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Yesterday’s local government finance settlement statement is pushing hard on local government to make further ‘sensible savings’, modernise services and keep council tax down. Councils pick through the figures and work out what it means for them, and some important issues to consider include:
1. Lower cuts are still cuts. We’ve become so used to austerity that there is a sigh of relief, as there was at the Autumn Statement, that cuts are only an average of 2.9 per cent. Yet even this amount is still significant for authorities which have cut back a great deal, without it notably affecting satisfaction with services. The settlement will also, as always, have the biggest proportionate impact on the areas most reliant on central government funding, including some of the bigger cities. It’s going to be a challenging year for all councils and the pressure to transform services and deliver more for less will keep on growing in the years ahead.
2. Freezing council tax remains an important political issue. Extra funding is on offer to freeze council tax for two years and the Government is also calling on local authorities to use their reserves to freeze council tax. This is, however, neither sustainable nor the best use of those reserves (which only account for 16 per cent of total spending power for any given year, which is not much given cuts of 2.9 per cent per anum today). For some councils, the biggest concern around freezing council tax will be the cumulative impact it has on the budget over a number of years and it will be interesting to see how many councils opt to increase council tax despite the blandishments being offered by central government, and to see how central government reacts. It’s also worth noting that, while satisfaction with local government has remained constant, residents are not willing to accept less from their council to pay down the national debt (according to an Ipsos Mori poll).
3. Councils can raise more of their own money, but it’s still a highly centralised system. The increased emphasis on local authorities taking decisions that can increase their funding is welcome; councils need more incentives to grow the local economy, as more jobs and better housing will also reduce demand for all kinds of public services. But it’s still a centralised system; despite the Government’s figures, Centre for Cities’ work suggests that on average only 40 per cent of local budgets are locally generated, and even then all kinds of rules prevent councils doing what they want with the money.
4. DCLG is right to call for more reform: but alongside that more freedoms are also needed. In the statement, DCLG called for further reform for reducing procurement budgets, tackling fraud, reducing Council Tax arrears and managing property assets along with joining up services. These do need to happen, but councils needs greater freedoms over their shrinking resources and powers to manage and coordinate their investments to make that happen. Without more fiscal freedoms, the cost savings councils need to make may come at the expense of future economic growth.
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