The end of the beginning

So there we have it, the much dreaded and much delayed local government settlement, when town halls learned the reality of the cuts to come.With the spending review setting out a 28% cut to local government over the next four years, councils were expecting bad tidings from communities secretary Eric Pickles and he did not disappoint.

Despite his best efforts at dressing himself up as Santa, by spinning the reality of deep cuts as smaller reductions to overall ‘spending power’ – a measure that has not been used before by ministers and shall no doubt be dropped if grant levels are to rise at some point beyond the grim near future – Mr Pickles was, as expected, the grinch.

‘Spending power’ spin

As exclusive LGC analysis of the settlement shows, Mr Pickles’  claim that no council would see its ‘spending power’ – broadly government grants, including NHS funds, added to council tax – reduced by more than 8.9% was mere tinsel.

In fact, the overall cuts to formula grant and specific grants totalled 10.2% in 2011-12 and 5.9% the following year, with an average cut to councils of 10.7% and 7.6% respectively. But even that misleads. As LGC’s spreadsheet (available here) demonstrates, the range of cuts next year runs from a reduction of 4.8% to Surrey CC to a mammoth 17.3% for Aylesbury Vale DC.  The front-loading of the cuts, which Mr Pickles had so forcefully contested in the build up to the settlement, is there in black and white.

To be fair to Mr Pickles, he did make an effort to see good on his pledge that no councils would face cuts of 20% next year (For the record, he told the London Councils summit: “I can’t imagine a government moving forward and taking  20% out in year one”). As first revealed in LGC, Mr Pickles had, following that pledge, gone cap in hand to Treasury to ask, like Oliver Twist, for more cash to bail out local government, having so agreeably settled for the toughest cuts to the sector of any in the spending review.

Treasury, the mother-of-all grinches, said no. So Mr Pickles was forced to raid his own department’s budget, to the tune, we now know, of £85m to help ease the impact of the cuts. This cash – called a transitional grant- was focused on 37 councils facing the worst cuts, to ensure they did not fall below Mr Pickles 8.9% spending power reduction. As revealed in LGC, Mr Pickles also put in place a four-banded ‘damping’ system to cushion the impact of the cuts on those councils most dependent on grant.

All in it together?

Given these efforts,  Mr Pickles adopted something of a swagger in parliament, facing down with characteristic bonhomie questions from somewhat baffled MPs, who were unfamiliar with the ‘spending power’ measure being employed and suspicious of dirty tricks.

For instance, when Joan Ruddock, Labour MP for Lewisham and Deptford, said the cuts would “devastate her deprived constituency”, Mr Pickles pleasantly waved away her objection. “The hon Lady will be pleased to know that Lewisham [LBC] faces a drop in spending of 6.5% this year and 4.3% the following year. That does not strike me as draconian by any stretch of the imagination,” he countered.

Perhaps not, but in reality Lewisham LBC faces a cut of 10.4% next year and 6.2% in 2012-13 – significantly more swingeing than Mr Pickles’ said. Furthermore, as LGC’s analysis shows, the cuts, far from being “fair” as Mr Pickles claimed, do hit the most deprived the worst, with the bottom quintile of most deprived local authorities facing cuts of 12.9% on average next year, well above the overall average of 10.7%.

Nick Clegg’s pledge that the coalition would not let spending cuts unfairly impact on the north was also clearly betrayed: next year councils in the north-east, north-west and Yorkshire & Humber face formula and specific grant reductions of 13.5%, 12.3% and 12.1% respectively, compared to 8.5% in London and 8.4% in the south-east. As chair of the cabinet committee that signed off the settlement, Mr Clegg can hardly plead ignorance.

Mary Orton, Waverley DC chief executive and the honorary secretary of the Association of Local Authority Chief Executives, said she was left “reeling” by Mr Pickles’ spin, likening it to that of Alistair Campbell – a comparison surely likely to offend both men equally.

Reality bites

But it could yet be worse, as councils go through their individual settlements and try to track down the whereabouts of what are now being called the “missing-in-action” grants – around £2.26bn that has been unaccounted for since the spending review.

For example, LGC’s analysis (attached below) shows Blackburn with Darwen BC faces a 14.2% cut next year to formula and specific grant – taking into account its share of the transition grant- and an 8.3% cut the following year (This compares to Mr Pickles ‘spending power’ reduction of 8.9% and 5.5% respectively). But having looked at their settlement Blackburn now figure their actual cut next year to be 22% - in cash terms this means the council will lose around £10m more next year then the government’s figures suggest.

Graham Burgess, Blackburn with Darwen’s chief executive, says the difference means councillors “will have to make brutal choices about service and job cuts”.  “We know other very deprived areas of the North West are also in a similar position,” he adds. The council leader Kate Hollern (Lab) accused ministers of peddling untruths.  “Clearly the government has lied about the true extent of the cuts they are inflicting. Instead of spinning, the government needs to come clean and hold its hands up. They have decided to inflict these cuts and are expecting councils to face the public backlash.”

The blame game begins

But Mr Pickles and his team insist still that the cuts – which the Local Government Association call the “toughest in living memory” - can be met by cutting chief executives pay and sharing services. “I would like to see [councils] sharing chief executives, I would like to see them sharing their legal and account departments, payroll, IT, planning, education, support functions. And when they have done that, if they feel they have to close libraries, they should come and talk to me again,” he told Sheffield’s local paper, where the city council faces a 14.5% cut next year.

As readers of this blog will have previously noted, the actual savings that can be found through these actions are dwarfed by the reductions in budgets they now face – not to mention councils now have only four months to put in place such reform ahead of the next financial year.

The truth, of course, as councils well know – and which ministers won’t admit – is that frontline services will be hit, and in some places savagely. Mr Pickles’ rhetoric that only “lazy” councils will make those kinds of cuts makes it clear that the phoney war over the local government spending is now well and truly over. We’ve reached the end of the beginning. The battle to apportion blame for the cuts to local services has now well and truly begun.

Merry Christmas.