Tag Archives: deficit reduction

(Some) Districts given thumbs up for tax rises of up to 8%

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Copied from Local Government Chronicle online
Districts given thumbs up for tax rises of up to 8%
2 January, 2013 | By Ruth Keeling

“Low cost” district councils who have been granted leeway over council tax next year could increase rates by up to 8% without holding a referendum.

LGC has identified the 50 district councils that are set to benefit from the extra flexibility over council tax setting announced in last month’s local government settlement.

Under the proposals set out by local government minister Brandon Lewis, districts within the lowest quartile of council tax rates in 2012-13 will be able to increase tax above 2% without a public vote as long as the increase is not more than £5 in cash terms.

There are 50 district councils in the ‘lowest quartile’ with average Band D council tax rates below £142. They include Breckland BC which has the lowest council tax rate in the country at £65 and where an extra £5 equates to an 8% increase, as well as West Oxfordshire DC and Hambleton DC, where a £5 rise is a 6% increase.

Mr Lewis, speaking to councillors during a Q&A the day after the announcement, said it was only fair that “low cost” authorities be granted some additional flexibility. However, he said it was not clear the same flexibility would be offered after 2013-14.

The potential rises available to each of the 50 councils is listed below. There is no indication yet that any of the councils in question plan to take advantage of the extra flexibility available to them.

Council Maximum increase without a referendum (£5)
Breckland 8%
West Oxfordshire 6%
Hambleton 6%
South Staffordshire 5%
Tewkesbury 5%
Basingstoke & Deane 5%
North Dorset 5%
Wychavon 5%
Hinckley & Bosworth 4%
East Lindsey 4%
Broxbourne 4%
Broadland 4%
South Cambridgeshire 4%
Vale of White Horse 4%
South Oxfordshire 4%
East Devon 4%
King’s Lynn & West Norfolk 4%
Cherwell 4%
East Northamptonshire 4%
West Dorset 4%
Exeter 4%
Charnwood 4%
Stratford-on-Avon 4%
Test Valley 4%
Huntingdonshire 4%
Wellingborough 4%
Sedgemoor 4%
Rushcliffe 4%
Malvern Hills 4%
South Norfolk 4%
West Somerset 4%
Wycombe 4%
Chichester 4%
Eastleigh 4%
Daventry 4%
East Hampshire 4%
South Kesteven 4%
Taunton Deane 4%
Runnymede 4%
Forest Heath 4%
Blaby 4%
South Hams 4%
North Norfolk 4%
East Cambridgeshire 4%
North Kesteven 4%
Chesterfield 4%
Horsham 4%
Fareham 4%
Ashford 4%
Ribble Valley 4%

Local government funding cuts – the truth?

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Hardest hit face cuts of 15% next year
2 January, 2013 | By Ruth Keeling

Cuts to some councils’ core grant allocations could be as high as 15% next year – potentially rising to almost 40% by 2014-15 according to LGC analysis of data on the local government finance settlement.

Figures for councils’ individual ‘start-up funding assessment’ – which provides a measure of their main basic revenue streams – show an average cut of 4% next year and 9% in 2014-15.

The settlement – announced by ministers on 19 December – saw ministers focus on their preferred measure of councils’ ‘spending power’ which includes a wide range of service-specific grants and an estimate of council tax revenues and showed an average reduction of 1.7% last year.

But a detailed breakdown of each council’s individual allocation was not published until Friday the 21st – literally hours before the end of the last working day before the Christmas break.

LGC’s analysis of these figures show some authorities face cuts to their ‘start-up funding assessment’ as high as 15% next year. With cuts in 2014-15 set to be even more severe, the sector faces an average reduction of 12% over the second half of the spending review, with hardest-hit council potentially facing cuts of as much as 39%.

The start-up funding assessment measure does not take into account payments made under the New Homes Bonus, which stands to substantially benefit many district councils. Furthermore, figures for revenue streams in 2014-15 are no more than predictions as the new system of retained business rates will by then be in effect.

Those worst affected by the cuts have been offered a transition grant in 2013-14, re-badged as an “efficiency support grant” – designed to limit cuts in spending power to 8.8% but which has the effect of limiting cuts in start-up funding assessment to 15% in the first year. However, the efficiency grant is not assured in the second year and depends on whether councils make certain improvements to the way they deliver services.

