By Daniel Hunter

The Local Government Association (LGA) is warning that the Government is damaging councils ability to make well-informed financial plans and, as a result, is magnifying the impact of already significant cuts to funding for local services.

The analysis shows that local services will face a far bigger cut in funding than the 10 per cent reduction announced in the 2015/16 Spending Round. This is because the cut to council's basic allocation from central government will be 15 per cent in real terms, £1 billion deeper than signalled in May.

The LGA analysis shows that while additional funding streams may reduce in some areas the overall size of the cut to 10 per cent, the money which closes the gap is either being held back from local government's revenue, or is new burdens funding which, by definition, should be allocated to meet additional costs brought about by changes to national policy.

A further proportion of that funding is conditional and will be paid out during the financial year. However, because individual councils do not know how much, if any, of that money will be released to them, they have to budget as if the money does not exist. The reason for this is that councils are legally required to balance their budgets at the end of each financial year and therefore must make the most conservative assumptions in relation to revenue when planning their spending.

A number of local authorities will have to cope with the full 15 per cent cut because they will not meet eligibility criteria for the release of withheld funding or money from the national programmes which the Government plans to pay for out of local government's funding. Several have indicated that a combination of the cuts to their funding, combined with the compounding factor of the way the reduced funding is being distributed, will damage their financial viability to the point where they will be unable to meet their statutory responsibilities.

Local government is already facing the biggest cuts in the public sector, with the overall reduction in central government grant to reach 43 per cent by the end of this Parliament, and the LGA believes the Government's approach will significantly deepen the impact of the existing cuts on local services.

"The Government's approach to allocating funding will lead to unnecessary cuts to local services. The uncertainty over how much money will be available to councils means they will have to assume the worst and plan for it," Sir Merrick Cockell, Chairman of the LGA, said.

"No business would choose to operate in this environment and no other part of the public sector is expected to. It is not fair to residents to create this damaging uncertainty.

"People will be surprised that the Government is hoarding hundreds of millions that needs to be spent on frontline services at the soonest possible date. The impact on services is likely to come much sooner than 2015/16 as many councils will be compelled to hold money from the intervening years in reserve in order to ensure they can balance the books as they are legally required to do.

"Caring for the elderly and vulnerable, picking up the bins and monitoring schools performance are not second priority services. They are absolutely essential but in order to deliver them properly councils need to be able to make accurate financial plans based on clear information. This funding settlement simply does not provide the certainty councils need.

"It is particularly frustrating that the Government has announced its plans in a ream of dense technical documents during the parliamentary recess when there will be limited opportunity for them to be publicly examined and scrutinised."

Join us on
Follow @freshbusiness