Magazine article Public Finance

Town Halls Prepare for Life after Hard-Hitting Spending Review

Magazine article Public Finance

Town Halls Prepare for Life after Hard-Hitting Spending Review

Article excerpt

Local authorities are preparing for profound changes in the way they provide services and run themselves after council spending emerged as one of die worst-hit areas in this week's Comprehensive Spending Review.

The October 20 review cut overall departmental spending by an average of 19%, well below the previously trailed 25%, but local government was particularly hard hit

Total council income from central government grants is to fall by 26% - including a 28% cut in Department for Communities and Local Government grants.

Capital grants to local authorities are expected to be reduced by 30%, while the DCLG's own running costs are planned to halve over the four years of the review period.

But councils are to be given more control over their finances. Chancellor George Osborne said the number of ring-fences on local authority spending is to be reduced from more than 90 to around 10. Additional funding worth £4bn is to be rolled into the general revenue support grant

Osborne announced a 'fully funded council tax freeze', setting aside £650m to enable councils to keep their bills flat for the next four financial years. The cash will fund the realterms loss to their tax take at a rate of 2.5%.

The review calculates that tìiis additional funding will mean a 14% fall in total council budgets by 2014/15.

The budget for council tax benefit spending is to be cut by 10% from 2013/14, saving £490m - but control over the reduced budget will then be devolved to local authorities.

Rob Whiteman, chief executive of the Local Government Improvement and Development agency, said it was a 'mean figure - in two senses' as only the average figures have been published, and councils will not know how deeply they will be affected until individual allocations are released.

But, he added, councils will have been surprised to find out the cuts are 'top-loaded'., with the greatest reductions to be made in the first years of the CSR period. 'Many will have been expecting a straight line - this is going to give them a tougher first year.'

Richard Kemp, vice chair of the Local Government Association, said the government had set councils a 'very difficulf target.

We will be fighting to make sure that anything local government does is done fairly - and keeping the most disadvantaged from as many of the cuts as possible,' he said.

He told Public Finance he was concerned that some smaller second-tier authorities would not be able to cope, particularly those that have not started sharing services or back-office functions. …

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