notes from JK

The great local government squeeze


The government is dramatically cutting funding for local councils. You may be aware of the headline figures but these don’t adequately reflect the depth of the devious ways in which this money is being clawed away from local services and kept by the Treasury in Whitehall.


For example over 4 years Brighton & Hove City Council’s Formula Grant from central government will be reduced by 33%. But that’s just the start of things, the public face of the reductions.


Now begin the cuts by hook or by crook: Because academies don’t have to use local authorities for services, councils will lose some funding there, but not in a way which actually reflects the number of academies in our area – it’s a flat cut across the whole country.


Next the government cancelled the trading element of the Carbon Reduction Commitment. This would have ensured that the scheme was overall cost neutral. Now it will be costing Brighton & Hove over £200k next year which is going straight to funding the Department for Energy & Climate Change’s budget savings targets.


Council Tax Benefit is next, where the government is cutting 10% off the funding and leaving councils to either make up the gap themselves (somehow) or decide how to deliver reduced benefits to our residents. The depth of harm this change will bring is shown by the finance directors of all councils in Sussex unusually having jointly written to the government expressing their concern.


There’s also the case of the “missing business rates income”. Law requires that local authorities are paid from a ring-fenced fund made up of all the business rates collected. Every penny collected from business rates should be re-distributed to local government. However after the spending review it became clear that the total amount paid to local authorities in England will be much less than the total amount of business rates collected. The missing amount is estimated to be £2.5 billion pocketed by the Treasury and Brighton & Hove’s share of this would be about £12.5 million.


In the future there’s more to come. The government are proposing to introduce reform of local government finance. At the moment all business rates go into the (supposedly ring-fenced) national pot which is then redistributed to councils through a formula. The proposals are that councils would get to keep their business rates with a few caveats:


  • Ministers have promised that the first year of the new system will not differ significantly to the last year under the formula. So there will be a system of tariffs and top-ups to try and balance council incomes in line with what they received the year before.


  • Councils will be able to only keep new business rates income if that growth exceeds inflation and a nationally set growth target for England. Failure to exceed that target will result in councils not just standing still, but actually losing funding. Yes, losing funding. Business rate income which doesn’t exceed the target plus inflation will be clawed back by the Treasury, on top of the £2.5bn they’ve already sliced from business rate funding for local government.


All councils will have choices about how to face these cuts – will they prioritise results or appearances? Will they take the tough longer term thinking or try to take short term quick fixes which will swell into bigger problems in a few years? Will they go for redundancies or reduced pay? It will be incredibly tough and councillors of all political stripes will have considerable soul searching to do before budget setting meetings.


But we must never forget that this is all being imposed on us by a cynical Conservative/Liberal Democrat government who continue to pump out misleading nonsense. Government claims of reserves groaning with spare cash, acres of spare land and wasteful spending keep emerging to be debunked. but only after the headlines have splashed. Councillors will be able to decide the nuance of the cuts, but the size and speed is all of the government’s making.


What is their agenda here? It certainly isn’t to empower local government when they cut our budgets at every turn and don’t even trust us to set business rates ourselves. I think quite simply the government are trying to push as much of the pain of their mad budget cuts onto local government. In this way they can deflect the blame for service cuts onto councillors rather themselves. Almost as criminal as the Coalition’s actions is the Local Government Association’s extraordinary passivity in most of this. Do councils need to form a new collective to properly voice their anger in this time of crisis?


The government are destroying local government by starving it of resources. People’s quality of life will visibly suffer from this, the vulnerable will be put at risk and public services will be a wan shadow of their former selves. Welcome to localism.


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