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Tony Travers: Councils need more money or fewer responsibilities

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This week’s local government finance settlement is the last one determined by the 2015 spending review. 

‘Spending power’ for 2019-20 will be about £500m higher than in 2018-19, equivalent to just over 1% in cash. 2019-20 expenditure is about £1.3bn above the 2017-18 level, a 3% cash increase over two years, and thus a real terms reduction.

It is true the rate of decline in council spending has abated latterly, though this fact is mostly because local authorities have been allowed to increase council tax to provide emergency funding for adult social care. The government may be about to do something similar for the police. In effect, local government is being encouraged to put up local taxation partially to replace central funding lost since 2010. The 2019-20 settlement will inevitably mean that all services apart from social care will, in most places, continue to face further real reductions.

James Brokenshire, the housing and communities secretary, has signalled that he is more likely than his predecessors to fight to protect local government. But as UK economic growth has slowed since the Brexit vote, the chancellor has little cash to give away in next year’s spending review. Having said this, if the UK leaves the EU with no deal, the ensuing upheaval may well lead the government to pump-up borrowing and, indeed, to print money to provide buoyancy for the economy. A Keynesian boost, with higher public spending and tax cuts, would almost certainly occur if Brexit goes wrong.

Local government will have to spend money in 2019-20 planning for every eventuality, including ‘no deal’. It will be interesting to see if the Ministry of Housing, Communities & Local Government offers any financial support to councils to prepare for a no deal Brexit as part of the settlement.

The spending review and, in parallel, ‘fair funding’ reforms offer ministers a chance to break with the pattern set in 2010-11 and which will still be visible in 2019-20. Either councils need more money or their responsibilities need to be reduced. Ministers know voters like libraries and pothole-free roads and will have to find some real new money.

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