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Council budgets to face 15% cuts

New analysis of the coming cuts to council budgets for 2015/16 shows that the real-terms effects will be much worse than that announced by the Government in the spending review.

Local authorities will have their basic allocation from central Government cut by £1bn more than signalled in May, jeopardising their ability to deliver essential services. Additional funding streams are being held back, or are conditional, forcing councils to budget without this extra support. Some extra funding must also be allocated to meet new costs due to national policy changes.

In a new briefing paper, the LGA explains: “It is now clear from the latest consultation paper that £1bn has been set aside from the settlement for allocation outside the main business rates retention system to some authorities but not others. It emerges that this includes much of the new money announced in the Spending Round. Therefore underlying the headline 10% real terms cut in funding announced by the Government at the Spending Round lies a 15% real terms reduction in the basic allocation affecting all authorities, the Settlement Funding Assessment or SFA (which comprises local business rates and Revenue Support Grant and is broadly analogous to the old Formula Grant). Authorities that do not get an allocation of any of the new money will suffer cuts on this scale.”

The difference is explained by “money that the Government has set aside for other priorities and that will not be allocated to all authorities” – including the Collaboration and Efficiency Fund (£100m); the fire transformation fund (£30m); social care new burdens (Dilnot) (£335m); the Independent Living Fund (£188m); plus allocations yet to be determined, including extra cash for the Troubled Families programme. Additional funding is also being withheld for the New Homes Bonus and business rates retention safety nets.

Certain councils have warned that cuts could damage their financial viability to the point where they are unable to meet their statutory responsibilities.

Sir Merrick Cockell, chairman of the LGA, said: “The Government's approach to allocating funding will lead to unnecessary cuts to local services. The uncertainty over how much money will be available to councils means they will have to assume the worst and plan for it. No business would choose to operate in this environment and no other part of the public sector is expected to. It is not fair to residents to create this damaging uncertainty.

“People will be surprised that the Government is hoarding hundreds of millions that needs to be spent on frontline services at the soonest possible date. The impact on services is likely to come much sooner than 2015/16 as many councils will be compelled to hold money from the intervening years in reserve  in order to ensure they can balance the books as they are legally required to do.

“Caring for the elderly and vulnerable, picking up the bins and monitoring schools performance are not second priority services. They are absolutely essential but in order to deliver them properly councils need to be able to make accurate financial plans based on clear information. This funding settlement simply does not provide the certainty councils need.

“It is particularly frustrating that the Government has announced its plans in a ream of dense technical documents during the parliamentary recess when there will be limited opportunity for them to be publicly examined and scrutinised.”

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