So is that what all the fuss was about? Councils face a cut in their "spending power" next year of 4.4%. The grant will be cut by an average of 9.9% in 2011/12. There had been lots of alarmist talk of 20%. "Apocalypse Now," screamed The Times this morning. The directly elected Mayor of Hackney, Jules Pipe, claimed he was facing a cut of 20% (which would – shock, horror-  had taken the funding level back to what it was in 2006/07.) Communities Secretary Eric Pickles told him "the nominations have not yet opened for the Man Booker Prize for Fiction." In fact the grant cut for Hackney will be 8.9%.

Has Eric gone soft? He has certainly been tougher on his own Department's spending that on the money being passed to Town Halls. But this is the right way round in terms of protecting front line services.

Reductions to council spending reflect the urgent need for the public sector to help put the country’s finances back in order, keep interest rates down and prevent national debt escalating to £1.4 trillion of taxpayers’ money. Ministers have taken a progressive and fair approach to calculating how the £29 billion of central taxpayer funding for local government grants this year will be allocated.  More money is being channelled at those areas of the country that have the highest levels of need. A plain English guide to today’s Finance Settlement is also being published to cut through Whitehall jargon.

Ministers are clear that the settlement represents a fair deal that will enable councils to protect the front-line services people rely on, shield the most vulnerable places, safeguard the most vulnerable people, and protect taxpayers’ interests.

The Government has:

  • Given more weight to those parts of the country with the highest levels of need. For example, funding per head for residents in Hackney in 2011/12 will be £1043 compared with £125 per head in Wokingham.
  • Ensured that the settlement is fair between different parts of the country – north and south, rural and urban, metropolitan and shire. Formula grant is being directed to where it is needed most.
  • Sought to insulate those areas of the country most dependant on central government funding by creating four separate grant bands to group councils into, based on the extent to which different councils are reliant on government funding. These bands or ‘floors’ set different limits for their reductions and thereby protect councils against the sharper grant reductions they would otherwise have faced.
  • Established a transitional grant of £85 million for 2011-12 and £14 million in 2012-13. This transitional funding will help councils manage issues related to the ending of the Working Neighbourhoods Fund. This was a three year fund that was always scheduled to end in March 2011.

Ministers have also sought to deliver a fair deal to local taxpayers and all councils by:

  • Taking a fairer and more progressive approach to calculating grant than that used in the past by focusing on the impact any grant reductions would have on the all important spending power of individual councils. Local authority budgets are not just made up of formula grant – they also include other government grants plus council tax receipts. A focus on spending power therefore considers the financial position of councils in the round – this includes funding from the Department for Health totalling £648 million in 2011-12 and £622 million in 2012-13 of NHS funding to support social care and benefit health, improving integrated working.
  • Limiting the average spending power reduction across all councils to 4.4% in 2011-12 and ensuring that no council faces a reduction of more than 8.9% in spending power in 2011-12 or 2012-13; the provisional settlement today distributes the £29 billion in 2011-12 and the £27 billion in 2012-13 that the October Spending Review allocated to local authorities through formula grant.
  • Protecting the public from council tax rises by making £650 million available to fund a one year freeze on council tax, offering real help to families and pensioners. The funding will continue over the Spending Review period to prevent council tax from shooting up next year. Local taxpayers living in an average Band D home could save up to £70 a year over the next four years.
  • Rolling £2.4 billion funding into the formula grant to support adult social care services – one of the biggest pressures councils face – ensuring that the lion's share of resources go to councils delivering social services and that the needs of the most vulnerable people are met;
  • Making additional resources available through the Early Intervention Grant to support early years’ services, the Regional Growth Fund to support areas to deliver economic growth and the New Homes Bonus to establish a financial incentive for councils to deliver housing.

Secretary of State for Communities and Local Government Eric Pickles said:

“This is all about how we raise and spend taxpayers’ money. Government has been living a credit card lifestyle at taxpayers’ expense, and now it’s time to pay off some of those bills.

“There has been a great deal of speculation and scaremongering about what the implications of the local government settlement might be. The reality is that despite the toughest economic circumstances in recent memory, the Coalition Government will ensure that next year the average reduction in councils’ spending power will be 4.4%.

“By adopting an intelligent and fair approach to the way funding is allocated we have been able to ensure those parts of the country that are most reliant on central funding continue to get the lion’s share of the taxpayers’ money that is available. Funding fairness underpins this settlement.

“We are protecting the public from excessive council tax rises by stopping any council tax revaluation and setting up a £650 million fund so town halls can freeze council tax this April. This will offer real help to families and pensioners.

“Taxpayers are no longer prepared to write a blank cheque for the public sector. But they do want less interference in their local communities from Whitehall government. So the Coalition Government is delivering the most significant shift in power from officials in London to elected local councils in a generation.

“Whilst resources are tight in the current financial climate, council freedoms are not. Councils now have unprecedented freedoms over how to prioritise their money. The need to reduce public spending means that this is a unique settlement, but also a unique opportunity for councils to show how efficient they can be, root out the wasteful spending that still exists and ensure that money goes to the frontline public services.”

The settlement is set against the background of the most radical shift in power to local government for a generation.  Local authorities have already been given full control over £7 billion of funding, all non-schools ring fenced grants have been removed, councils and the NHS are being brought closer together and the bureaucratic burdens associated with inspection and targets have been removed.

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