The Government hits rural local authorites in the Spending Review with Cornwall set to lose a further £6m
Back in November the Government released its Spending Review. As always there is a lot of spin on how the review is good for people. However, as they say, the devil is in the detail. That detail was released over the Xmas period and surprise surprise despite the spin; it means more cuts to local authorities. From the words of one financial officer this settlement is one of the most complex they have ever seen.
One of (and there is many) worrying areas is the re-distribution of the Revenue Support Grant (RSG) from rural local authorities to urban ones. Yep, you have guessed it; they have moved funding from Shire Counties and Cornwall to Metropolitan and London Boroughs.
What makes this worse is there was NO consultation by the Government on the redistribution of the RSG. No wonder they did not, as this will heavily effect those two-tier authorities (District and County). It is a small mercy that Cornwall is a single tier LA. Otherwise it would have been far worse for us.
In the first year of 2016/17, Cornwall Council will lose just shy of £2m. Over the period of the review (2019/20) the total amount we are set to lose comes to £6m. This is on top of the existing cuts the Government is imposing on local authorities like Cornwall Council.
For those technically minded, Cornwall Council currently recieves 0.9% of the overall Local Government budget of £18.6bn. The Local Government department will see a reduction of budget of just under £4bn in the period up to 2019/20. In 2019/20, our share of the fund will reduce to 0.86 of a pot of £14.7bn.
For other Unitary and County Council many have been harder with the redistribution of the RSG. Devon has been hit harder and is set to lose £7.6m of the RSG. Dorset £7.25m and Somerset £3.18m. Though some of the South West local authorities have fared better than areas such as Hampshire who will set a reduction of £12.5m, Surrey £16.7m and Kent £11.2m. Remember this is for the 2016/17 period only and if you use the same formula being imposed on Cornwall Council, these local authorities could be funding reductions of £30m/£40m. (details *)
To put the £6m extra cuts in to perspective, that is our entire Library and One Stop Shop Budget in Cornwall and would still leave us £2m short. This extra cut has to be found on top of the huge cuts Cornwall Council is already having to deal with in RSG grant funding. In 2015/16 Cornwall Council received £92m; this reduces in 2016/17 to £65.2m and is set to be reduced to £14.5m in 2019/2020.
Then this funding will be phased out by the end of this Parliament. In its place the Government has said local authorities will be able to keep 100% of the business rates. One of the issues is the Government has said it would top up this if your business rates if you income from these rates is lower than your needs. However, this commitment to top up is only in the first instance, and there is no guarantee this will be a long-term top up. Furthermore, Cornwall’s industry is SME, and therefore, it gives little scope for economic growth from large-sized business. And lastly, Business Rates cannot be raised above 2% unless you have a directly elected mayor, but a local authority can lower the rate to any level.
The Government has also claimed in its statements it will be helping rural local authorities with additional funding. For Cornwall Council this will amount to £200k in 2016/17. It is set to increase in later years. But this additional funding no-way makes up for the larger cuts to the RSG.
There is a further hit to two-tiered areas is in the New Homes Bonus (NHB) which District Council’s receive. This could be up to half the amount they receive. This money will be given to the County Councils are part of the Better Care Fund (BCF). Cornwall Council receives the NHB and the BCF. So for us, it is less painful than the two-tiered local authorities.
There is also going to be a massive bun-fight between the District Councils and County Councils over the split of business rates. Currently, this is split 80/20 in favour of the District Council’s (DC collect and give County 20%). The Government has indicated it will change this split in favour of County Council.
In a spooky coincidence, the Government has changed the regulations to allow District Council to merge and become unitary council in a fast-track process. In fact I think the plan is to force District Council’s into becoming Unitary Council’s via reducing the funding to Districts.
The bugbear is Councils get the blame for the Government’s cuts. I can assure you the cuts we are having make are not easily done, but when you have less money to provide services, you have little choice but to reduce services. And the reason why is the Government has cut the funding!!
One thing is for sure, this settlement is not good news for local authorities despite the spin!
*Figures correct from the LG Settlement to LA’s as of 18th Dec 2015.