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Local Authority Funding

Volume 519: debated on Thursday 25 November 2010

8. What his policy is on the distribution of reductions to local authority funding over the comprehensive spending review period; and if he will make a statement. (26206)

It would be rational to accept that the size of the front-loaded cuts coupled with the council tax freeze in the first year will create a huge problem for even prudent local authorities, necessarily giving them less time, less flexibility and less chance of saving front-line services. Does he agree?

No I do not. I draw my hon. Friend’s attention to the fact that we have proceeded at a rapid rate with de-ring-fencing and breaking down the silos between different funds coming to local councils, reducing the number from more than 90 to around 10. We are also putting large sums of money at the disposal of local authorities. I also want to draw his attention to the option that local authorities have of raising their council tax income by up to 2.5% and receiving a compensatory grant so that their residents do not have to bear that cost, thereby protecting residents and giving councils the opportunity to generate more revenue.

The Treasury’s green book confirms that funding for local councils will be cut by 28% over the next four years, but the spending review framework document says that the Government will limit the impact of the reduction in spending on regions that are heavily dependent on the public sector. As we are all supposed to be in it together and in order to ensure fairness will the Minister confirm that the cuts faced by local councils will be based on their total budget requirement and not on their formula grant? As he knows, the formula grant accounts for up to 80% of the budget requirements of some councils and less than 20% of others.

The hon. Gentleman is quite right that the picture is very complex. That is why when the settlement comes, he will see that the Government have responded to the points he has raised.