How the government is quietly squeezing local authorities of money


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8:55 am - November 10th 2011

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contribution by Cllr Jason Kitcat

The government is dramatically cutting funding for local councils. You may be aware of the headline figures but these don’t adequately reflect the depth of the devious ways in which this money is being clawed away from local services and kept by the Treasury in Whitehall.

For example over 4 years Brighton & Hove City Council’s Formula Grant from central government will be reduced by 33%.

Then because academies don’t have to use local authorities for services, councils will lose some funding there, but not in a way which reflects the actual number of academies in our area – it’s a flat cut across the whole country.

Next the government cancelled the trading element of the Carbon Reduction Commitment. Instead of being cost neutral, it will now be costing Brighton & Hove over £200k next year.

Council Tax Benefit is next, where the government is cutting 10% off the funding and leaving councils to either make up the gap themselves (somehow) or decide how to deliver reduced benefits to our residents.

There’s also the case of the “missing business rates income”. Central government is not paying all of the funds to local government that it should be by law. The missing amount is estimated to be £2.5 billion pocketed by the Treasury and Brighton & Hove’s share of this would be about £12.5 million.

The devastating cut in Feed In Tariffs has also choked off one of the few ways councils could raise money, reduce emissions and offset some of the cuts.

And there’s more to come on business rates too.

While councillors will be able to decide the nuance of the cuts, the size and speed is all of the government’s making.

What is the Coalition’s agenda here? It certainly isn’t to empower local government when they slash our budgets at every turn and don’t even trust us to set business rates ourselves.

I think quite simply the government are trying to push as much of the pain of their mad budget cuts onto local government. In this way they can deflect the blame for service cuts onto councillors rather than themselves.

Almost as reprehensible as the Coalition’s actions is the Local Government Association’s extraordinary passivity in most of this. Do councils need to form a new collective to properly voice their anger in this time of crisis?

The government are destroying local government by starving it of resources. People’s quality of life will visibly suffer from this, the vulnerable will be put at risk and public services will be a wan shadow of their former selves. Welcome to localism.

—
Jason Kitcat is Green Cabinet Member for Finance & Central Services, Brighton & Hove City Council

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Reader comments


1. Paul

Jason, a useful round up of the ‘quiet’ cuts, as bad or worse than the ones which brought about an ineffective hoo-haa earlier this year.

A couple of specifics if I may:

1) You mention business rates only briefly, (presumably) not least because the complexity of the changes makes it almost impossible to put in a LibCon-sized article. This is a clever move by the Tories, because there is general support (at least from businesses surveyed) for the principle of keeping any growth in business rates local. Why wouldn’t there be when it’s set out in those terms? But the devil is in the detail.

The plans are they stand (in the now-finished consultation) are such that poorer councils will be hit hardest simply under the technical details surrounding what changes are inflation-linked and what are not. While my spreadsheet calculations are that Brighton will be hit for around £130,000 a year under this technical provision, skint-old Knowsley, which has almost exactly the samet budget as Brighton, will be hit for around £8.8m a year, around 8% of its budget. (Full details here http://thoughcowardsflinch.com/2011/08/03/birmingham-to-lose-29m-in-the-small-print/)

As bad as this is what the new system will make Councils do. Biggest amongst these unintended (possibly intended) consquences is that over time Councils will be driven to squeeze discretionary rate reliefs to the maximum, meaning that sensible choices in council departments about supporting, let’s say, incipient social enterprises, will be set to one side in favour of short term cash targets. Ultimately, localisation of business rates will end of as a disincentive for proper growth as Councils lose the bigger picture.

2) You are right to mention solar power and the effect of the govt’s remarkably stupid ‘consultation’ paper. The press coverage that there has been has understandably been on the impact on the firms themselves, but as important is the loss of income which many councils (and RSLs) had been banking on. It’s difficult to build up a picture of exactly how much income will be lost to councils, but perhaps you might give an indication of how it will hit Brighton (this depends to a large extent on whether you own your own housing stock – I don’t know).

My own view is that the govt plans have been put in motion so unlawfully that – while I don’t like the idea of council money going to lawayers – it might be a good idea for like-minded, like-affected councils to throw a few bob in the pot (maybe alongside FoE, who are leading the charge) to seek Judicial Review on the govt’s (non-consultation, under which the slashed tariffs come into play on 12th December, two weeks before the end of the govt’s own consultation period on the changes ends. Again, see http://thoughcowardsflinch.com/2011/11/08/solar-shower for my detail, for what it’s worth).

2. G.O.

“In this way they can deflect the blame for service cuts onto councillors rather than themselves.”

Yep. Even left-leaning people on blogs like this one have been queueing up to attack left-wing councillors for ‘implementing’ Tory cuts by spending less on public services – which to me makes about as much sense as attacking tax credits claimants for ‘implementing’ Tory cuts by spending less on their children’s shoes.

3. Leon Wolfson

“The devastating cut in Feed In Tariffs”

They’re still FAR too high. They’re a tax on energy bills which directly harm the poor. That you’re complaining about them…oh right, green, anti-science.

4. Robin Levett

@Leon Wolfson #3:

They’re still FAR too high. They’re a tax on energy bills which directly harm the poor.

The problem with the tariffs isn’t that they are too high – they aren’t. The problem is the method of financing them. Ideally, this would be centrally financed. Less ideally, the electricity suppliers should be prevented from passing the cost on to other consumers.

5. pjt

@3: ” They’re a tax on energy bills which directly harm the poor. ”

But not enough. If you really want to cut CO2 emissions, you’ll have to hit the poor people (as well as everyone else) a lot harder.

6. Leon Wolfson

@5 – Absolute nonsense. Nuclear power plants. Build enough, and you can also run a hydrogen economy for cars.

7. Falco

I never thought I’d see it but Leon is bang on. It appears that your budget was based on plans that would extract subsidy from the poor to pay for whatever you happened to think was important.

While the business rate stuff is interesting and deserves further investigation the rest amounts to a complaint that the governing party is different to yours.

8. Paul

Leon

You make a sound point about the way the FIT has been developed as an anti-distributive measure, but for me the key practical point is that the FIT is being slashed (probably unlawfully as it happens) just at the point when loads of council (perhaps Brighton) and housing associations were about to benefit, and thus reduce energy bills significantly for RSL and Council tenants.

The other point is simple enough – that making the change with no real tail off period throws the solar companies – whom you can’t really blame for extending their businesses during the FIT times – into turmoil,and will pretty certainly lead to thousands of layoffs.


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