Without the grant the worst hit – Great Yarmouth BC, which pulled out of a shared management arrangement following last May’s elections – will face cuts of 28% in 2014-15, creating a cumulative reduction of 39% over the two final years of the spending review period. But even councils not eligible to receive the emergency grant could be facing cumulative cuts of potentially 25%.

The table below shows authorities not cushioned by the efficiency grant will face reductions in their start-up funding assessment figure in excess of 20% over the next two years. Authorities eligible for the efficiency grant are marked with an asterisk.

Council 2013-14 % change Cumulative % change 2013-14 to 2014-15
Great Yarmouth* -15% -39%
Burnley*. -15% -38%
Barrow-in-Furness* -14% -36%
Bolsover*. -14% -35%
Hyndburn* -13% -34%
Pendle*. -15% -33%
Hastings* -15% -33%
Chesterfield -14% -25%
Preston -13% -24%
Copeland -10% -21%

‘Start-up funding’ v ‘spending power’

The new ‘start-up funding assessment’ refers to a local authority’s share of the spending control total. This SUFA figure is made up of two parts: an authority’s revenue support grant in that year and the baseline funding level as set for the start of the business rate retention funding system.

‘Spending power’ includes the start-up funding assessment and 13 other council revenue streams ranging from those affecting very few authorities, such as funding for fish conservation authorities, to more widespread items such as council tax requirement, social care funding and New Homes Bonus.

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True scale of settlement cuts emerges

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Copied from Local Government Chronicle online
20 December, 2012 | By Dan Drillsma-Milgrom

Councils face much higher funding cuts than those announced by communities secretary Eric Pickles, fresh analysis of the local government settlement has revealed.

An LGA briefing on the settlement said council funding would be cut by almost 4% next year and 9% the year after.

The cuts in core government funding for councils stands in contrast to communities secretary Eric Pickles’ claims that local authorities’ ‘spending power’ would reduce by only 1.7% next year.

LGA chairman Sir Merrick Cockell (Con) said the figures showed that local government continued “to bear the brunt of public spending cuts in the spending review period”.

The LGA’s calculations showed that councils’ start-up funding allocation in the new retained business rate funding system would decrease on a like-for-like basis of 3.9% in 2013-14. The following year, while councils’ local share of retained business rates is projected to grow by 3.1%, the revenue support grant which still makes up the bulk of councils’ funding is forecast to fall by 17%. The net effect is for a projected 8.6% decrease in funding.

Sir Merrick claimed that local government’s cuts in the spending review period would now exceed 33%, in comparison to the 28% originally announced.

The briefing also confirmed a number of details from the settlement announcement:

Of the £661m being paid to councils through the New Homes Bonus, £411m would be top-sliced from councils’ formula funding in 2013-14.
The amount held back to fund the safety net has been reduced from £245m to £25m
Twenty areas have been designated as pools for the purposes of top-ups, tariffs and safety net payments. These are: Berkshire; Greater Birmingham & Solihull; Buckinghamshire; Coventry & Warwickshire; Cambridgeshire; Devon; Gloucestershire; Leeds City Region; Leicester & Leicestershire; Lincolnshire; Greater Manchester; Norfolk CC and Broadland; Northamptonshire; Nottinghamshire; Oxfordshire; Somerset; Staffordshire & Stoke-on-Trent; Suffolk; Surrey; Worcestershire

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READERS’ COMMENTS (2)

Graham669 | 20-Dec-2012 2:40 pm
Pickled is doing his usual act of stupidity, the secondary effects of the crazy cuts in LA funding will last far longer than he is in office.
This charlatan will unfortunately leave a legacy of social damage that will take decades to heal.

patrick newman | 20-Dec-2012 4:04 pm
As predicted we only find out the truth well after Pickles has spoken but I doubt if cares too much about that. A further round of redundancies is inevitable thus putting more pressure on state finances through increased benefits and reduced tax yield. There must be many councillors who feel unhappy about being Pickles’ neighbourhood axemen.

