Councils face 8.9 per cent funding cuts

Announcing the Local Government Finance Settlement in Parliament, Eric Pickles said the average reduction to council’s spending power would be just 4.4 per cent.

The cuts appear to be less deep than previously feared, after Mr Pickles confirmed he had allocated an extra £30m from his own department to help local councils, which had been bracing themselves for average cuts of around 10.7 per cent.

Also today, Mr Pickles unveiled the detail of the Localism Bill, which aims to give more power to local councils and local communities.

“Every part of the public sector has to play its part…I have sought to achieve a fair and sustainable settlement for local government. This will be a progressive settlement and fair between different parts of the country,” he said.

Read more from Eric Pickles on the Localism Bill, writing for Channel 4 News 

Mr Pickles said the settlement had taken into account which areas had the highest need by creating four separate grant bands for councils. These bands would set different limits for their reductions and thereby protect councils against the sharper grant reductions they would otherwise have faced, he told MPs. He also said there would be a transitional grant of £85 million for 2011-12 and £14 million in 2012-13 designed to help with the withdrawal of the Working Neighbourhoods Fund.

Council tax freeze

Mr Pickles said £650m had been allocated so every council could freeze council tax without hitting local services – and said his department would provide councils who froze the levy with the equivalent of a 2.5 per cent funding increase.

“The Government also wants to ensure council taxpayers are protected against authorities who impose excessive council tax rises,” he said.

“The Government wants to ensure council taxpayers are protected against authorities who impose excessive council tax rises.” Eric Pickles, Communities and Local Government Secretary

“We will introduce powers for residents to veto excessive council tax increases through a local referendum. In the meantime the Government will take capping actions against councils who propose excessive rises.”

The Labour Party questioned the “spending power” formula used by Mr Pickles, which incorporated money raised from council tax and NHS funding into the amount of cash available for local councils, along with central government money. Unions also warned that jobs would be at risk as the ‘Big Society’ plan pushed on.

Shadow Communities Secretary Caroline Flint said: “You are imposing unprecedented cuts on town halls the length and breadth of the country.

“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.”

Impact on local services

However, local services could still be impacted. Councils face difficult decisions over cuts to services which are seen as less essential than social care or children’s services – such as funding for voluntary organisations and the arts, including libraries.

Local Government expert Tony Travers, from the London School of Economics, told Channel 4 News: “We will see the deepest and longest cuts since 1945. It will have a systematic, long-term impact on local governments and will mean councils will have to find new ways of providing local services.”

But the CBI’s Director for Public Services said: “While the local government settlement is tough, there is a lot that local authorities can do to protect frontline services. The settlement is an opportunity to look afresh at how public services are delivered locally.

“New ways of working and re-engineering delivery can allow local authorities to maintain or even improve public services while saving money.”

Localism Bill

As Mr Pickles announced the funding settlement, he also unveiled the detail of the Localism Bill, one of the centrepieces of the Big Society, which will impact dramatically on how local government works.

He told Channel 4 News: “Once upon a time local government in this country had the power and the authority to make a difference. They improved public health, they cut poverty, they replaced slums with safe and secure housing. But decades of centralisation left councils hamstrung and ineffective. Now the time has come to restore town halls to their former glory: not out of a romantic attachment to the past, but because this is the best way to build a stronger economy and a fairer society.

“The Localism Bill, which I published in Parliament today, will fundamentally shake up the balance of power in this country. Councils will get a ‘general power of competence’ – legal shorthand for cutting central government’s leash. With common sense restrictions – they won’t be able to saddle up and invade each other or impose taxes like modern day sheriffs of Nottingham – councils are now free to do whatever they want.”

Details of the 'Big Society' Bill 

The Localism Bill aims to give more power and freedom to local councils and communities. It includes:

- Devolving powers to councils, including introducing directly elected mayors in 12 cities;
- Establishing more rights for local communities so they can hold local authorities to account, as well as giving them the power to take over services, buy local assets such as pubs and libraries, and hold referendums over council tax rises. Bin tax laws will be repealed;
- Reforming the planning system to give more local control, including replacing the Infrastructure Planning Commission;
- Giving local communities more control over housing and social housing through a new Community Right to Build initiative, and scrapping Home Information Packs;
- Giving local government more control over local economies, including granting discretionary business rate discounts and cancelling backdated business rates such as port taxes.

The Local Government Information Unit (LGiU) thinktank said the two announcements, on funding and power, represented “unprecedented change in our public services”.

LGiU Chief Executive Andy Sawford said: “These announcements will each have a huge impact on local councils and local communities. Together they represent unprecedented change in our public services and in the governance of Britain.

“It’s important to be realistic and acknowledge the difficulties that must be faced.” LGiU Chief Executive, Andy Sawford

“The finance settlement will be very tough for councils and there is no doubt that some, if not all, will have to make major cuts in spending. At the same time the Localism Bill envisages a brave new world in which councils are free to lead their communities and citizens are free to challenge the council. We absolutely support this aim, but it’s important to be realistic and acknowledge the difficulties that must be faced.

“Eric Pickles hails it as a revolution, but Britain is not a revolutionary nation…In terms of the settlement, it is welcome that the Secretary of State has moved to decrease the impact of frontloading the level of cuts, however the quick fix mechanism for damping down variations in council grants does appear to have created a real dog’s dinner in which some councils will be left wondering whether they are receiving a fair allocation of funding. What is also clear is that even with the attempts to soften the impact, some councils are going to be facing much bigger cuts than others.”