Local authority settlement fails to address major funding issues and shortfalls

AND government has said if councils need more money they should hold referendums which might, or might not, agree to further council tax rises to make up for the shortfall.

“Last week’s provisional settlement for local government was predictably disappointing, says Richard Harbord, while the big issues of funding social care and council tax reform wait unaddressed in the political long grass.

The delayed settlement was eventually published last week, leaving local authorities little time to do any detailed work on it before Christmas.

It has to be said it was never going to be earth-shattering, being the last year of an agreed multi-year settlement negotiated four years ago.

The actual settlement says that the government are planning to increase resources by £1.3bn next year, but this seems to include a number of separate issues such as Winter Pressures Funding for social care, the bulk of which comes with conditions, and the removal of the threat of negative grant.

The Local Government Association in a somewhat low-key response says that this settlement will still leave local authorities some £3.2bn short of the resources they require to maintain a reasonable standard of service.

Other announcements were expected at the same time but a number of these did not appear. The amount of time and energy spent on leaving the European Community has left a large void in moving forward to resolve the many problems local government faces.

There was a consultation paper on business rate retention, but this has been so long discussed in the joint working parties between central government and the LGA that it is hardly new. It is now set at 75%, this is somewhat less than Eric Pickles’ 100% and the various other figures talked about over the last few years, and is perhaps a disappointing increase on the 50% which has been the scheme for the last few years.

The announcement says that the government continues to work on the Fair Funding Formula which was also expected to go out to consultation. This was never intended to take effect next year, but local authorities need to know if there are to be major changes to distribution and to account and allow for them in their medium-term financial plans.

We had already been warned that perhaps the most important of all – the options for dealing with the increasing expenditure on social care – had been put back until next Summer. This was, it will be remembered the subject of a bungled announcement during the last general election campaign which had to be withdrawn with a Green Paper promised for immediately after the vote.

This has been delayed several times. It is just too difficult to find options that are acceptable to the majority. If there is to be a central funding solution rather than an insurance solution, it will have to come from additional taxation. Politicians continue to believe that increases in taxation are to be avoided at all costs but a relatively small increase in taxation could produce workable options.

The LGA urges the government to reconsider and to improve the offer by the time of the final settlement early next year. This is extremely unlikely to happen.

The fact is that this settlement does nothing to help local authorities become sustainable and to save them from having to make even more serious cuts in services going forward.

Business rates retention may have been sorted, but the government really needs to address the issue of council tax. Hopelessly outdated and not understandable to owners of properties, it is in desperate need of reform.

The government argue that it is open to local authorities to run referendums to increase council tax by over 3 % , indeed they have encouraged local authorities to do so but the limited gains and negative publicity have put authorities off.

At the very least the values used need to be current values and the banding system needs drastic revision to reflect the fact that so many properties are valued at over £1m and should be contributing more to local services.

We do now look forward to the spending review, but there cannot be widespread optimism that all will be well.”

http://www.room151.co.uk/blogs/provisional-settlement-does-nothing-to-help-local-authorities/