Do we stay calm and carry on? No…

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Copied from Local Government Chronicle online
13 December 2012 | By Michael Bichard

The Public Services Hub at the RSA together with the Social Market Foundation (SMF) recently produced an important report entitled ‘Fiscal Fallout’, which is worth a read…but is not for the fainthearted.

It spells out the scale of the continuing financial crisis and makes a strong case for much greater coherence between the national strategies for fiscal sustainability,sustainable growth and public service reform.

The report – co-authored by Ben Lucas and Ian Mulheirn – explains how growth has been weaker than expected, social security expenditure continues to grow and government borrowing is, this year, running at 10% above forecast.

As a result, using HM Treasury’s method for estimating the structural part of the deficit, the SMF suggests that to remain on it’s planned fiscal path the government will need to make a further £22bn of cuts or tax rises by 2017/18 on top of the already planned £26bn of cuts announced in the last Autumn Statement.

Looked at in Departmental terms, if the NHS, Education and International Development remain ring-fenced then the consequences for other departments, including DCLG will be brutal.

Stay calm and carry on?
In the face of such forecasts the future is alarming if all we do is ’stay calm and carry on’.

As I have argued before,and the report reinforces,we have to be more radical than that not least because of other unavoidable pressures. After all,the LSE predict that an additional 6% of GDP will need to be spent on public services by 2020 to meet the social costs of an ageing society and the LGA estimate that the cost of meeting increased demand for statutory services will leave a funding gap of £16.5bn by the end of the decade.

What we need is for the next spending review to point the way towards a new Public Service model with a very different starting point. As the RSA report concludes, we need to redefine the relationship between citizens and services because value in public services is not transactional; it is about enabling people to achieve their goals to be capable, autonomous and socially responsible’In the language of the RSA you need to build social productivity by shifting resources away from traditional departmental priorities and silos towards the the things that citizens need to build strong and capable communities.

We have to move away from social protection to social productivity and we need to move on from a philosophy primarily concerned with response to one which gives much greater emphasis to prevention,early intervention and demand management; and we should know that this approach works because it is already happening in some local authority areas.

Councils like Oldham and Sunderland have begun to develop innovative approaches based on decentralising services,developing local commissioning capacity and taking a community leadership role in brokering and catalysing neighbourhood behaviour change thereby reducing demand for public/state services.

The question for me is whether the centre understands the importance of these radical initiatives and is capable of redesigning a public service model that has been shown to be expensively flawed.

Lord Bichard, senior fellow, Institute for Government

West Somerset to become ‘virtual authority’

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And so it begins. For those who think elected members should be culled, here’s the answer, just get rid of the council and give it to the private sector!

Copied from Local Government Chronicle online
6 December, 2012 | By Ruth Keeling

Minsters have persuaded a council branded ‘unviable’ not to pursue a merger with neighbours and instead becoming a “virtual authority” commissioning services from other providers.

West Somerset DC has rejected LGA advice to commence a boundary review following a meeting with local government minister Brandon Lewis during which he made it clear he believed the authority should continue as a sovereign democratic body.

According to West Somerset’s account of a meeting held last month between Mr Lewis and the council’s chief executive and leader, the ministers endorsed the LGA view that the authority was “not sustainable” in its current structure but insisted there was “no need to engage with the Boundary Commission on the subject of a merger” as advised by the LGA.

He also warned the authority that it should not expect the local government settlement due later this month to solve the council’s problems, the report states.

Mr Lewis was of the “firm belief that the council should be retained as a democratically elected and accountable unit of local government representing the people of West Somerset”, according to West Somerset papers published on Wednesday, a stance in direct contrast to an LGA report published last month which stated “the council is not viable as a unit of local democracy and governance over the long term”.

‘Virtual authority’

Following Mr Lewis’ advice that West Somerset work closely with neighbours and become a commissioning council, a business case is to be drawn up with neighbours to investigate how the council can commission from “other service providers whom would predominantly, but not exclusively, be neighbouring councils”.

Under the fledgling plan the council of 82 full time employees would reduce its workforce further and “only retain a small nucleus staff to manage the commissioning arrangements once in place”.

