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Ministers and LGA in fresh settlement dispute

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The majority of councils have been left “marginally worse off” by the final local government finance settlement published this week compared to proposals outlined in December, council chiefs have warned.

Despite ministers’ claims that additional funds had been put into the system, the “disappointing” settlement left 248 of the 382 English councils and fire authorities worse off than the provisional plans, the Local Government Association said.

The LGA is considering options, including a legal challenge relating to the re-allocation of business rates, following the announcement of the settlement which will allocate £29.4bn of formula grant to councils next year and £27.1bn in 2012-13.  

Ministers said on Monday new funding had been provided so no council would receive a fall in ‘revenue spending power’ greater than 8.8%, compared to the provisional settlement where worst hit councils would have seen an 8.9% decrease.

Unveiling the proposals, local government minister, Bob Neill, revealed ministers had received 330 written responses from 283 authorities but that he had decided to “broadly confirm the proposals for the distribution of formula grant for 2011-12 as announced in December”.

He added: “We have listened to views and looked hard at the figures and have pushed more money to those most dependent on grant so now no council will face a reduction of more than 8.8% and shire districts will get £10m to compensate for the loss of concessionary bus travel funding.”

Some councils gain

The additional funding provided so no council would receive a fall in ‘revenue spending power’ greater than 8.8% was funnelled in through an increase in the ‘transitional grant’, the grant handed to councils to “manage issues relating to the ending of the Working Neighbourhoods Fund”. This was increased from £85m to £96m in 2011-12 and from £14m to £21m in 2012-13.

The move meant 44 authorities handed transitional grant in the provisional settlement received an additional boost while seven authorities, who had not been allocated transitional grant in the provisional settlement, also received a small boost.

They were: Aylesbury Vale DC, Babergh DC, Bradford City MBC, Manfield DC, Rossendale BC, Salford and Sunderland City Councils.

Extra concessionary fares funding not new, say LGA  

A further £10m has also been made available through formula grant “to compensate district councils for the loss of concessionary travel funding in 2011-12,” local government minister Mr Neill told Parliament.

The Department for Communities & Local Government told LGC money had been taken from the departmental budget to fund the £18m boost to the transitional grant and £10m to compensate districts for losses relating to changes to concessionary fares arrangements.

But the LGA said the concessionary fares top-up was not ‘new’ money and appeared to have been made available to the 2011-12 budget by raiding council’s formula grant for 2012-13 budget.  

The LGA said this was evident when looking at changes made to the new ‘floors’ system.

For 2011-12, where the extra cash has appeared, the ‘floor’ for shire districts in band four had been adjusted so instead of preventing a district taking a cut more than 16.8% in grant funding, it prevents councils taking a cut of more than 16.2%.

However, the floors have been re-configured for the 2012-13 as well to account for this. For example, the floor for band four for district councils in 2012-13 was adjusted from 13.5% in the provisional settlement to 15% in the final version.

Reaction

LGA director of finance & performance Stephen Jones declined to comment on whether or not the LGA would be taking legal action as a result of the settlement but said that the results were disappointing and that most councils had been left “marginally worse off”.   

He said: “[D}CLG has not changed its position on a range of areas that we have raised as concerns and we are not happy about that. Members will consider what action to take before the House of Commons debate on the settlement next week.” 

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