COLD COMFORT FROM THE AUTUMN STATEMENT

As may be apt for an autumn statement, the announcements today from the Chancellor show no let up in the freeze on local government funding, and there is an even frostier outlook for the years ahead.

If you’ll forgive the terrible metaphor, here are some of the key points from today’s statement. Firstly, in terms of funding:

  •  The government is continuing with its commitment to freezing Council Tax in the next financial year. The Treasury has earmarked £450m to compensate over the next two years, but this still translates to an effective 1% cut in local authority funding in 2013/14 as the extra funding will not offset the in-year loss of revenue. Based on the OBR’s forecast inflation, this will amount to more like a 3.5% cut in real terms.
  • There will be a further 2% (£445m) cut in funding for local authorities in 2014/15. This will be on top of the effect of a likely further Council Tax freeze and the effects of inflation.
  • In the longer term, the Government has proposed lowering the local authority tax referendum threshold to 2%, so future revenue raising powers will also be diminished.

Chilling stuff, but the statement points out that the Government has actually spared Local Authorities a further funding reduction in 2013/14 imposed on most other resource budgets because it wants to encourage investment in “consolidating back-offices and transforming service delivery”. On a related note, larger scale consolidation is also given the green light, with the commitment that “the Government will support local authorities that wish to create a combined authority or implement other forms of collaboration”. What that support is remains to be seen.

Perhaps the biggest announcement for revenue spending in local government is that “there should be no new centrally determined local pay rates”. Centrally determined pay has been a controversial issue with potentially significant repercussions on the distribution of local government funding. The fact that these plans have now been shelved will ease the fear that local authorities in areas with cheaper labour costs might be given less funding from central government, and avoid the suggested “brain-drain” of local authority staff from lower to higher paid areas.

 Whilst the forecasts for local government funding appear frosty, there is more positive news for capital funding for local projects.

  • Following Lord Heseltine’s review, a greater proportion of growth-related public spending is to be devolved to local areas, primarily through Local Enterprise Partnerships (LEPs).
  • There will be a concessionary rate from the public works loan board, although it seems this is limited to just one infrastructure project nominated by each LEP.
  • There will also be additional funding to grow capacity in LEPs, in recognition of their new role. LEPs will be expected to start competing for funding based on their new strategic plans for their area.
  • There is further investment for infrastructure in enterprise zones, large housing projects, and to enable quicker disposal of public land.

The aim of all of this is to give the LEPs more power, and although the Government wants LEPs to remain “business-led organisations”, this does increase the role local government can have in driving through economic strategies in local areas, which is something of a silver lining in an otherwise gloomy picture for local authorities.

In all, this was an autumn statement of few surprises. As the economic woes continue, there is no let up in the reductions in funding, but at least in the search for economic growth, local leaders will be given a greater role, and crucially, a bit more funding. The freeze continues, but local authorities are at least being given a more tools to try and bring on the thaw.

MS

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