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Auditors asked to examine latest council cuts

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The leader of England’s largest council has called on the government’s financial watchdog to reopen its inquiry into the way local government funding has been cut.

Birmingham City Council leader Albert Bore (Lab) made the appeal to the National Audit Office as he revealed that further cuts in the Budget and spending round announcements added more than £200m to his authority’s savings requirement.

He also criticised the way additional funding reductions had been revealed to councils in a quietly released consultation paper at the end of last month without an accompanying statement from the secretary of state.

“I am today calling for the NAO, which now has a remit to look after local government interests as well as national government interests, to examine central government’s management of its funding to councils, and to assess the future viability of local government if these cuts go ahead,” he said.

In January this year the NAO published a report examining the financial sustainability of local government which concluded that councils were so far coping with the large funding cuts administered by central government.

However it warned that the Department for Communities & Local Government and others in Whitehall had to do more work to assess the impact of planned reductions and questioned whether measures were in place in case some councils could not cope.

Sir Albert said this exercise needed to be repeated because, since the report had been published, both the Budget and the spending round announcement had reduced funding further.

At the time of the NAO’s last report, Birmingham had calculated it would need to find savings of £615m between April 2011 to March 2017.

“Since then we have had a series of further announcements from central government and their impact can only be described as shocking and, in fact, far worse than we originally predicted,” he said.

The Budget announcement added £77m a year to the savings requirement while the spending round added another £42m, he said.

“Then, to add insult to injury, came what to many observers in local government was the final straw,” Sir Albert said.

“Without any prior warning or without any public statement being made by the secretary of state or the chancellor, the Department for Communities and Local Government issued what it called a “technical consultation” in the last week of July.”

As previously reported by LGC, this consultation paper revealed that funding cuts for individual councils could be as much as 16% in 2015-16 - higher than the 10% indicated by the chancellor in his spending round speech.

Birmingham funding will be cut by 14.5% and Sir Albert Bore said this added a further £23m a year to the council’s funding deficit.

The council has this week released an updated “jaws of doom” model which, like the “Barnet graph of doom” and the LGA’s funding outlook, shows the widening gap between funding and service demand. The graph shows that an initial assessment of a £615m funding gap by 2017 was now expected to be more like £825m.

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