The report to full council, due to be debated next week, states the council’s existing lack of capacity will “impact on the council’s ability to move forward with the necessary urgency” and, as a result, £25,000 has been set outside to employ outside expertise.

In setting out the objections to other options, the report notes that a boundary review would be unlikely to be completed before elections in May 2015, as recommended by the LGA, and argues that a large council tax increase was a short term solution which would be unlikely to win the support of the electorate in a referendum.

A business case for the move to commissioning is to be drawn up “as soon as possible” with the council’s own risk assessment making it clear that, if no action is taken, it is “possible” the council will be unable to balance next year’s budget. It also states it is “likely” ministers will identify West Somerset “as a failing authority and put intervention measures in place”.

Shared management arrangements with Taunton Deane BC and Sedgemoor DC were investigated in 2010, after an earlier report also questioned the viability of the council, but the proposals were abandoned in early 2011 partly because the cost savings were minimal. Other shared service ventures were pursued, however.

Ministerial advice

The West Somerset papers, which set out in detail the pros and cons of the options available ahead of a full council meeting to be held next week, also reveal that Mr Lewis’ recent advice contradicted advice given by his predecessor Bob Neill.

At a December 2011 meeting with Bob Neill “the advice given at the time was to seek local support for a council tax increase that was above the national threshold or seek a merger with a neighbouring council through the Boundary Commission”, according to West Somerset.

However, a Department for Communities & Local Government spokesman disputed this suggestion.

“It is wrong to suggest government has changed its views. In December the local government minister [Bob Neill] made no proposals for boundary review, he raised concerns over possible council tax increase specifically that government could not countenance large increases and said it would be supportive of a shared service approach,” the spokesman said.

“The important thing is that West Somerset is looking to ensure that they have a sustainable approach to the financing of their council and should be actively looking at the scope for joint working to make sensible savings.”

The report also said the view of the LGA had “seemingly changed” since its report said a boundary review would be necessary in the long term. A spokesman for the LGA said it stood by the advice given in October based on information available at the time, but that it supported West Somerset in pursuing alternative options following discussions with other parties.

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READERS’ COMMENTS (1)

Roger | 8-Dec-2012 12:36 pm
This council is being led down the garden path by this minister, for reasons I cannot currently fathom.
It may be that he is following the Pickles plan of decide and conquer when it comes to this government’s wish to see local government reduced to no more than a parochial puppet of central government. This would also align with this government’s obsession with everything private. Conning this council into becoming no more than a front for a totally outsourced solution, that can then be touted around as the way forward for all councils, is also a possible goal.
Can somebody please explain to me what the role of the elected member is in an organisation where everything is totally contracted out and therefore offers little or no flexibility without throwing more money at the issue? Every complaint would elicit the same answer, sorry, it’s in the contract. I suppose they would only ever need to turn up for the quarterly performance reviews, followed by the annual contract review.

‘Stressed’ councils set to struggle financially

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From and copyright of Local Government Chronicle online
21 November, 2012 | By Ruth Keeling

A quarter of councils may struggle to balance their books in this spending review period – and more than a tenth risk running into trouble this year, the Audit Commission has warned in a wide-ranging financial health check of the sector.

The commission’s second Tough Times report shows that a growing number of councils are causing concern to district auditors. The proportion at risk of failing to keep to their budgets has risen from 10% last year to 12% in 2012-13.

Commission chairman Jeremy Newman said auditors had expressed concerns about a number of councils already showing “signs of stress” and facing further “significant challenges”.

Councils of most concern were most likely to have struggled during 2011-12, the report said. These had carried out ‘unplanned actions’ or faced relatively high funding cuts and – “perhaps more important” – had low reserves, the report added. Unplanned actions include the use of reserves and exceptional requests for capitalisation.

The commission’s report confirmed that the most deprived areas were hardest hit by funding cuts even though they continued to receive the highest per capita spending.

Cumulative cuts over the first two years of the spending review produced a 19.5% cut for metropolitan districts compared with 16.6% in London and 11.8% for counties. Metropolitan districts were the most likely to fall into the “high stress group”, the report added.

Despite these concerns, Mr Newman praised local government’s handling of severe budget cuts as a significant achievement.

