Leisure services, parks and libraries across England are likely to suffer, as councils are to face cuts of almost 10% next year in their core central government funding.
Speaking in the House of Commons today, Communities Secretary Eric Pickles announced that councils will lose much of the financial support they receive from central government.
Pickles announced an average 4.4% cut in the spending power of councils next year, and said the “formula grant” from Whitehall would be reduced by 9.9% in 2011/2012 and by 7.3% in 2012/2013.
But he did not give the exact figures for cuts to councils’ revenue support grant.
As it stands, local authorities in England are funded in two main ways: through central government grants (which include redistributed business rates), and council tax.
Central government grant money pays for capital projects, such as roads or school buildings, as well as revenue spending, such as the cost of maintaining council housing and running services.
Local authorities currently receive three types of central government revenue grants to fund local services:
1) The first are specific grants, which pay for individual services, such as key government priorities. This money is ring-fenced and must be used in the way specified.
2) The second are area-based grants, which pay for services deemed by a council and its partners to be local priorities.
3) The third are formula grants, which are calculated using mathematical formulae based on, among other things, the local council tax base and how many people rely on local services. These will be reduced by 9.9% in 2011/2012.
Bristol council buildings
Councils in England are going to lose a big chunk of the financial support they receive from central government, as government support is to be cut by 27% over the next four years.
That is a cut of several billion pounds in their primary source of income. Comparable cuts are also expected in Scotland, Wales and Northern Ireland.
The hardest hit areas will lose 8.9% of their spending power for two years. These include Ashfield, Great Yarmouth, Barrow-in-Furness, Hastings, Bolsover, Hyndburn, Burnley, Pendle, Chesterfield, Preston, Copeland, and Thanet.
Pickles did however promise that no local authority would undergo a decrease of more than 8.9% in 2011/12, as a result of the grant reductions.
He also said £650mn would be set aside so every council could freeze council tax without hitting local services. The government will provide those who freeze council tax with the equivalent of a 2.5% increase in funding.
Furthermore, Pickles promised to help protect frontline budgets by providing £200m to help councils modernise and cut back office costs.
The government is also proposing a Localism Bill, which aims to empower local residents and communities so they, not the state, take more responsibility for services and decision-making.
Forming a key part of the government’s “big society” agenda, the Bill will give local people and organisations the right to buy community assets like shops and pubs. It will also allow them to overrule planning decisions, empower them to create directly elected mayors in 12 cities, and allow them to approve or veto “excessive” council tax rises.
Pickles said today: “The Localism Bill will deliver a new democratic settlement to councils, overturning decades of central government control.
“The Bill will fundamentally change councils’ freedom to act in the interest of their local communities through a new general power of competence.”
Concerns have been raised, however, about how this agenda can be achieved without more money.
Paul Brant, Labour deputy leader of Liverpool Council, told BBC Radio 4’s World at One: “Some of these reported powers are illusory. The government is making savage cuts to local government finance… Without the money, some services will just fall off the edge.”
Leisure services, parks and playgrounds are likely to be affected
Shadow communities secretary, Caroline Flint, told the BBC: “Today we find out what the government really plans to devolve to local councils – the most devastating cuts in funding for a generation and the blame for difficult decisions.”