EXCLUSIVE: Fiscal fears rocket

By Dan Peters | 19 February 2015

Concern among council bosses over whether local authorities will be able to deliver their legal duties has rocketed in the last year, an exclusive survey published today has found.

Amid warnings that the current local government finance system is ‘bust’, more than half of council chief executives, finance bosses and leaders said there was a danger that financial constraints could put their authority in a position where it did not have enough funding to fulfil its statutory duties.

The 54% who fear their council will not be able to meet its legal duties is a huge rise on the 37% who sounded the alarm call in response to the same question in last year’s finance survey, carried out annually by The MJ and Local Government Information Unit (LGiU) think-tank.

Chair of the communities and local government committee Clive Betts said: ‘Councils have managed incredibly well given that local government has had bigger cuts than central government by a long way.

‘There is no prospect in the next Parliament that they will be able to manage with a similar level of cuts.’

More than half also said they may be forced to dip into their council’s reserves to make ends meet.

This prompted director of the Society of Local Authority Chief Executives (SOLACE), Graeme McDonald, to warn councils with ‘reserves at dangerously low levels to take care in such a volatile fiscal environment’.

In the same week as the Independent Commission on Local Government Finance suggested fiscal devolution was needed to solve the broken system, survey respondents came up with a raft of possible improvements of their own.

An overwhelming 94% of English local authority chiefs called for the Barnett formula to be scrapped while 82% said the next Government should bite the bullet and undertake a council tax revaluation.

SOLACE finance spokesman Paul Martin, chief executive of Wandsworth LBC, said: ‘Nine out of 10 of the people closest to the coalface of local government finance think the current system is bust.

‘As the Department for Communities and Local Government’s new permanent secretary prepares the briefing pack for the Secretary of State following May’s general election this should be agenda item number one.’

Treasurer of the Special Interest Group of Municipal Authorities, Frances Foster, added: ‘This survey is yet more damning evidence that this government has got it wrong when it comes to local government finance.

‘With 93% of councils saying that the current system is not fit-for-purpose and more than half saying that statutory services are at risk, the Government must now realise that something must be done.’

Despite the gloomy financial picture, council bosses are clear they can become financially independent of the Government’s revenue support grant if they are given additional freedoms to generate income themselves.

Three out of four respondents said increasing the proportion of business rates they are allowed to keep locally would pave the way for their authority to become financially sustainable.

Other positive measures suggested by those surveyed included the creation of single local budgets, introducing a levy on tourists and un-ring-fencing the housing revenue account.

Shadow local government minister Andy Sawford said: ‘The MJ/LGiU survey shows the level of concern in local government about the impact of the huge cuts.’

He added that a Labour government would distribute funding more fairly, offer multi-year settlements so local authorities can plan ahead, invest in prevention, and devolve power and £30bn to local areas.

But local government minister Kris Hopkins highlighted how his government had provided a fairer deal for rural areas, supported those with the highest demand on their services, found extra funds for long-term work with high-cost troubled families and launched the Better Care Fund to join-up services for the elderly while keeping council tax down and cutting the deficit.

For an in-depth analysis of our survey results click here.

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Whitehall Finance SIGOMA Business rates MHCLG Chief executives Troubled families SOLACE Council Tax Housing Devolution CLG Select Committee Better Care Fund Fiscal Freedom
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