Government ‘blindly ploughing on’ with local government cuts

Local authorities have borne the brunt of central government cuts since 2010 and it is inevitable that they will continue to bear savage cuts with the new administration’s budget, announced today, in 2015.  While some cuts are, I believe, inevitable the choices made by the government in how the cuts are administered reveal the priorities of the current administration and are an attack on front line services.  In November last year the National Audit Office criticised the government saying that local authorities have worked hard to manage reductions in government funding, but the DCLG needs to be better informed about the situation across England.  In spite of the savage cuts and the truth that there have been greater cuts per head in more deprived areas (Hackney has seen a cut of £469 per head while Surrey’s cut is £36) it is also true that some councils have innovated faster and more effectively than others to protect their front line services.  I believe the government should reflect on the NAO’s criticism before blindly ploughing on with further cuts without having a proper picture of its effect on front line services. 

The government chooses to administer its cuts through cuts in the Revenue Support Grant to councils.  In calculating RSG the Government takes into account how much councils raise from council tax, taking into account the different mix of properties in different areas.  This is known as the resources element.  As cuts to revenue support grant bite, council tax income now accounts for a larger share in authorities’ total income.  But the government have chosen not to rework their calculation of how much weight should be given to the resources element within the overall settlement funding since 2013-14 and do not intend to rework them until 2020.

The reason the government give for this is that it would affect the calculations of how much councils could retain in business rates.  Another consequence of this freeze is that as local population increases the RSG still gets cut whatever the impact on the local authority; this means councils with high population growth, such as Milton Keynes, will not have this reflected in their retained business rate until 2020.  Even if one concedes the argument as far as the local share of business rates is concerned, it should not necessarily apply to RSG.

Local government has had grant reductions of over £10bn since 2011, from a total grant of £27bn and total controllable expenditure of £51bn. This represents a 40% real terms cut to funding since 2011.  The Local Government Association states in its recent funding outlook report that reductions will increase in 2016-17 and 2017-18.  Tomorrow we will start to learn more of the extent of future cuts, although it is likely the full picture will only become clear in the spending review in the autumn.  As cuts are piled on cuts it becomes ever more likely that back-office efficiency savings will no longer be available and frontline services will be affected.  It has been demonstrated by the Local Government Association that there is a clear correlation between greater cuts for those living in greater deprivation.  I believe it is incumbent on the government to break this correlation and to administer the overall settlement to restore the link between funding and need.