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The prime minister's announcement last week that there was not going to be an election might have come as a bit of a surprise to many people in local government. The news from chancellor Alistair Darling, on the other hand, was entirely to be expected. A tight settlement had been predicted for a very long time. And from summer onwards, warnings were trickling out of the Treasury that it was even worse than previously imagined. Although finance directors still await the full figures for their individual authorities, it's fair to say that an average 1% above-inflation settlement for the next three years is never going to be enough to meet the growing demands on council cash. The Government points out that, over the past 10 years, the finance settlement has grown by 39% in real terms – or 3.9%, on average, a year. Is this a defence of the meagre settlement this year, or does it just highlight how bad things are? Speaking at the SOLACE annual conference in Cardiff last week, CIPFA chief executive, Steve Freer, told a workshop that those who were branding this the worst-ever settlement had obviously forgotten how bad things were in the 1980s and 1990s. He warned councils' spending rates had been ‘full throttle' for so many years they would have to ‘slam on the brakes' now, rather than risk an overspend by waiting a few months before the belt-tightening exercises began in earnest. But perhaps his key point came when he said: ‘We must resist the temptation to blame the Government. It makes us look like victims.' Instead, he urged chief executives to concentrate on efficiency and value for money, rather than negative aspects of the settlement. Croydon LBC's finance director, Nathan Elvery, agreed there were ‘not many surprises' in the settlement – but whereas there was normally some element of consolation, this year's deal had nothing. ‘It's not so much robbing Peter to pay Paul – it's more like both Peter and Paul have been robbed,' he told The MJ. There is no doubt efficiency is going to be key in surviving the next three years financially – but should local government just accept this settlement without a fight, as CIPFA has suggested? Local authorities have met central government's efficiency agenda head-on. They have strived to cut costs and drive up services – often with more success than in other parts of the public sector. Efforts have been rewarded by a spending review which gives more cash to the National Health Service and education, and pushes efficiency further on to councils with a£150m grant to drive savings up to £4.9bn. While no-one begrudges other parts of the public sector getting cash, it is easy to feel bitter when the reward for efficiency seems to be less cash. Association of Public Service Excellence chief executive, Paul O'Brien, claimed making ends meet under the settlement would be like ‘mission impossible'. He said councils had driven up improvements, raised public satisfaction, and delivered £3bn savings. ‘To expect councils to deliver what is likely to be about a 3% cut in local budgets will mean already-rationed local services…. will be stretched to absolute breaking point, just when central government is professing to understand the importance of good local neighbourhood services. ‘ Then there is the Government's rhetoric surrounding localism and encouraging local economic growth. The New Local Government Network's Chris Leslie welcomed freedoms over the supplementary business rates as a sign of more trust from central government. ‘Moving to a position where local government finance is rooted in local economic development rather than Whitehall grant alone is a step in the right direction,' he said. ‘If councils are motivated to create new jobs and a better local economy, then they will spend their energies on these issues rather than on arguments about grant-funding formulae.' But the former junior minister seemed to have overlooked how little cash would now be coming through the local authority business growth incentive (LABGI) scheme. The grant, set up to reward encouraging business growth in the area, was originally £1bn over three years. Now it will be just £50m next year. The SBR will also bypass London boroughs in favour of a GLA-wide rate – and it is likely to be paying for the Crossrail project rather than local borough schemes – not really a localist settlement. Councils will have less cash ring-fenced – £5m in total. But they are already being warned to keep council tax under 5%. This hardly bodes well for a new era of ‘trust'. Councils at the centre of their LAA partnerships will be coming to the table as the poor relation, compared with the budgets of their education and health partners. They may be able to ‘make do and mend' with the efficiency agenda, but any flexibility over cash directed to local project is out of the window. As Mr Elvery said: ‘We are not on the same playing field. If this is going to work on a local level, kicking local authorities is not going to help.' Local government minister, John Healey, rather mischievously put out a statement announcing the 1% rise was what the LGA had said it wanted. In fact, it was the very minimum councils could survive on – and it was 1% of general and specific grant that was needed, not just general grant, as had been given. The figures are dramatically different. With no leeway on council tax with a 5% cut, it has definitely not been the gift he implied. But, as a former Treasury minister, we can perhaps assume Mr Healey is immune to being lobbied for cash. Speaking at the SOLACE conference, communities secretary Hazel Blears told delegates of the big silver lining – that the Government had decided to fund concessionary bus fares. It was, she said, a major issue for local government, and the first point raised to her at the LGA annual conference a few days after she took up her post in July. ‘You asked for it, and we have delivered it,' she told delegates at the Cardiff conference. ‘Let's all think carefully about what we want to ask for in the first question at LGA conference next year.

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WHITEHALL

Braking point for finances

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