Settlement cracks

PeterSmith.jpgPeter Smith on the deep flaws in the latest round of local government funding

Formal announcements about local government funding have slipped further back into December, so this year – with only six more shopping days to Christmas – the statement got well and truly lost in the pre-Christmas rush. In the New Year however, we have an opportunity to expose the settlement for the partisan shifting of resources.

The government’s headlines were that it was only a 2.9% drop in “spending power”, every where was being treated fairly and could be achieved with “sensible savings”. 

None of these is really true. The idea of “spending power” is a Coalition invention and seeks to identify a range of spending streams into an area. It was distorted this year by omitting the GLA as though it had ceased to be a local authority and by including some health spending, which was double-counted as it is also in the Department of Health figures. One of the much disputed elements is the New Homes Bonus, which returns money to those areas that have more new houses built so those with buoyant housing markets gain considerably.

The level of funding in direct grant went down by around 9%, and as this is distributed on need the loss was felt more acutely in deprived areas. So no surprise these are mainly Labour councils. With the biggest cuts faced by the likes of Liverpool, Manchester and Newham whilst the good folk of Epsom and Ewell received a 3% increase in funding.

This pattern began soon after the 2010 election, so all the easy low-hanging fruit have been picked off in previous years; and there are now real reductions in services to vulnerable adults and children as well as further threats to libraries. The language being used in town halls around budget setting includes service transformation (doing less), reducing dependency (for fewer people) and greater efficiency (with fewer staff). 

Meanwhile spending pressures continue to mount. Local authorities have to cope with inflationary pressures (we also pay fuel bills), demographic changes (Wigan has seen a 19% rise in over 65’s in six years) and with new burdens from government and Parliament. Don’t be fooled by the claim that this is covered by new burdens money – this is often top-sliced from existing grant or merely disappears. When local government took over the old Social Fund it was grant funded, and some set up money was likely to go within two years. Now the whole grant for local welfare provision has vanished from the 2015-16 figures.

I saw yesterday that Wolverhampton council has had to do an emergency budget to avoid facing, in their words, “insolvency”. The probability is that more authorities will become non-viable over the next few years as the cuts continue to bite. There are ways that councils should be able to work with an incoming Labour government towards public service reform, and to achieve better and cheaper outcomes by place-based budgeting. To do so however, requires adequate and fair funding to meet local needs.

Lord Peter Smith is the Leader of Wigan Metropolitan Borough Council and a backbench Labour Peer

Published 9th January 2014

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