LGA fights further government attack on council finances

From a correspondent:

The Local Government Association is taking a strong stand against very damaging parts of Housing and Planning Bill currently in the Lords. Fundamentally, the proposal is to tax councils for a third of their most expensive council homes, expecting them to have been sold at a discount whenever vacant. Ministers Lewis, Clarke and presumably Osbourne are very intransigent on this issue, saying it was in the manifesto which 36.9 per cent of people voted for. They are dead set on a smaller public sector.

Under new legislation, councils will have to hand over the estimated equivalent sum for the sale of a third of their housing, whether they have sold them or not. Housing Associations will be expected to use that money towards building more housing somewhere in the country. It is hard to make it add up when substantial discounts are taken out along the way. It is also very discouraging for councils to build, knowing they will have to sell cheap. That pushes more people into the private rented sector. That is accompanied by an increase in the cost of welfare benefits and a greater risk of homelessness. Meanwhile the councils’ ability to assist is reduced.

Working with the Lords, the LGA has been clear that this legislation as it stands is very damaging. Crossbench Peers who have a great deal of expertise on this field and are working very hard on this, this week. They are proposing improvements in the legislation and hopefully some amendments will survive the course through the Lords and when it goes back to the Commons.

Next week, the Minister is considering our responses on the Finance Settlement 2016/17. The LGA submission is hefty and wide-ranging at nearly 30 pages long. It follows a series of direct meetings by leading members and officers to clarify each point. The Independent group members have played a substantial role in this. The reductions of 40 per cent in real terms is enough for some councils to be unable to set a budget at all, even with raising their council tax by 2 per cent. The additional 2 per cent care tax on top is a big help but will not cover the rising costs. Effectively there is a replacement of the income tax, in the government grants that comes to Councils in RSG, with council tax. This is less and being a property tax is a blunter tool.

The new business rates that are due to arrive are to be allocated to particular responsibilities of councils. For example, public health, capital development for transport in London, housing benefit administration and attendance allowance. This means the cuts we face now are long term. The effect of this is very harsh in some councils. For example, in one County Council it is currently proposed in this one year to use pretty well the remains of irs reserves to make the budget balance (£38m) and make cuts/savings of £42m, all on a budget of £476m. The council has also been selling off property as fast as possible, not looking for longer term gains, to help cover next year’s shortfall. However, it is now evident that the shortfall is not likely to be temporary.”