The report also identified a number of trends in council spending in 2011-12 and budget plans for 2012-13, including

Central government funding fell by £1.6bn in 2012-13 while a second year of council tax freeze saw real-terms income fall by a further £400m over the same period.
Adult social care will be less protected as the only service set to be cut more in 2012-13 (3.4%) than in 2011-12 (2.2%).
Children’s social care spending is due to increase by 0.6% in 2012-13 after a 3.4% cut in 2011-12.
Planning and development will suffer less as planned savings fall from 27.2% in 2011-12 to 6.9% in 2012-13.
Housing faces further cuts of 9% in 2012-13, following a 12% budget cut the previous year.
Councils increased their reserves by £1.3m in 2011-12 despite plans to reduce them.
Treasurers described the report as an accurate reflection of councils’ experience, but warned that it could not take into account the financial risks associated with numerous funding reforms, which were due to come into force in April 2013.

Bob Palmer, audit lead at the Society of District Council Treasurers, said incentive schemes such as the New Homes Bonus and the retention of business rates would disadvantage authorities with below-average growth. “We are going to see increasing funding and financial difficulties for those councils unable to boost their domestic or non-domestic properties. That’s a serious issue that comes on top of overall reductions,” he said.

Frances Foster, chief policy officer at the Special Interest Group of Municipal Authorities, echoed Mr Palmer’s concerns. Referring to the report’s confirmation that the most deprived areas were hardest hit, she said localised business rates and council tax discount schemes would exacerbate this effect.

“It is difficult enough to deal with cuts when resources are known but build in volatility of business rates and council tax income then I would expect the ‘stress levels’ to increase accordingly,” she said.

LGA chairman Sir Merrick Cockell (Con) said councils were doing “an outstanding job in extremely difficult circumstances”. “The strain of the 28% cut in funding is undoubtedly starting to show across all service areas,” he said, pointing to cuts in the previously protected area of social care.

Sir Merrick said councils were in an “increasingly precarious position” due to funding cuts, risks to revenues and rising demand. He said the sector should be spared from a similar scale of cuts in the next spending review. “It is now time for others to do the heavy lifting,” he added.

A spokesman for the Department for Communities & Local Government said the business rate retention system could add £10bn to the wider economy. “Councils account for a quarter of all public spending – this year English councils will spend £114bn – so it is vital they continue to play their part tackling the inherited budget deficit,” he said.

Response to the report

Steve Freer, chief executive of the he Chartered Institute of Public Finance and Accountancy said the report was “positive” but pointed out it did not assess the impact of cuts on services. He also said public reactions to the cuts are “influenced in part by perceptions of fairness” and warned the governemnt to “reflect very carefully on the message from this analysis that deprived communities are bearing a disproportionate share of the pain”.

Joanna Killian, chair of Solace, also warned the that “public concern at service closures will only be heightened if this autumn sees the government’s contribution reduced even further” and called for “a full debate with the public about what local services they want and how they should be paid for is also required”.

Yet another doom and gloom report for us to digest

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Copyright LocalGov.co.uk
£48bn of spending cuts needed by 2018, argues report
Jonathan Werran

Alarming public finance figures indicating further eye-watering cuts and prolonged austerity suggest the Government should focus on localising public finances and economic growth, a think tank has urged.
An analysis issued today by cross-party think tank the Social Market Foundation (SMF) and the Royal Society of Arts (RSA), based on models used by independent forecasters the Office for Budget Responsibility (OBR), indicate an extra £48bn of additional tax hikes or spending cuts will be required by 2018.
According to the report, Fiscal Fallout, the likelihood of a greater than anticipated black hole in the nation’s finances – the March Budget implied only £26bn of cuts would be needed beyond the current Spending Review period – suggests unprotected Whitehall departments will see their budgets shrink by nearly a quarter (23%).
In effect departments would face sharper yearly cuts of 3.7% between 2015 and 2018, compared with 2.3% under the current Spending Review – making some departments like the Home Office and Ministry of Justice 40% smaller than they were at the start of the decade.
To balance the demands of deficit-reduction and public service reform, the RSA argues for a radical re-evaluation of how public services are delivered, focusing on localising public finances, promoting preventative services and promoting ideas like localised spending on growth.
Report author and director of the SMF, Ian Mulheirn said the OBR’s modelling shows the economy has less room to bounce back. ‘Combined with high public borrowing since March this implies a much bigger black hole in the public finances, making the stakes for the next spending review higher than ever.’
‘Combined with the savings pencilled in at the last Budget, the developments since March mean that the Chancellor will have to lay out some eye-waering cuts at the next spending review and will prolong austerity deep into the next parliament.
Ben Lucas, chair of public services at the RSA said: ‘Faced with the unprecedented level of cuts to public spending outlined by the SMF, we can’t continue to tinker around with a model of public services that was designed in the 1940s. What’s needed is a radical new approach based on social productivity which moves away from Whitehall towards local-based collaboration, integration and shared services.’

