Since the settlement was announced, it is disappointing to see how much focus and acceptance is being given to a low 1.8% spending power cut, as opposed to the more realistic analysis by the Chartered Institute of Public Finance & Accountancy of a 6% cut.
A truly independent and objective analysis of the settlement, and what it means in terms of the impact on councils’ budgets, would be unlikely to conclude that spending power has only been cut by 1.8%. It would also be unlikely to conclude, as the government has claimed, the settlement is fair to north, south, urban and rural areas.
The evidence of councils’ own budget announcements indicates that the 6% cut in spending power highlighted by Cipfa is far more realistic. The impact of inflation, service pressures and the cost of achieving savings, actually means that even higher savings have to be made. Given the wide range of cuts in spending power for individual authorities, budget savings of over 10% can be seen at councils facing the highest cuts.
An analysis of the distribution of the cuts shows that, whichever measure is used, they fall disproportionately and most heavily on cities, London, the north and the most deprived areas elsewhere in the country. The 10% most deprived areas see an average cut that is 6.7% higher than the 10% least deprived areas. This is equivalent to an average difference in cuts of about £190 per household.
In the next few weeks in the run-up to the vote in Parliament in early February, MPs need to have a clear and transparent view of the level and cut in the grant from Parliament for statutory services and its distribution to each council – this is the key decision that they will be taking.
The finance settlement outlines a 17% cut in “upper tier funding”, which includes funding for children’s and adult social care. This needs to be better understood, as does the variation in the distribution of funding cuts.
The main causes of this variation are the large cut in council tax resource equalisation; the way top-slices and holdbacks are made; the 17% cut in upper tier funding particularly in children’s social care and concessionary travel; the impact of council tax freeze grant; cuts in council tax support; and ineffective damping arrangements to protect the most grant dependent authorities.
The Department for Communities & Local Government needs to do more to soften the impact of the cuts. This could include restoring the £50m held back for the business rates “safety net”, and providing extra protection to authorities providing care services that are facing the highest cuts, potentially funded from any unallocated council tax freeze grant.
Paul Woods, local government finance adviser. Mr Woods was previously treasurer at Newcastle City Council