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Council spending power to be cut by 1.8% as government grant drops 8.8%

Councils in England will face an overall cut of 1.8% in their spending power next year, local government minister Kris Hopkins has stated. 

Speaking in Parliament, he said “as planned, we have kept the overall reduction to 1.8% – lower than last year and one of the lowest levels of reduction under this government”. 

He added that if local transformation funding was included in this the overall reduction in spending power would be 1.6%. 

In addition to this, Hopkins stated that no councils will face a loss of more than 6.4% in their spending power (the government’s preferred measure when calculating council cuts) in 2015-2016, the lowest level in this Parliament. 

However, the Local Government Association (LGA) has calculated that English councils will receive 8.8% less funding from the government grant to run local services compared with 2014-15.

The association, which represents 415 authorities in England and Wales, adds that this means savings of £2.6bn will need to be found from council budgets for 2015-16. Today’s announcement also brings the total reduction in core government funding to councils since 2010 to 40%. 

LGA Chair Cllr David Sparks said: "Today's settlement confirms the huge financial challenge local services now face.  

“The savings of more than £2.5bn councils need to find before April will be the most difficult yet. We cannot pretend that this will not have an impact on local government's ability to improve people's quality of life and support local businesses.” 

Council tax 

All councils have been ‘advised’ to freeze their council tax in 2015 to 2016, with the government providing additional funding (equivalent to a 1% council tax increase) to help councils freeze this. 

Hopkins added: “This is the fifth successive year of freeze funding provided by government. 

“Councils choosing to increase should have the courage to put their case to local people. Any council proposing an increase of 2% or more will need to allow local people the opportunity to approve or veto the increase in a referendum.” 

Yesterday it was revealed that the communities secretary, Eric Pickles, had his plans to force all councils and police authorities to hold a referendum if they want to raise council tax rise by more than 1% blocked by an alliance of the Lib Dems and Theresa May

Cllr Sparks said: “The 40% cut in funding from central government, combined with the cap on council tax increases and restrictions on raising income in other ways, has left local government with few options in dealing with the rapidly-rising cost of adult social care. Keeping the referendum threshold will place a further limit on those options. 

“With only a few weeks remaining until next year's budgets need to be finalised, councils are unlikely to go through the costly process of staging a referendum, which itself would need to be paid for by local taxpayers.” 

Hopkins also announced that he would welcome views on whether the “highest spending parishes” should be subject to the same referendum principle as the rest of local government. 

But Cllr Ken Browse, chair of the National Association of Local Councils, told PSE: “We remain opposed to referendum principles being extended to parishes, such interference by government would be a sledgehammer to crack a nut. 

“We called for the government’s local government finance statement to help and not hinder parish councils and we will continue to make the case for fair funding, as unlike principal councils, parishes do not receive Revenue Support grant, a share of business rates or the council tax freeze grant.” 

In response to the local government settlement, Graeme McDonald, director of the Society of Local Authority Chief Executives and Senior Managers (Solace), said: “This settlement reminds us that the financial challenge facing local government is immense. Cuts [to spending power] of up to 6.4% will push some authorities to breaking point. 

“Government is beginning to recognise that councils have led the way on deficit reduction, but with cuts and demand increasing, fragility is beginning to show. The financial future of local services is unsustainable without a more ambitious plan for public service reform.” 

Labour’s Hilary Benn said councils resented the government suggesting cuts were “modest”. He said that councils serving the poorest areas had seen the largest reduction in funding “relative to spending”. 

The local government minister also said the government would not be making any new funding available for the Local Welfare Provision Grant. 

But he said part of each upper-tier local authority’s funding settlement would be earmarked, but not ring-fenced, for local welfare schemes, totalling £129m – 25% lower than the £172m available for the fund in 2014-15.

Cllr Sparks added: “It is hugely disappointing that government has not listened to councils and charities which have been urging it to provide funding to support local welfare assistance. 

“We will continue urging government to reconsider its decision ahead of this settlement being finalised in February and note that the minister promised on the floor of the house to consider further responses on this issue.” 

A consultation on the provisional local government finance settlement will run until 15 January. 

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