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Greg Clark offers ‘historic’ four-year funding deal for councils, but the cuts go on

Greg Clark offers ‘historic’ four-year funding deal for councils, but the cuts go on

🕔17.Dec 2015

Government funding for local councils will fall by 6.7 per cent in real terms after inflation is taken into account over the next four years, wiping billions of pounds from town hall budgets.

But the cut announced by Communities Secretary Greg Clark is not as great as the Government predicted five years ago when the scale of the country’s financial crisis first became clear.

In 2010 Clark’s predecessor Eric Pickles predicted a 14 per cent fall in funding from 2016 to 2020.

The latest projections are hardly likely to come as much relief to hard-pressed councils.

Birmingham city council expects to have to cut a further £250 million from its budget by 2020 on top of more than £500 already axed since 2010.

Announcing what he termed a “historic settlement” for town halls Mr Clark confirmed that by 2020 councils will be fully funded from local taxes. Government grant will disappear to be replaced by business rates, which councils will be able to keep, and council tax.

In order to plan for this transformation Mr Clark is offering four-year funding settlements “to any council that wishes to plan ahead with confidence”.

Over the next four years Government grant paid to Birmingham city council will be £227 million in 2016-17, £177 million in 2017-18, 144 million in 2018-19 and £110 million in 2019-20. During that period the council will be able to retain an increasing proportion of business rates.

According to figures in the settlement, core spending power for local authorities across England, the government’s preferred measure of council finance, will fall from £44.50 billion in 2015-16 to £43.25 billion in 2016-17. Authorities with social care responsibilities, including Birmingham, face a 3.2 per cent reduction in spending power next year, compared to 1.1 per cent for non-social care councils.

However, over the Spending Review period to 2019-20, authorities responsible for social care will face only a 0.2 per cent reduction in spending power, releasing £3.5 billion of additional funds, compared to an 8.3 per cent reduction for districts and others not responsible for care services.

Mr Clark told MPs in the House of Commons:

This is an historic settlement for local government. It makes local councils fully responsible to local people for their financing – rather than central government – something that local government has been campaigning for over a number of decades.

In doing so it protects the resources available to councils over the next 4 years, puts more money into the agreed priority of caring for elderly people, and offers councils the certainty of a 4-year budget.

This settlement has been achieved by listening to local government leaders who have had a good track record of making savings and delivering valued services over the last five years. The resources available, the funds for social care, and the long term reform go beyond what council leaders dared hope for even a few months ago. It is a vote of confidence in the power of devolution.

Mr Clark listed three main planks of the settlement:

  • To give councils further financial certainty before the devolution of business rates by 2020, the Government has taken the unprecedented step of offering a four-year settlement to any council that wishes to plan ahead with confidence.
  • An extra £3.5 billion for adult social care. Up to £2 billion will come from a new two per cent social care precept – which is the equivalent to £23 per year on an average Band D home – to provide dedicated caring for the growing elderly population. A further £1.5 billion will be available to councils to work with the NHS to ensure that care is available for older people following hospital treatment through the Better Care Fund.
  • Ministers are clear savings will be needed in services outside of adult social care, but at 6.7 per cent over this Spending Review period in real terms compared to 14 per cent announced at the Spending Review of 2010. Total funding for local councils will fall by 2.8 per cent in 2016 to 2017, before rising again so that by 2019 to 2020 it is virtually unchanged.

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