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Funding gap may be as much as 15%

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The DCLG’s latest consultation on the Council Tax Benefit Funding arrangements gave councils an opportunity to do more than simply respond to the single formal question posed.  

It was an opportunity to make points about the impact and deliverability of the proposal and to seek more certainty about funding and the size of cut that they need to plan for in 2013/14. This was essential to be able to draw up local schemes for formal consultation. There is cause for concern that the funding cut may be much higher than 10%.

While the publication on 17 May of illustrative 90% grant figures helped illustrate how grant may flow to the different tiers of billing and precepting authorities, it has not given the certainty needed to complete the design of local schemes. This is because it has raised fears that the funding gap in 2013/14 could be much bigger than 10%, possibly around 12.5% to 15%.  This is due to concern that the national grant total to be set in the Autumn may be too low and that grant allocations based on 2011/12 costs may not adequately reflect changes in claimant numbers in 2012/13.      

The illustration of an England grant total of £3,697m, which assumed reductions in claimants between 2011/12 and 2013/14, and which appeared to make no allowance for any increase in council tax in 2013/14 has raised concerns that the grant agreed in the Autumn may also reflect unrealistic assumptions.

As an example, the 90% grant figure that has been illustrated for 2013/14 is around 12.3% less than current benefit costs in our region.   If a council was to choose to increase council tax in 2013/14, the funding gap could grow to around 15%.  

A scheme aimed at bridging a 12.5% or 15% funding gap is likely to be significantly different to one based on a 10% cut.  As well as uncertainty about the size of the funding cut, there is also uncertainty about the realistic level of extra income that could actually be raised by changing exemptions.

Greater certainty is needed before the end of July about the level of the 90% grant total for 2013/14 and whether the grant will be uplifted for inflation in future years, so that councils can prepare local schemes for consultation with greater confidence.   

With recent news that councils have indeed collected more than £600million extra business rates in 2011/12, the Department has the opportunity to allocate some one-off money to help cushion the level of savings required in 2013/14 to enable the changes to be phased in more realistically or to provide the comfort that if the national grant total turns out to be too low, that extra funding would be provided as a top up later in 2013/14.  

Paul Woods, treasurer, Newcastle City Council

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