Friday, 28 December 2012

City Council considers options after £170,000 cut announced in funding

Councillor Abbott Bryning says the
recently-announced Local Government
Finance Settlement is another blow
to the Council's finances
There was grim news for Lancaster City Council just before Christmas, after the government announced it would have to make a further £170,000 in budget cuts next year.

Councillor Abbott Bryning has described the news as "another blow" to the Council's finances and local anti cuts campaigners are gearing themselves for further battles to preserve vital services.

The Council says it is carefully scrutinising the provisional Local Government Finance Settlement, announced on 19th December, to determine its impact on the council’s budget and future service provision.

Nationally, some of the poorest councils will get cuts of up to 8.8% while some of the wealthiest councils will get rises of up to 3% in 2013/14.

In our area, the government statement indicates the City Council will need to make further cuts in its services of £170,000 in 2013/14, with a further reduction in 2014/15 of around £1.6million, or 13%.

The Government released figures on the amount of money each local authority, including Lancaster City Council, receives to run their services, just before Christmas, but because of changes in the way support from Government is calculated, the full effects the settlement will have on the council and its services are still being analysed.

The headline figures indicate that there is to be a further reduction to the City Council’s current budget of around £170,000 with a further reduction in 2014/15 of around £1.6million, or 13%, but further work is being undertaken to confirm these figures and assess their impact.

"Another blow to our finances"

Councillor Abbott Bryning, Cabinet member with responsibility for finance, said: “The city council has already faced huge reductions over the last few years to its budget and this is yet another blow to our finances.

“At this stage we are still working on gaining a clearer picture of exactly how much the council needs to save over the coming years. The LGFS brings in some complex changes and we need time to work these through.

“But what it is clear is that the council will have less money and will have to consider real cuts to services if we are to balance the books.”

"Bad News for services"

The Chartered Institute of Public Finance and Accountancy has warned that the Local Government Finance Settlement heralds a ‘very challenging’ phase in the austerity programme, while the Local Government Association called it ‘bad news for services’.

"Confirmation of a further reduction in funding for local services comes on top of the unprecedented cuts councils already have to implement," says the Local Government Association. "This is bad news for local services and undermines the role councils can play in promoting economic recovery.

"It is good that the Government has taken significant steps to soften the possible negative financial impacts of changes to business rates distribution and funding for education services. Despite these sensible moves, councils are still exposed to some sizable new costs and risks which could draw money away from other services.

"Local government has borne the brunt of cuts to public spending and today's announcement confirms that this will continue to be the case until 2015. What was scheduled to be an extremely challenging 28 per cent reduction in council funding will now exceed 33 per cent and, for some councils, may go much higher. In comparison, Whitehall departments' budgets are being cut by on average 8 per cent.

"This pattern cannot be repeated into the next spending review period," the LGA warned. "Councils are one of the few parts of the public sector which actively promote economic growth. Curtailing that role hampers Britain's economic recovery."

CIPFA also noted that as well as cuts already demanded, councils will not be notified of their public health funding allocations until the new year, meaning they still don't know how much money is being made available for them to tackle costly public health issues such as smoking, alcohol abuse and obesity.

The institute has urged authorities to finalise their 2013/14 budgets prudently and in a way that safeguards both essential services and the financial health of their organisations.

"Councils hoarding billions", claims Pickles

But the government's Communities Secretary Eric Pickles has attacked the Local Government Association’s prediction of a crisis in local government services, accusing the group of being “seduced by statistics” and arguing that cuts to councils’ funding have been “modest”.

The Local Government Chronicle reports that he told the communities and local government select committee that it was “utterly ludicrous” for the LGA to predict that councils could struggle in future to fund anything other than social care and waste services.

He also accused some councils of scaremongering about funding cuts after it was revealed that town hall reserves have risen by more than a third in the past five years.

Public Finance reports an analysis of national council funding by the Audit Commission, published earlier in December, found that local government reserves totalled £12.9bn at the end of 2011/12, equivalent to almost a third of net spending on services. Reserves increased by £4.5bn between 2007 and 2012.

The watchdog urged councils to ‘strike a balance’ between current and future needs and said they should provide greater detail on how their reserves could be used.

Pickles claimed councils were "hoarding" money and said: ‘People would be surprised that councils are hoarding billions whilst some are pleading poverty.’

Given the rise in reserves, it was "disappointing and irresponsible that some sections of local government have chosen to needlessly scare the public with unfounded predictions of doom and gloom".

"As with any prudent family budget, councils set aside money to invest for the future and hold some back for a rainy day," Merrick Cockell, Chairman of the LGA stated, respodiong to the Audit Commission's original report.

"The prudent, entirely justified increase in reserves is designed to help councils manage the significant and growing financial risks to vital local services, as the Audit Commission readily acknowledges in its report.

"Unlike central government, which can borrow to cover day-to-day spending, councils cannot operate a deficit. These reserves are all that stands between local authorities and the risk of financial collapse. This sound approach to financial management has not been matched elsewhere in the public sector.

"The money is absolutely essential in helping to cover the threat of any unexpected cuts to funding, such as the up to £1 billion extra the Government says it may take from councils next financial year. This would be over and above cuts previously signalled in the Comprehensive Spending Review."

Labour: Cameron and Pickles "living in a world of their own"

Nationally, the Labour Party has condemned the settlement – and Mr Pickles


"David Cameron and Eric Pickles are living in a world of their own," says Hilary Benn MP, Labour's Shadow Communities and Local Government Secretary. "They simply doesn’t understand the impact that their decisions on funding are having on services and the local people who use and rely upon them."

Mr Benn also rounded on the Communities Secretary, deriding his opinions and arguments on council funding.

"This is what Eric Pickles' colleagues on the front line say about him. The former Tory chair of the Local Government Association, Baroness Eaton, described his understanding of the effect of local government cuts as 'detached from the reality that councils are dealing with'. Her successor, Sir Merrick Cockell, has called the cuts 'unsustainable'. And the Tory Leader of Kent says his county 'can’t cope' with further reductions and 'is running on empty'.

"Let’s be clear what is being lost due to his unfair cuts," Mre Benn warned. "Libraries, sports centres, Sure Start centres, places at women’s refuges.

"He is unfairly hitting the poorest areas hardest," he argued. "The Audit Commission has found that 'the most deprived areas have seen substantially greater reductions in government funding as a share of revenue expenditure than councils in less deprived areas'.

"Why is the most deprived local authority, Liverpool, facing a cut of 7.7 per cent in its estimated revenue spending power over two years when David Cameron’s council of West Oxfordshire is getting an increase of 1.1 per cent?"

 

Some business leaders have welcomed the government's plans, arguing it will open up opportunities for more privatised services.


"D Day, not Doomsday"

Commenting on the Settlement, Fresh Business Thinking reports Oxygen’s European Chief Executive Roberto Moretti said it was "D Day, not Doomsday" and has urged councils to consider fresh alternatives that will provide vital new income stream for public sector bodies.


Mr Moretti said: “Today’s settlement has intensified the pressure on Local Government, which has already discovered so many ways to tighten its belt, such as partnership working and outsourcing. It is now being placed in a position where it needs to go further and find more.

Through the Oxygen Early Payment programme — already adopted successfully by Oldham Council — Mr Moretti argued a new source of income for councils can be provided in terms of a rebate for early payments to contractors and suppliers.

“This is money that will help protect frontline jobs and services and spark growth in local areas.”

Cabinet will present its draft budget to Council on Wednesday 27th February 2013.

Full details of the Government settlement are here on the Department for Communities and Local Government web site

 

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