Councils face 2.9% cut in funding

Preston and Leyland Citizen: Local councils in England are facing a 2.9% cut in overall Government funding for 2014/15, it has been announced. Local councils in England are facing a 2.9% cut in overall Government funding for 2014/15, it has been announced.

Local councils in England are facing a 2.9% cut in overall Government funding for 2014/15, it has been announced.

The figure, announced by local government minister Brandon Lewis in a written statement to the House of Commons, does not include the Greater London Authority.

Mr Lewis said that it should leave councils with "considerable total spending power" of £2,089 per dwelling and give them the stability and certainty needed to plan budgets and "move ahead with transforming local services and ongoing efficiency".

He also announced that Local Government Secretary Eric Pickles and Chancellor George Osborne have agreed measures to allay council concerns that central government support for council tax freezes might be withdrawn on a "cliff edge" basis in future years.

Mr Lewis said: "English local government accounts for £1 of every £4 spent on public services, and is expected to spend some £117 billion in 2013-14. So the settlement that we are proposing recognises the responsibility of local government to find sensible savings and make better use of its resources.

"This settlement marks the second year of business rates retention, and leaves councils with considerable total spending power, with an overall reduction, excluding the Greater London Authority, for next year of just 2.9% We expect the average spending power per dwelling to be some £2,089."

He added: "We have tried to be fair to every part of the country - north and south, rural and urban, metropolitan and shire.

"Of course, it is inevitable that individual local councils will wish to call for more funding for their area. Unlike the old system which encouraged councils to talk down their local areas to win more funding, the decentralisation of local government finance now puts councils in the driving seat: rewarding them for supporting local enterprise, building more homes and backing local jobs."

Explaining the measures being taken to ensure that the council tax freeze does not destabilise local government finances, Mr Lewis said: " From April 2014, funding for 2011/12 and 2013/14 freezes is now in the main local government settlement total for future years.

"I can also announce that the Secretary of State has agreed with the Chancellor that the funding for the next two freeze years will also be built into the spending review baseline. We hope this will give maximum possible certainty for councils that the extra funding for freezing council tax will remain available, and there will not be a 'cliff edge' effect from the freeze grant disappearing in due course.

"We have done our part - we now expect councils to do theirs in helping hard-working people with the cost of living."

Mr Pickles indicated that he is ready to consider lowering the 2% threshold at which a proposed rise in council tax will trigger a local referendum. The trigger point is due to be announced in the New Year following consultation.

The Department for Communities and Local Government said ministers were "particularly open to representations suggesting that some lower threshold be applied to councils, given the strong need to protect taxpayers wherever possible from unreasonable increases in bills".

Mr Pickles said: "Every bit of the public sector needs to do their bit to pay off the budget deficit, including local government, which accounts for a quarter of all public spending. This year, councils should continue to focus on cutting waste and making sensible savings to protect frontline services and keep council tax down. Extra funding is on offer to councils to freeze council tax for a fourth year in a row.

"Opinion polling suggests that satisfaction with local government is either constant or improved compared to 2010, helped by the fact that council tax bills have been cut by 10% in real terms. This is in contrast to the last administration when council tax bills more than doubled and went through the roof."

Local Government Association chairman Sir Merrick Cockell said the settlement confirmed that the money given to councils to run local services will fall by 8.5% over the next two years.

Sir Merrick said: "Today's settlement confirms that councils will continue to be at the sharp end of public sector spending cuts up to 2016, but that Government has started to listen to local authorities and made some important concessions without which local services would have suffered.

"The next two years will be the toughest yet for people who use and rely on the vital everyday local services that councils provide. By the end of this Parliament local government will have to have made £20 billion worth of savings.

"Councils have so far largely restricted the impact of the cuts on their residents. They have worked hard to save those services that people most value and have protected spending on social care for children and the elderly, but even these areas are now facing reductions. That impact will only increase over the next two years."

Graeme McDonald, director of the Society of Local Authority Chief Executives and Senior Managers (Solace) said that some authorities will face cuts as high as 6.9%.

"This settlement reminds us that the financial challenge facing local government is immense," said Mr McDonald. Cuts of up to 6.9% will push some authorities to breaking point.

"While some stability in the settlement process has helped councils to plan for the long term, this has been completely undermined by uncertainty on local referenda. Councillors are not being allowed to make the decisions that they were elected for.

"Until Government loses the ability to micromanage local funding, we will never have a fair, stable process which allows councils to properly plan their finances. England's towns and cities must be trusted to manage their own money."

The chief executive of the Chartered Institute of Public Finance and Accountancy (Cipfa), Rob Whiteman, said that several years of frozen council tax had "hollowed out" local authorities' independent source of finance, leaving them ever more dependent on central government.

With the freeze grant continuing into 2014-15, income from council tax will be £3.2 billion lower than if increases had continued at the previous rate - the equivalent of a 13% cut in revenue from that source before inflation is taken into account, said Cipfa.

"The continuation of the council tax freeze is hollowing out the local tax base and every year it continues it erodes the long-term financial sustainability of local government, increasing its already disproportionate dependence upon the central government grant," said Mr Whiteman.

"The Government must stop the erosion of the local tax base in this way and end the council tax freeze."

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