LGN & LocalGov Newsletter – More cuts to come

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23 October 2012
Council leaders warn further cuts ‘certain’
James Evison

Further council cuts are ‘absolutely certain’, local authority leaders in the north of England have warned.
The news comes ahead of the end of the local government grant settlement next March, with the Government currently consulting on new financing arrangements beyond April 2013.
Local authorities are due to discover the settlement in December, but it is widely anticipated that a further two years of spending cuts will be required for council budgets.
Preston Council deputy leader, Cllr John Swindells, claimed the council have ‘probably cut as close to the bone as we can’ – and any further savings will result in services being affected ‘deeply’.
Durham CC leader, Simon Henig, echoed the statement, claiming the impact on vulnerable people and care budgets was ‘accelerating’ as a result of the budget cuts, and had to find in excess of £40m for the next few years.
North Yorkshire also has to find budget cuts of more than £48m having already implemented plans for a £69m reduction in costs at the beginning of this year.
The Local Government Association is warning local authorities will only be able to provide basic services at the end of the decade should the budget shortfall continue – and local authorities would end up £26.5bn in the red.
Last week Lewisham LBC mayor, Sir Steve Bullock, said it could ‘get a whole lot worse’ following an announcement the local authority planned £28.3m in cuts from next April.

your comments

Interesting to read the MJ article a few lines down, “Councils are failing to make ?fair? payments to care home operators…”. Cutting funding to the public sector is cutting business in the private sector too. That golden thread may take time for the Treasury to understand.
Dominic Macdonald-WALLACE, Shared Service Architecture Ltd, Added: Tuesday, 23 October 2012 01:11 PM

What is certain is that these cuts to funding are designed directly to force the destruction of jobs and services and is part of a plan to destroy the concept that there is such an entity as society. It is clear that the destruction of the public sector is priority number one. The future for ex public sector workers is workfare or McDonalds, since the Government clearly wants low paid low cost workers not what we currently have. I would suggest that the pain to come has been underestimated.
David Hambly, Added: Tuesday, 23 October 2012 11:08 AM

Desperation or inappropriate favouritism?

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The latest bright idea from the coalition government, liberalised gambling laws, has an uncanny parallel with a similar bright idea of the previous Labour Government – 24 hour drinking.

The changes to the licensing laws have been an unmitigated disaster for our town centres, making them no-go areas at weekends, unless you are one of the thousands of 18-30’s determined to become hopelessly intoxicated and dangerously aggressive.

Changing the gambling laws won’t have the same type of negative impact as the changes to the drinking laws. However, making it even easier for the public at large to gamble to excess, will prove just as damaging in the long run. I can’t workout whether this is an idea born out of desperation to find a further source of deficit reducing revenue, or a sign of some sort of inappropriate favouritism, where looking after the financial interests of those who fund political parties and campaigns, takes precedent over everything else. I wonder how many expensive lunches it took the gambling industry to persuade ministers this was a good idea.

These proposals have been dressed up as localising control, giving councils the power to determine what happens locally. If its anything like the licensing laws, all it will do is impose yet another function on councils that are already struggling to maintain current services. The one thing it won’t do, is, as with the licensing laws, give councils the ability to say no, simply because they believe it would be bad for their community.

Whilst on the subject of lobbying, how long do you think it will take before ministers start releasing media statements, saying how good it would be for everybody if we retained the changes to Sunday Trading laws, currently only in place for the Olympics.