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Councils face £12bn blackhole

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Local government could face a £12bn funding shortfall over the next four years which will lead to services being ditched and fees and charges ramped up, a report published has warned.

The New Local Government Network (NLGN) report said councils could see grant funding slashed by at least third over the next four years.

And the thinktank said councils must be given greater financial certainty from Whitehall and greater flexibility to raise local revenue if they are to cope with the cuts.

It joined calls for so-called “place agreements” which would see shared public spending across the local state and local authorities handed full discretion over council tax levels as well as the ability to retain a slice of business rates locally to incentivise economic growth.

The report also said councils could be on a collision course with residents as a result of service cuts.

The report, Financial Horizons, said: “The public oppose cuts to environmental services as much as they do to education services, yet our survey of finance directors found that environmental services were one of the areas most vulnerable to cuts.

“Cuts to social care services would be overwhelmingly unpopular with over 70% opposing cuts. However, cuts to protective, environmental, education and even highways services would prove similarly unpopular with between 60% and 67% of those polled registering their opposition to potential cuts.”

Council chiefs and finance directors also told the authors library services, sport facilities, museums and street cleaning are particularly vulnerable but only a third of respondents said they expected cuts to be wider than 20-25%

Responding to the report, junior local government minister Bob Neil said that while tough decisions would be required, there was an “opportunity to both decentralise power, and to save taxpayers’ money through more joint working, professional procurement and greater transparency”.

He added: “The coalition government will work with councils to defend frontline services such as bin collections, as evident by our reduction in the red tape of ring-fencing and protecting formula grant in the recent savings announced last month.”

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