The next financial settlement for local authorities has been announced, but there are very different views about what it means for funding of local services. Our man in Westminster asks why councils refuse to use some of their vast cash pile â€“ which grew larger last year â€“ to fund services, not cut them.
Before Parliament rose for the Christmas recess the government announced the annual local government financial settlement for the next financial year â€“ and with it came the usual tit-for-tat comments from the government and the Local Government Association (LGA) over its implications.
Local government finance is a fiercely complex issue. But I take a close interest since it has clear implications for the ability of local authorities to subsidise bus services. I struggle to understand how all sides can interpret the settlement figures so differently.
The government inevitably played up its claim that it has kept the overall reduction in funding to just 1.8% â€“ â€œlower than last year and one of the lowest levels of reduction under this governmentâ€ â€“ with no council facing â€œa loss of more than 6.4% in their spending power in 2015/16 â€“ the lowest level in this parliament.â€
Meanwhile the LGA put out a press release saying councils across England â€œwill receive 8.8% less funding from government to run local services from April 2015.â€ But nowhere in any of the papers issued by the government could I find such a figure.
Needless to say the LGA paints a picture of doom and gloom, and I have no doubt that in the weeks ahead there will be dire warnings of cuts to local services including further cuts to bus subsidies.
I don’t know which side is right about either the fairness of the financial settlement or its consequences.
But I make two observations. First, the Office for Budget Responsibility says local authorities are collectively sitting on reserves worth over 20bn, and the reserves increased during the last year, despite the cuts. This is a colossal amount of money for local authorities to be sitting on.
Yet they plead poverty and make dire claims about the impact of government cuts on local services.
I understand the need to maintain reserves for a rainy day; that’s prudent.
But over 20bn? Next time a local authority says it has to cut bus subsidy, perhaps operators should find out what cash reserves the authority has, and ask why it is not using this to support local bus services instead of cutting them?
Local authorities have the ability to raise additional income through council tax by increasing the rate above the level specified by the government, provided the authority puts the matter to a local referendum. No authority has yet had the courage to hold a referendum and ask the local electorate whether it is prepared to pay more in council tax in order to preserve local services.
Local authorities doubtless have their reasons for being so reluctant to use this power. But it is hard not to conclude that it is simply because, deep down, they know what the answer will be.
For all of their huffing and puffing, local authorities know the local electorate would rather see council tax kept low, even if this is at the expense of local services.
I might be wrong â€“ but prove it. Hold those referendums and find out what the local electorate really thinks. When it comes to subsidising bus services, why always push the problem up to the national taxpayer?
As it’s a local service, shouldn’t the local electorate first be asked if they are willing to pay extra council tax to support it? At the very least, why not ask the question?