A Christmas Present from George Osborne

A week before Christmas, as most people’s attention was either on the devastating floods in Cumbria or their last minute Christmas shopping lists, the Government announced the details of how it will fund Local Government over the next four years. Behind the Communities Secretary’s best wishes to everyone for a very merry Christmas, there was a stark message of substantial cuts in funding for local authorities in England, often much more than expected.

Across England as a whole, funds from Central Government for “core revenue spending” will be cut 10.5% in 2016/17. For Elmbridge, the cut in funding amounts to 10.8%, even after taking into account an increased New Homes Bonus of just under £3million, which, for the first time ever, will be more than the core “Funding Settlement Assessment” of £2.8million. It will be interesting to see whether the Administration at Elmbridge keeps to its policy of putting all its New Homes Bonus (which is not ring-fenced in any way) into reserves rather than using some of it for ordinary spending. For Surrey County Council, the cut in overall core funding amounts to over 20%.

Central Government no longer believes that local authorities can absorb this level of reduction in funding. There is no attempt to offer incentives to keep Council Tax levels frozen, and the spreadsheets show the expectation that Local Authorities will have to increase their Council Tax base by increasing the building of new homes, as well as increasing tax rates by 2% for Borough Councils such as Elmbridge and 4% for County Councils such as Surrey that have responsibility for the provision of social care.

This picture continues over the entire 4 year period. There will be a consultation about the future rules for the New Homes Bonus, but the figures in the overall settlement spreadsheet shows that the total spend on New Homes Bonus will be cut by around 40% by 2019 /20.In addition the core funding settlement for Elmbridge will have reduced by 80% in 2019 / 20 as compared to this year. For Surrey County Council, the reduction over the same period is some 56%. The net effect is that in 2019 / 20 Elmbridge will be covering 85% of its core revenue spending from Council Tax receipts compared to 66% now. For Surrey County Council, Council Tax receipts will cover 88% of core revenue spending as compared to 72% now.

 

The implications for local residents are clear. There will be a succession of increases in their overall Council Tax bills of 3% to 4% each year for the next 4 years. Even with this, local authorities will have to find ways to cut costs even further and / or raise income from increasing charges for the services they provide. We shall need to be vigilant to ensure that key services are not cut.

Published with permission of Cllr. Chris Sadler

Published on Monday, January 4th, 2016
in General Interest