Magazine article Public Finance

Town Halls Feel the Pinch in a Tight Settlement

Magazine article Public Finance

Town Halls Feel the Pinch in a Tight Settlement

Article excerpt

Town hall leaders are warning of cuts to services and jobs after the governments long-awaited Comprehensive Spending Review and Pre-Budget Report this week gave them a meagre 0.9% annual funding increase.

Local government was one of the biggest losers in what was a tight settlement all round, with Chancellor Alistair Darling setting out to Parliament public spending increases averaging 2.1% in 2008/09, 2009/10 and 2010/11 on October 9. That is just over half the 4% annual average growth since 1999.

Sir Simon Milton, chair of the Local Government Association, condemned the sector's settlement as 'the worst in a decade', pointing out that it relied on authorities achieving £4.9bn of efficiency savings over that period. He told Public Finance it would have serious consequences on key services such as adult social care - and council tax bills.

Milton warned that authorities would struggle to keep tax rises below the government's 5% cap and dismissed government claims that the settlement would enable councils to hold increases at well below the limit. 'It is going to mean above-inflation rises in council tax over the next three years, near the government s 5% capping limit,' Milton told PF.

'To meet that authorities will have to look for cost reductions through efficiencies, through headcount reductions and through reductions to services. We will see a continuation of the trend among councils of raising the threshold for eligibility for services'.

But in a pre-emptive move, local government minister John Healey made clear immediately after the CSR statement that he would not accept the LGAs arguments. "There is no excuse for excessive council tax rises or a reduction in the quality of services,' he said.

'This is a tight but fair settlement for central and local government alike. We all face tough choices and local councils need to demonstrate leadership in showing they can govern efficiently.'

Under the settlement, combined revenue support grant and national non-domestic rates will rise from £23.9bn in this financial year, to £24.8bn in 2008/09, £25.7bn in 2009/10 and £26.5bn in 2010/11.

Milton warned that this also meant bad news for the unions over local government pay. …

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