Council finances are in crisis. Local Government has taken a bigger hit than any other part of the public sector since 2010, with the recent Budget making even deeper cuts than anticipated to the funds councils spend on local services. Here are ten ways that George Osborne and David Cameron have hit local government since 2010, and what the impact of those cuts have been in my own council of Brighton and Hove.
1) Revenue Grant: accounting for a third of expenditure on local services, this general grant will be abolished entirely by 2019. Here in Brighton and Hove that means the loss of over £140 million that the council was spending on street cleaning, libraries, street lighting and dozens of other services in 2010.
2) Council Tax benefit: this is the discount given to those who can’t afford to pay council tax. The Government is passing responsibility for paying for this to local councils, and funding an 80% discount will cost Brighton and Hove around £3 million in the coming financial year.
3) Bus Passes for Older People: introduced by the Labour Government, this keeps older people active and healthy. Again the Government has passed the cost to councils, meaning Brighton and Hove has to use almost all of the surplus from parking revenue to fund it, around £9 million. This money would otherwise be spent on subsidised bus routes, road safety, pedestrian crossings and more.
4) Benefit Changes and the NHS: cuts to benefits and healthcare mean councils have to deal with the costs of people made homeless, discharged from hospital early or thrown into debt. The introduction of Universal Credit alone is estimated to cost councils £1 billion.
5) Cuts to Social Rents: the reduction of 1% in rents for council and housing association tenants is moderately good news for the, though the main beneficiary will be the Treasury in Housing Benefit savings. However the impact on councils will be severe. Brighton and Hove will lose £16 million, money earmarked for building much-needed additional council housing.
6) Introduction of the National Living Wage: another welcome but limited boost to people on lower incomes, but one which will increase council wage bills by an estimated £834 million nationally by 2019/20. There is also the Apprenticeship Levy, which councils will have to pay at a cost of £600 million.
7) Starter Homes: the Government is requiring councils to build new housing on offer at 80% of market rates, well beyond what is affordable to most here in Brighton and Hove. However it is exempting those homes from the Section 106 and Community Interest Levy payments that developers normally pay towards new infrastructure to support additional housing. Councils will have to meet those costs, around £3 billion nationally, themselves.
8) Pensions: within five years, 34p in every pound paid in council tax will have to be spent on funding local government pension payments, and the Budget made that worse to an as yet uncosted amount. As council tax increases by 2 – 4% each year, including the levy to fund Osborne’s “extra money” for rising social care costs and to make up for cuts to grant funding, more and more pension costs will be met by councils. We don’t yet know the impact here.
9) Schools: as the Government increasingly strips councils and local parents of the powers to run schools, so funding will go too. Here in Brighton and Hove that is around £150 million a year.
10) Business Rates: the final nail in the coffin of local government. Osborne said again in his Budget speech that councils will be fully financially self-sufficient by 2020, when they can retain all of their local business rates. At present the Treasury takes half. This was already at risk from a revaluation exersise next year, and from a growing number of appeals by businesses against what they are required to pay. Yet moments after saying this, the Chancellor said that almost all small and medium sized businesses would be exempt from paying business rates from 2017. Almost all of the businesses in Brighton and Hove have fewer than 200 employees, meaning that a very significant proportion of the £100 million we might have got in 2020 will now vanish. Good new for local shopkeepers accounting, but more bad news for councils who clean and maintain the streets in which they trade. The Government have said they will compensate councils for the loss of some £1.7 billion in revenue. I very much doubt it.
The Local Government Association estimated that even before changes announced in the Local Government Settlement and the Budget, councils would be around £10 billion worse off.
Labour leader Jeremy Corbyn said after the Budget: “Every library that’s been closed, every elderly person left without proper care, every swimming pool with reduced opening hours or closed altogether is a direct result of government underfunding our local authorities and councils.”
People will be paying more in council tax, but in many cases seeing a reduction in services as a result. Osborne expects most residents to blame local councils, and not the Government, making his task of shrinking down local government via the back door easier.
Brighton and Hove has huge challenges in delivering affordable housing, in funding social care, and in maintaining basic services. We are probably looking at a cut of around 40% in our funding over a ten year period, somewhere in the region of £200 to £250 million when all of the above is factored in. Yet we are probably mid-table in the rankings of councils worst affected. Conservative councillors have had the hypocrisy to complain this week about grass verges being unmaintained, and a library building being sold, without taking any responsibility for their own Government’s actions.
We want a fair deal on council funding and we want local Tories to join with their colleagues elsewhere in saying so.
We will innovate. Our joint housing venture, City Innovation Challenge and cooperative schools proposal are just three of the ideas we are putting forward to challenge Tory cuts. We can’t escape the impacts, however, and in common with many councils across the country, the days of easy choices and pain-free savings are long since gone.