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Risk rising as Whitehall shunts costs

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The Budget has come and gone, but for local government it, yet again, raised more questions than it answered.

Our budgets for 2013-14 appear to be settled, at least for the moment. But, looking ahead to 2017-18, the scale of the financial challenge has become starkly clear.

In 2014-15 we know there is an additional 3% reduction on top of the spending review, but we don’t know how that cut will be distributed. Looking to 2015-16 and beyond, we can expect the slow emergence of an increasingly alarming picture.

Our analysis at London Councils suggests that core funding for local government services could see a real-terms reduction of 57% over the period 2011-12 to 2017-18. At the same time spending pressures and demographics will continue to drive up costs.

We are in harsh times and we all, local government included, must play our part. However, the sector has shouldered more than its fair share of the burden so far.

I am also becoming increasingly frustrated with the additional pressure being passed to us by Whitehall through cost-shunting - the practice of ‘devolving’ a responsibility without the full funding necessary to deliver it.

For London alone, our analysis shows that in three areas that are being devolved and cut - council tax benefit, the social fund and care for children and young people on remand - costs have risen dramatically and will continue to do so.

It is not just cost that is being shunted - but also risk. These three areas have volatile budgets driven by demand that is likely to increase in difficult economic times. Council tax benefits expenditure has risen in all but one of the past 16 years, from £1.9bn nationally in 1996-97 to £4.3bn in 2011-12.

The social fund - an emergency fund for people who are destitute - is being devolved to local government with a cut of 25%. Under the control of central government, applications have gone up by 26% over the past three years and are likely to rise further.

The budget for children and young people on remand is even more volatile with Ministry of Justice statistics showing a potential swing of 10-15% between one year and the next. The riots of 2011, for example, will have had a significant impact.

Devolution to local government is good; we are good at delivering efficiently on the ground and better able to adapt services to meet local circumstances. However, such devolution must be executed with the serious intention of delivering better services at lower cost.

In the current climate cost-shunting is an unacceptable pressure that risks damaging local services rather than delivering the radical change that will be needed.

Hugh Grover, director of fair funding, performance and procurement, London Councils

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