Published on Friday, 27th November 2015

 

The government has published the long-awaited Spending Review - the document that sets out the broad parameters of public sector spending over the next four years. The big picture is one of lessening the demands of austerity. The abandonment of a plan to reduce tax credits was the most high profile change set out by the chancellor, but there were many others including protecting the defence budget and limiting the savings required from the police.

 

Local authorities were not similarly spared. Despite having already delivered bigger savings than any other part of government, councils have once again been called on to make the largest savings of all.

 

By 2019/20 grants to local authorities will have fallen to £5.4bn from £11.5bn this year and as that is in cash terms the inflation-adjusted reduction will be larger still. On the other hand the government forecasts greater income from council tax and from the 50% of the business rates that council’s keep. Adding the two together and the official figures suggest a £200m increase in expenditure over the period. Coming up with that number relies on a couple of accounting devices and in my view does not reflect the real situation. It also assumes a 4% rise in the council tax every year.

 

Briefly the government is assuming local authorities will put £1.1bn into reserves this year and nothing in 2019/20 and that the Department of Health-funded Better Care Fund will all be spend on Social Service whereas in practice only about 50% of it is. Strip out these two assumptions and council expenditure will fall from something like £38.5bn to £36.8bn in cash terms and by rather more once inflation is allowed for.

 

The local government trade press says, variously, that these reductions are as expected or that they are a little less. Quite what this means for Portsmouth is not yet clear, but on the face of it the council’s estimate of needing £31m in savings over three years is broadly right and there are certainly no scope for revising the £11m target that must be addressed next year.

 

Tags: Budget