District Councillors in South Cambridgeshire, on Thursday 4th February 2011, received briefing from the Council’s Finance Corporate Managers on the final settlement figures, following the government’s announcement on 31st January 2011. The settlement figures follows months of speculation on the depths of the expected cuts to public funds, and only gives interim figures for two financial years up to 2013.
The settlement has been slammed by various organisations, including the Local Government Association, as the Shire Counties face the worst cuts.
Local government minister Bob Neill said “the settlement reflected the government’s desire to support areas most in need“.
The Secretary of State for Communities and Local Government, Eric Pickles said “it is a fair and sustainable settlement“.
The vice chairman of the Local Government Association said “its the toughest settlement in living memory“.
It is hard to understand if all three are talking about the same settlement figures. If course the government is bound to “talk it up”, whilst the councils that have to implement services from non-existent funds, can only say it as they see it. Richard Kemp warned that local government would have to find a way of funding a shortfall of an estimated £6.5bn in the next financial year.
Some councils, face a reductions of 16% or more, in the amount of money they receive from the government. This is far greater than the figures quoted by government, who seemed to have used a novel way of estimating cuts – the revenue spending power.
Revenue Spending Power
Revenue Spending Power (RSP) is a new term derived by Eric Pickles, the Local Government Minister, to determine the settlement given to Local Authorities. This is an aggregation of three broad types of revenue grants.
RSP = Council Tax Requirement + Formula Grant + Other Grants.
The Department of Communities and Local Government (DCLG) was able to announce that councils would face an average reduction of 4.4%, and a maximum of 8.9%, in their revenue spending power. It also announced that some councils would receive a Transition Grant to ensure the reduction in RSP is no more than 8.9%. The reality is that its a subterfuge, a smokescreen designed to cover up the real damage that is being done.
South Cambridgeshire District Council Settlement Figures
According to the DCLG, the reduction in Revenue Spending Power for South Cambridgeshire in 2011/12 is just 6.72%, compared with the 2010/11 figure.
For South Cambridgeshire, the Formula Grant actually reduces from £7.106mil in 2010/11 to £6.026 mil in 2011/12, this being a 15.2% decrease. It reduces further to £5.185 mil in 2012/13, a further reduction of 14% from the previous year, giving a cumulative decrease of 27% over two years.
The Council tax requirement stays the same, and there’s a small increase in other grants from £718,000 to £818,000. Aggregating all three gives the governments figure of 6.72%. The reality, as shown above, is different.
Impact of Revenue Cuts
This front loading of the cuts is a major blow to councils that have campaigned and lobbied government to take some of the sting out of the cuts by spreading them evenly over four years rather than front loading it in the first two. The full impact of the reduced funding is likely to be severe.
South Cambs District Council is also one of those considering whether to take up the government’s offer to fund a council tax freeze through its special £650mil fund or to raise council tax as normal. If the Council votes to freeze council tax for 2011/12, then it will be eligible for a “freeze grant” worth 2.5% of its council tax, a figure of £173,000 calculated based on the number of equivalent band D properties in the district. The grant will be paid for 4 years only, and then stopped. I should clarify here that whilst this may sound like a good plan, it has a nasty sting in the tail.
A bit of history
South Cambridgeshire District Council has, historically, been a low spending, low council tax authority. In some ways, it has been a victim of its own success, in particular in the previous boom years when we saw council tax frozen for a number of years, and the District Council was having to pay a subsidy to the County out of its healthy reserves, in lieu of collecting this in council tax from South Cambridgeshire residents.
The base point therefore remained low. When the council needed to raise council tax to cope with growth, it found itself being capped by central government. Truth is, the council is not raising enough from its precepts to cope with the increasing growth in the District, and has been dipping into its reserves, which understandably are now depleting.
Freezing the tax for one year, means the base position for the council tax will remain low for the medium term, and if the council wants to bring it back to useful level where it can at least break even, then higher tax rises will be required in subsequent years. The matter is being considered by the Cabinet and then should go to full Council meeting on 24th February, when Councillors will consider the options, implications and make a decision.
Whatever the outcome, the District Council is facing a tough time ahead.