PLC Public Sector reports:
Following the statement by the Secretary of State for Communities and Local Government on 19 December 2012 on the provisional figures for the 2013/14 and 2014/15 local government finance settlements, local authorities in England will have been carefully scrutinising the figures to determine the proposed grant that they will receive for 2013-14 and the impact that that the proposed settlement will have on their own budget and future service provision. The total central government funding for all local authorities in England (known as the Aggregate External Finance (AEF)), will fall by 3.9% in 2013/14 and by 8.6% in 2014/15 (although ring-fenced grants for frontline education are excluded). This means that local authorities will have to find further savings in budgets that have already been significantly reduced over the last few years.
These local government finance settlements are the first ones to be announced since the introduction of the Business Rates Retention Scheme (BRRS), following various consultations relating to the scheme (see Legal updates, DCLG technical consultation on business rates retention and DCLG consults on draft regulations covering business rates retention). The intended effect of the reforms, which will shift spending power from Whitehall to the town hall, is that 70% of local authority income will be raised locally compared to 56% under the current formula grant system (described by the Secretary of State as the “begging-bowl” culture). According to the Secretary of State’s statement, what is proposed will leave local authorities with considerable total spending power, with an overall reduction in spending power of just 1.7%. Although there is a recognition that some local authorities, under the proposed settlement, will need to make larger savings, the DCLG states that no councils face a loss of more than 8.8% in their spending power because of a new efficiency support grant (although as the name suggests, in order to qualify for the grant, local authorities will have to improve their services which is intended to ensure such authorities modernise rather than continue to be subsidised by more efficient authorities).
Local authorities have until 15 January 2013 to respond to the proposed settlement for their authority.Although meetings with local authorities and their delegations are welcomed, the reality is that the timetable for consultation is tight. Therefore, requests for meetings from individual authorities are to be based on a first come first served basis by contacting the Parliamentary Under Secretary of State’s office no later than 9 January 2013.
Therefore, local authorities in England have a very limited amount of time to analyse the effect of what is proposed on their services in order to respond by the consultation deadline. Until that analysis is undertaken, councils cannot begin to start work on draft budgets which will need to reflect the changes to the financial system and the 2013/14 and 2014/15 local government finance settlements. In order to demonstrate that it is possible for local authorities to reduce their budgets, and that the proposed settlement recognises the responsibility of local government to find sensible savings and make better use of its resources, the DCLG published on 24 December 2012 50 ways to save. The document sets out examples of sensible savings that have been made in local government and include:
- Sharing back offices.
- Using transparency to cut waste.
- Clamping down on corporate charge cards.
- Tackling local fraud.
- Improving council tax collection rates.
- Encouraging direct debit and e-billing.
- Improving property management.
- Reducing senior pay and posts.
- Hiring out the town hall.
- Sharing senior staff.
- Cutting expensive travel.
Although some of the examples cited give reported savings, others relate to predicted savings and it may be that they are not sufficient on their own to plug the shortfall in local authority funding (see Opinion, LGA report: shared services projects are delivering savings but can’t plug the budget deficit on their own). Indeed, the document’s methodological notes contain the caveat that, since they are examples based on different timescales, the DCLG does not assume that the amount of cost savings reported in one authority will generate the same percentage saving in another authority. What the document is intended to show is that there is significant scope for savings and innovation across local government. It will be interesting to see whether the changes in the local government finance system will provide the potential £10 billion economic boost that the government hopes by 2020.