Lord Porter of Spalding is the Leader of South Holland District Council, the Chairman of Local Government Association and Chairman of the Conservative Councillors Association.
What do the numbers announced in the Spending Review last week mean for local government? The answer seems to be different wherever you look.
The Institute for Fiscal Studies and Chartered Iinstitute for Public Finance and Accountamcy both declare that there will be a 56 per cent cut to local government funding over the Spending Review period. The IFS also says there will be a reduction of 79 per cent between 2010 and 2020. However the Government claims the cut is 6.7 per cent and that there will be a cash increase over the spending review period.
I think it’s somewhere in the middle – I’m not risking getting splinters by sitting on the fence.
The Local Government Association has calculated that core central government funding will fall by 24 per cent in real terms by 2020.
But that’s where things get really complicated.
The Chancellor announced a range of measures, many of which local government has been asking for, as the Government continues with its ambition to devolve powers and resources to local people. This will help us to better control our own destiny but also complicates the numbers even more.
Greg Clark has listened to our arguments and as a result, councils will have further flexibility to raise council tax by up to two per cent, with additional funds raised to be solely used for social care, above the existing two per cent limit. That will allow us to offset some of the cost pressures on social care, which is a major step in the right direction. Also added to this was another £1.5 billion for the improved Better Care Fund to help those areas where the tax base is low, although we will need to see how much of this is new money before we can work out the true benefit.
Working with Greg, we have also managed to persuade George Osborne to let us keep 100 per cent of the business rates income. This is something we have long called for. We want the extra duties and responsibilities that come with the money. The changes will be a fiscally neutral switch but they mean that businesses will see a direct benefit from the tax that they pay.
It is difficult to see how any councillor could have expected these benefits to have come without some reduction of the Revenue Support Grant – particularly as the Government were elected on the basis that they had to continue to pay down the deficit it inherited. But council leaders will need to help their councillors to understand this.
I’m also pleased we have seen councils given the power and flexibility to use capital receipts from the sale of assets to pay for local services, although you can only sell an asset once and when it’s gone, it’s gone.
Of course there’s always a “but”: It’s estimated that extra demand and wage pressures etc will bring an additional £10 billion of cost pressures by the end of the decade.
So, for local government, it’s a bit of a mixed picture. No where near as bad as we have planned for – with good news that the government is listening to our concerns about social care and our calls for more flexibility. But as pressures and demand grow the next few years will undoubtedly be tough for local government.