered Institute of Public Finance and Accountancy (CIPFA), said there will be winners and losers in this local authority settlement.

“Top-tier local authorities are set to benefit as high-demand critical services, such as social care, receive welcome direct support,” he noted. “However, it is likely that District Councils will find a greater squeeze on their budgets as the new homes bonus is reduced by around £800m between now and 2019-20.”

Whiteman added that CIPFA welcomes the move to localised funding, but said there is still a long way to go.

“However, replacing central government funding with fully retained business rate revenues introduces real risk to council finances,” he said. “It is something of a gamble for many vital public services - as the assumptions underpinning greater localisation are that the economy continues to grow and a much greater number of new homes are built, which recent experience shows is anything but certain.”

Scotland settlement

Separately, the Scottish Government announced yesterday a 3.5% cut to its 2016-17 finance settlement, featuring measures to support health and social care integration, maintain council tax freeze and retain existing teachers.

But the Convention of Scottish Local Authorities (COSLA) slammed the government’s budget reduction, calling it a “totally unacceptable” deal that will cost 15,000 council jobs.

Its president, Cllr David O’Neill, said the settlement will hit the council workforce as well as the services it provides.

“It hits the child in care, it hits the elderly struggling with dementia and the vulnerable adults, all of whom solely rely on the support that only a council can provide,” he said.

“Make no mistake that this is a budget that has been made in Scotland and imposed on Scottish local government. The 3.5% cut (£350m) coming to us next year cannot be laid at Westminster’s door this time around, as well all know that the Scottish Government got a cash increase.”

O’Neill added the “harsh reality” of the “catastrophic” budget cut is that it actually translates to “real job cuts that hit real families, in real communities”.

“This budget could only have been constructed by someone who has no responsibility for service delivery and who clearly does not understand the reality on the ground or the impact it will have on those struggling in Scotland,” he concluded.

But the Scottish Government saw the deal in a different light, with deputy first minister John Swinney commenting yesterday: “Despite ongoing cuts to our budget as a result of the UK Government’s continuing austerity programme, the Scottish Government has always treated local government very fairly, with settlements maintained on a like for like basis over 2012-6.

“So local government in Scotland starts from a healthy base compared to the position in England where councils face a real terms cut in funding.”

Revealing that £250m would be transferred from NHS to local authorities to support the integration of health and social care, Swinney added: “The old boundary between NHS and local government spending – the boundary that has stymied so many attempts to improve care over decades – ceases to exist from April this year.

“So while this budget delivers a strong but challenging financial settlement for local government, we must recognise that the substantial investment in social care will support the delivery of that essential service.”

(Top image  c. Dominic Lipinski/PA Wire)

Comments

Gareth Jones   17/12/2015 at 20:31

How long can local government sustain the governments reduced spending to local authorties.

Mike Roberts   18/12/2015 at 07:30

I don't know what spin Gary is on but to keep describing these kind of accumulated cuts as we are being listened to in Local Government is astonishing. This is now the final frontier!

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