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Councils heading towards funding ‘cliff-edge’ as cash could be halved by 2020

The LGA has voiced funding fears over the loss of nearly half of local authority funding between 2010 and 2020.

Councils had been expecting to receive 100% of business rates by this point, but the policy has been repeatedly pushed back, suffering when the Local Government Finance Bill was not fully reintroduced after the election.

LGA officials now argue authorities are heading towards a “cliff-edge,” with 2020 funding cuts threatening to push some councils to financial breaking point and thus putting services under threat.

Authorities have asked that the pace of funding reductions is slowed in 2018-19 and 2019-20, while also calling for the government to clarify its intentions around business rates.

Cllr Nick Forbes, senior vice chair of the LGA, said councils were facing “double jeopardy” with fears about funding in the immediate future and a lack of information on other investment past 2020.

“Councils face an overall £5.8bn funding gap in just two years yet the Budget disappointingly offered nothing to ease the financial pressure on local services,” Forbes commented. “Our communities and the local services they rely on cannot take another two years of funding cuts with no solution in sight. The Local Government Finance Settlement must put this right.

“Smoothing out funding cuts over the next few years, introducing a fairer funding system and allowing local government to keep every penny of business rates collected to plug funding gaps is now the only way the government can ensure local authorities are able to protect the services communities rely on over the next few years.”

It was announced in the Budget that 100% business rate retention would be trialled for some boroughs in London over the next year.

In addition, chancellor Philip Hammond revealed changes to the way rates are defined by switching the basis from the current Retail Price Index (RPI) to the Consumer Price Index (CPI).

The change will make rates cheaper for business, but has been criticised by some for its effect on councils.

The LGA has also asked the government to remove the council tax referendum limit to allow authorities to increase tax by more once residents have agreed to the changes.

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