LGA - Transitional support needed for councils following funding shake-up

1 Feb 2016 02:55 PM

Transitional support is needed for councils over the next two years or the impact of government funding changes risk leaving many at financial breaking point and the existence of some local services under threat, the Local Government Association is warning. 

The LGA said some councils are already perilously close to the financial edge after years of funding reductions. Many more now fear being pushed closer to a funding tipping point as a result of changes to the way they will receive government funding over the next few years. 

Local authorities have been preparing for Revenue Support Grant - core government funding used to pay for day-to-day services - to be phased out by the end of the decade. This is part of the move towards local government keeping 100 per cent of its business rates income – a move long-called for by councils.

A radical shake-up of the way the Government will allocate this funding and the speed at which it will stop altogether at a local level has left some councils facing deeper than expected reductions in 2016/17, the LGA said.

It said the funding changes also mean 168 councils – almost half of all councils and made up of districts, counties, unitaries and London boroughs - face losing all this government funding by 2019/20. 

own halls only have a matter of weeks to set budgets for 2016/17 and face difficult decisions about how to find millions more in savings than they feared and plug even bigger funding gaps. 

Councils have long-called for further flexibility in the setting of council tax and town halls across the country are considering rises of up to 1.99 per cent and whether to also add a 2 per cent precept onto council tax bills to try and raise desperately-needed money to pay for already chronically underfunded services for the elderly and disabled. 

While this added flexibility will help some councils offset some of the funding pressures they face, it may still not prevent the need for cutbacks to local services, especially as local authorities won't see the real benefits of extra council tax income until the end of the decade. 

In its response to the Local Government Finance Settlement consultation, the LGA, which represents more than 370 councils in England and Wales, wants the Government to prepare a plan of action for when councils are left with insufficient resources to run services. It is also calling for government to smooth out its grant funding cuts to councils over the next few years.

Cllr Sharon Taylor, LGA Vice Chair, said: 

"The pace at which government funding will be phased out over the next few years was hugely unexpected and is placing significant pressure on some councils and their local services already stretched to the limit by rising demand and years of growing funding pressures. 

"Councils have been planning for further funding cuts in 2016/17 but some will have to find millions of pounds more in savings than they had planned for in even their worst-case scenarios next year. 

"For some councils, this might push them closer to the financial edge. For many communities, things might get a lot worse before they might get better. It will be our residents who suffer as councils are forced to take tough decisions about which services have to be scaled back or stopped altogether to plug funding gaps over the next few years.

"While extra council tax flexibilities and income will help ease some of the funding pressures facing councils, it would be wrong to think this will be enough to solve the long-term pressures facing local services and communities. After years of striving to keep council tax as low as possible, town halls find themselves in the impossible position of having no choice but to ask residents to pay more council tax over the next few years while possibly having to offer fewer services in return.

"Smoothing out funding cuts over the next few years is one of the essential ways the Government can give local authorities the best chance of being able to protect the services communities rely on over the next few years."

Notes

1. On December 17, the Department for Communities and Local Government published its provisional Local Government Finance Settlement. It confirmed that core government funding to councils would reduce by 27 per cent (£2.6 billion) in 2016/17 but also proposed a new methodology for allocating this grant funding.

2. The council tax referendum limit for all councils will remain at 1.99 per cent while social care authorities will be able to increase council tax by a further 2 per cent (3.99 per cent in total). Income from this additional precept must be spent on adult social care.

3.In its response to the provisional Local Government Finance Settlement consultation, the LGA is also calling for:

You can read our full consultation response here.