Tory councils warn of severe service reductions following ‘bitterly disappointing’ funding offer

Councils have warned that many remain at risk of effective bankruptcy despite the Government making £64 billion in funding available next year.

The local government finance settlement guarantees every council a minimum annual 3% uplift in their core spending power, which is the amount they have to spend from a combination of Government grants, council tax and business rates.

The increase in spending power, which was £59.7 billion in 2023/24, confirms figures set out in the local government finance settlement policy statement earlier this month.

Struggling councils have repeatedly called on the Government to provide emergency funding to protect crucial frontline services, with increases in spending power in recent years following a decade of significant funding reductions.

Since 2020, seven councils have issued at least one section 114 notice declaring they are unable to balance their budgets as required by law.

In a written statement Levelling Up Secretary Michael Gove said: “This settlement makes available over £64 billion for local authorities in England, an increase of almost £4 billion or 6.5% in cash terms in core spending power on 2023/24.

“This is a real-terms increase which demonstrates how the Government stands behind councils up and down the country.”

In maintaining the minimum core spending power uplift of 3% before decisions are made on council tax increases, Mr Gove said this showed the Government recognises “pressures still exist for all local authorities”.

As in previous years, council tax rises will be capped at 3% for upper tier councils, with an option to apply an additional 2% precept for social care.

However, Mr Gove said “in consideration of significant financial failure”, Thurrock Council, Slough Borough Council and Woking Borough Council will be handed “bespoke” referendum principles.

Thurrock and Slough will have a core council tax threshold of 8%, while Woking will be able to increase bills by 10% without holding a referendum.

“Councils in significant financial failure can make use of any additional flexibilities provided to support their financial recovery and going forward the Government will consider all reasonable steps to protect both national and local taxpayers and ensure councils are acting responsibly,” Mr Gove said.

Summarising the settlement, which will now be consulted on ahead of approval, Mr Gove added: “These proposals will provide councils with the support they need.

“It ensures stability, delivers additional resources for social care, and maintains balance on council tax.”

Jim McMahon, shadow minister for local government, described the provisional settlement as “a prime example of sticking plaster politics” and said Labour would support councils to deliver better services and local growth.

He added: “The government’s reckless approach to local government risks preventing older people from getting the care they deserve, risks children not getting the protection they need, and risks families being left without a safe and secure home.

“Local authorities are bearing the brunt of 13 years of Tory economic mismanagement, compounded by spiralling inflation and a stagnating economy. This is a crisis made in Downing Street being felt by every street in the country.”

The Conservative-led County Councils Network (CCN), which represents England’s largest councils, said its members will be “bitterly disappointed” by the announcement and warned councils will now have to implement more severe reductions to services and impose higher council tax rises.

Barry Lewis (pictured), Conservative leader of Derbyshire County Council and CCN finance spokesperson, said: “The CCN had put together a strong case for emergency funding next year to address the significant financial headwinds councils face which are outside of our control.

“But despite constructive discussions with ministers over recent days the government has chosen not to act.”

Cllr Lewis added inevitable council tax rises and service reductions will be a “double whammy” for residents during a cost-of-living crisis, adding an increasing number of councils will struggle to deliver a balanced budget next year.

Asked whether Rishi Sunak accepts it is inevitable councils will have to implement more severe reductions to services and levy higher council tax rises, the Prime Minister’s official spokesman told reporters: “Fundamentally, it’s the councils managing their own budgets.

“We are giving them an average, I think, an increase of 6.5% year-on-year to help them deal with the pressures that everyone is experiencing.

“We think that is the right approach. It’s a £64 billion funding package in total. Obviously, we need to fund councils in a way that is fair for taxpayers and we think this strikes the right balance.”

Asked whether councils need to learn to cut their costs accordingly, the official said: “Every council faces different pressures.

“But we know that high-performing councils are able to meet the demands with the additional support that we are providing.”

Shaun Davies, Labour chairman of the Local Government Association, said the settlement means councils will continue to face a funding gap of £4 billion over the next two years.

He added: “It is therefore unthinkable that government has not provided desperately needed new funding for local services in 2024/25.

“Although councils are working hard to reduce costs where possible, this means the local services our communities rely on every day are now exposed to further cuts.”

Copyright (c) PA Media Ltd. 2023, All Rights Reserved. Picture (c) Derbyshire County Council.