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Greg Clark

Well there’s another crisis blown over. Yesterday I reported on a looming rebellion of Conservative MPs regarding the Local Government Finance Settlement. There were strong feelings that rural areas were being unfairly treated and it was looking quite likely that the Government could be heading for defeat.

Not any longer.

Yesterday Greg Clark, the Communities and Local Government Secretary announced that an extra £416 million had been found to soften the grant cuts from central government. He told the House of Commons:

“Much in the provisional settlement was welcomed, but specific points were raised about the sharpness of changes in Government grant in the early years of this Parliament and there were concerns about the cost of service delivery in rural areas. Another very important point was made: many colleagues and councils felt that too much time has passed since the last substantial revision of the formula that assesses a council’s needs and the cost it can expect in meeting those needs. These responses to the consultation seemed to me to be reasonable and ought to be accommodated if at all possible.

“Everyone will appreciate that the need to reduce the budget deficit means that meeting the recommendations is extraordinarily difficult, but I am pleased to be able to meet all of the most significant of them. I can confirm that every council will have, for the financial year ahead, at least the resources allocated by the provisional settlement. I have agreed to the responses to the consultation, which recommended an ease in the pace of reductions during the most difficult first two years of the settlement for councils that experience the sharpest reductions in revenue support grant.”

Naturally, in response to the statement, Jon Trickett, the Shadow Communities and Local Government Secretary, said that Conservative Home was “essential reading” and added that “it is clear from the Secretary of State’s statement that he has studied carefully the representations” made “by some anonymous Tory MPs” via this site.

Clark responded:

“I am delighted to hear about the hon. Gentleman’s reading material and to learn that it is through “ConservativeHome” that he seeks to educate himself these days. That makes a change from the red book that is the preferred choice of the Shadow Chancellor. I encourage him to continue. He will know from looking at that very good website that there is constant praise for the efficiency of Conservative councils, which have a record of economy and good service for their residents.”

Even the Local Government Association, usually in Oliver Twist mode in matters of local government finance, sound relatively content.

Their Chairman, Lord Porter, says:

“The LGA has been working hard with the Government on behalf of all councils – both publicly and privately – to highlight the financial challenges they face over the next few years. We are pleased it has listened to our fundamental call for new money to be found to smooth out funding reductions for some councils in 2016/17 and beyond without any other councils losing out further as a result.

“Extra funding of up to £416 million, which includes an extra £93 million for rural authorities, announced today will go towards easing the financial pressure on those local authorities who were adversely affected by the method of allocating funding and will ensure that no council will move into a negative grant funding position within the next three years. Allowing all local authorities – not just the 51 districts with the lowest council tax bases – to raise their Band D council tax by £5 will also help some councils mitigate some of the additional funding pressures they face in 2016/17 and beyond.

“Funding reductions will still be challenging for councils over the next four years. Any extra cost pressures, such as those arising from rising demand or policies such as the National Living Wage, will have to be funded by councils finding savings from elsewhere. Many will have to make significant reductions to local services to plug funding gaps and will be asking residents to pay more council tax while possibly offering fewer services in return as a result.

“The move to full business rate retention is the most ambitious reform to local government finance of the last few decades. While it won’t solve the long-term funding challenges facing councils, it is absolutely critical to ensure any new system works effectively. We look forward to working closely with the Government on ensuring it is implemented and distributed in a way which maximises the potential it offers to our local communities and businesses.”

Of course, while Clark was making the announcement, he relied on George Osborne to find the money. One placated rebel I spoke to suggested that had Osborne pursued a confrontation on the matter it would have been “career limiting” in terms of the number of colleagues alienated. £416 million sounds a lot but isn’t really in the world of HM Treasury.

If all goes well with the public finances and the budget is balanced on schedule then all will be well. The risk is that should public sector borrowing prove more persistent then Osborne’s periodic bouts of generosity, such as the one announced yesterday, will be considered imprudent.

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