The announcement confirms that local government will be making a major contribution to the coalition’s deficit reduction strategy.
Because some councils are more reliant than others on Whitehall funding the government has worked very hard over recent weeks to find a way to dampen any extreme impacts for individual councils by making adjustments to the total settlement on a case by case basis for each council.
However, when the year one impact of reductions in the complicated mix of funding involved, including area based grant, revenue support grant and specific grants (such as the Local Enterprise Growth Initiative and the Working Neighbourhood Fund) are taken as an overall picture - it appears that a number of councils will still need to make cash reductions of more than 15% in relation to their revenue budgets in 2011-12.
This presents a major challenge in its scale and pace and its political implications locally. Some councils will use this situation as a creative platform for increased efficiency, productivity and financial self-sufficiency. But, in order to survive, councils will need to be ruthless in urgently deciding on front line service priorities.
As part of the response we should expect a series of front line services that councils consider relatively lower priority, including such things as libraries, arts, culture and leisure services, to be reduced or stopped.
There will though continue to be much significant new investment in other front line activities including adult social care. The settlement will also encourage further major reductions in the size of council workforces with reductions over the next four years still anticipated to be at least 100,000 in England.
Councils are trying to ensure that only a minority of these reductions will be compulsory redundancies.
Iain Hasdell, KPMG’s UK head of local and regional government