George Osborne’s 25 November Spending Review unleashed another round of extreme cuts in local government. The Tory chair of the Local Government Association said:
“Even if councils stop filling in potholes, maintaining parks, closed all children’s centres, libraries, museums, leisure centres and turned off every street light, they will not have saved enough money to plug the financial black hole they face by 2020.
“These local services which people cherish will have to be drastically scaled back or lost altogether as councils are increasingly forced to do more with less and protect life and death services, such as caring for the elderly and protecting children.”
The most wide reaching change is the end of the block grant to local authorities, money redistributed by central government to local authorities for general rather than defined purposes.
The alternative set out in the review is for councils to keep 100% of their income from business rates (property taxes currently not only set, but also redistributed, by central government) and to be able to raise council tax by 2% to subsidise social care (at present councils suffer severe penalties if they raise council tax).
By 2020 the block grant, worth £18bn last year, will have been completely abolished.
According to local authority leaders, only £11.5bn will come in from business rates to compensate. It is a huge shortfall, and one which will disproportionately affect the north of England, where business rates are lower.
Lower income areas also have a far higher proportion of band A properties on which the lowest rate of council tax is paid.
The Government’s contribution to new housing is almost solely based on private ownership.
Housing associations, local authorities and private house builders will be expected to make 135,000 dwellings eligible for the Government’s “Help to Buy” ownership schemes. Five housing associations will now be required to help their tenants buy out their properties, in an extension of Thatcher’s Right to Buy scheme for council housing.
The shift to business rate revenue is calculated to make councils compete against each other to attract business investment.
Osborne will only allow areas that accept his plans for devolution and an elected mayor to raise business rates. The extra revenue raised can then only be used for infrastructure, not for delivery of services.
Councils are likely to find their budgets cover only the services they have to supply by law. Even these services will be unsustainable if cuts continue.
The “dented shield” policy — Labour councils implementing the Tory cuts, but supposedly more softly — will make less and less sense.