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MPs demand answers after Birmingham hit harder by spending cuts

MPs demand answers after Birmingham hit harder by spending cuts

🕔18.Dec 2015

Communities Secretary Greg Clark has agreed to meet all of Birmingham MPs to talk about a fairer cash settlement for the city council.

Mr Clark responded to a request from Erdington MP Jack Dromey after it emerged the council is set to suffer a 4.8 per cent cut in spending power next year as Government grant continues to fall.

The Labour-led authority expects to deliver spending cuts of about £250 million by 2020 on top of more than £500 million already lost since 2020. Cuts of about £90 million are planned for 2016-17 and about 1,200 council jobs will go.

Birmingham is hit particularly badly by the Government’s cash distribution formula because it raises less cash from council tax payments than wealthier areas and is heavily reliant on grant payments to cope with high levels of social deprivation and unemployment.

Urban councils like Birmingham have been lobbying the Government for years over demands for a fairer funding system, with little success. Mr Clark has announced that all councils will become self-sufficient by 2020, raising all funding through a combination of business rates and council tax,

Birmingham MPs are expected to quiz Mr Clark about his plans for a safety net to ensure that the council is no worse off, and preferably better off, when the changes come into effect.

City council leader John Clancy reacted to the local government spending settlement by expressing his disappointment that “Birmingham is once again one of the hardest hit authorities”. He added:

We will receive a 4.8 per cent cut in spending power per dwelling, yet the national average is a 2.8 per cent cut, and authorities like Horsham and East Devon will actually receive increases of around eight per cent and seven per cent.

This translates to £100 less per dwelling for Birmingham compared to £52 less for England as a whole for 2016-17.

This is despite the Government taking on board our Fairer Funding proposals. However, I welcome the Secretary of State’s agreement to meet with our MPs to discuss how Birmingham can get a better deal from the government.

Although we fully support the intention to give councils more independence by allowing them to keep business rates instead of relying on government grant after 2020, Birmingham needs enough funding to support vital public services.

We will analyse the data in detail and of course await the final settlement in the New Year before we can come to a clear view on how it impacts on our budget plans.

However our first impressions are that there is little to celebrate for next year, although it would seem that the later years of this four-year deal show an improvement against our forecast, whilst still involving huge grant reductions.”

In other reaction to the settlement, the Society of Local Authority Chief Executives (SOLACE) welcomed the move to full business rate localisation which it said would help to make councils self-sufficient.

However, SOLACE president Mark Rogers, who is chief executive of Birmingham city council, warned that “the devil will most definitely lie in the detail” and he was concerned to find there would be “fairness and equity for all councils”. Mr Rogers added:

SOLACE is particularly concerned to avoid the introduction of new burdens at a time when councils are struggling to deliver existing responsibilities. A thorough rethink of funding, including the devolution of complementary tax raising powers and the rapid roll-out of place-based budgets, needs to be accompanied by a realistic review of councils’ functions.

SOLACE advocates the need for a full and radical re-evaluation of what is realistic in terms of the future services and outcomes that local government should be responsible for given the scale of funding reductions that will have been implemented by the end of the decade.

With the arrangement set out today, there is a danger that the differential ability of local authorities up and down the country to stimulate economic growth will mean that some will struggle to maintain even the most essential statutory services, despite high levels of need, such as for social care. This needs to be addressed if we are to achieve the sustainability of income and, therefore, services that our residents expect and deserve.

The Conservative-led Local Government Association broadly welcomed the spending settlement. LGA chair Lord Porter said:

Giving councils the option to fix longer-term funding settlements is hugely significant. The LGA has long-argued that it is crucial for councils to be able to plan ahead for more than 12 months at a time.

This is an important step towards the financial certainty councils need to run important local services to the high standard our residents deserve and will allow councils to review the level of financial reserves they need to hold.

Greg Clark has responded to our call for greater flexibility for councils in setting council tax levels. This will give local authorities the power to raise extra money to offset some of the impact of the financial pressures they face next year. Councils will be able to raise council tax by up to an additional two per cent to help tackle local social care funding pressures.

Despite receiving a flat-cash settlement over the next four years, there are still significant challenges ahead for councils who will have to make efficiency and other savings sufficient enough to compensate for any additional cost pressures they face.

Today’s settlement has also proposed radical changes to the way council services are funded in the medium term. It’s vital that government continues to work closely with us to ensure the views of all councils are heard and understood in order to deliver sustainable financing of local government services.

Alexandra Jones, chief executive of the thinktank Centre for Cities, said the four-year funding package for councils was a step forward. Ms Jones added:

Today’s announcement sets out radical changes to the funding system for local government, giving places welcome control over their own tax revenue and more tools to drive growth in their local economies. The four year funding commitment also offers local authorities helpful certainty on what’s ahead, which will help them adjust to the new financial climate.

Over the next four years, as councils become more dependent on money raised locally, the Government must continue to give cities more of the fiscal powers and incentives they need to boost key areas of economic growth like housing, skills and infrastructure.

By 2020, a reformed council tax and business rate system, together with devolved land and property taxes including stamp duty, would make a big difference in helping local leaders to drive economic growth.

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