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Strictly embargoed until: 00:01 Thursday 18 February, 2016
Seven out of ten councils say Government’s devolution proposals need to go further
Nearly 90 per cent forced to increase charges to make ends meet
New research out today reveals that the majority of councils question whether the Government’s devolution proposals go far enough to redistribute funding and spending power from central government to local government.
The 2016 State of Local Government Finance survey (conducted by the LGiU and MJ) found that six out of ten councils are confident that they can become financially self-sufficient by 2020 (when the Government has proposed phasing out the revenue support grant) but only if they are given more powers than what is currently on offer from Government. Primarily, they want increased powers over charging and trading, the ability to reband council tax and raise specific local taxes.
As councils finalise their 2016/17 budgets, nearly 90 per cent say they will have to increase charging for services while a further 82 per cent say they will be forced to dip into reserves to balance the books (up from 55 per cent in 2015). Nearly 40 per cent of councils say their 2016/17 budget will lead to cuts in frontline services that are evident to the public.
With the Coalition Government’s council tax freeze grant removed, nearly nine in ten councils said they are increasing council tax for residents this year (up from 50 per cent in 2015). Almost all councils eligible to do so have said they are likely to take advantage of the 2% social care precept offered by Government but three quarters believe this will not be sufficient to close the funding gap in adult social care.
Jonathan Carr-West, Chief Executive of LGiU, said:
“Local government finance is a mess. Our research shows that right now councils are cobbling together their finances by using reserves and increasing charging wherever they can.
The Government has shown a genuine and radical commitment to changing the way Britain is governed. But the path to devolution has been encumbered by decades of central government ducking crucial questions about how local government is financed.
The system we have now is one which no one would design. Central government and local authorities both want to see a sustainable independent funding model. But until we answer fundamental questions about how to make this work, devolution will be a process rather than a revolution.”
Heather Jameson, Editor of The MJ, said:
“Local government budgets have been squeezed dry over the past five years, and councils have done a fantastic job of protecting frontline services, but they can’t go on with less and less resources and still pay for vital services like adult social care.
Town halls want to be self-financing, but they need the tools to do so – and they need to be free of Whitehall diktat. Local government needs to be free to charge and trade and control its own income. The Government talks a good game when it comes to devolution, but let’s see them put their money where their mouth is and sort out local government finances.”
Notes to editors
The LGiU and MJ conducted the survey from 14 January – 4 February 2016 and received 156 responses. Responses were collected from Chief Executives, Council Leaders, Directors of Finance and Cabinet Members for Finance across 132 Councils in England.
The LGiU and MJ have jointly conducted the state of local government finance survey since 2012. Please note that survey data should be credited to the LGiU & the MJ.
An infographic with detailed analysis of the survey results can be found here.
Business rates: Councils were split on the impact of the return of business rates income with 30 per cent saying they will gain, 35 per cent saying they will lose, and 35 per cent saying they will remain the same. However, 87 per cent of councils said all councils (not just combined authorities with elected mayors) should have the power to raise business rates.
Summary of responses (2013- 2016): Does your authority intend to increase, use, or not touch your reserves this year?
Changes to the system: The findings also identified possible improvements that could be made to the system. Scrapping the Government’s requirement for a referendum for council tax increases above the 2% threshold was seen as a silver bullet with 76% per cent saying the measures would allow them to become financially sustainable. Other measures included: setting no council tax limit (51%), and introducing a higher cap on council tax increases (37%).
Summary of responses (2012-2016): Do you plan to freeze or increase your council tax?
The Local Government Information Unit (LGiU) is a think tank and membership body with over 200 councils and other organisations subscribing to our networks. We work to strengthen local democracy and put citizens in control of their own lives, communities and local services. For more information, visit lgiu.org.
About The MJ
The Municipal Journal (MJ) is the UK’s leading weekly magazine for council chief executives and senior managers in local authorities and allied sectors. It offers an insiders’ view of what’s going on and what people are thinking in today’s ever changing and challenging world of local politics – the latest news, incisive comment, in-depth features and interviews, business analysis and the top recruitment vacancies.