Westminster blog

It turns out today that cuts to local government “spending power” will only be 4.4 per cent on average next year across Britain’s councils. So says Eric Pickles and his DCLG department. This sounds great compared to the figure floating around recently about a 10 per cent cut for the same period.

Except this is looking at apples and pears.

The DCLG has come up with the “spending power” figure to include all council income streams, including council tax – which will stay the same in the coming years. (This measure will also include “specific grants*”). Under this calculation, no council will endure more than 8.9 per cent cuts this year or next.

Pickles argues that this is the right way to view council finance given that some authorities get most of their money from council tax and others do not.

Yet the more important number here is the formula grant, which is the £29bn a year given by Whitehall to local government. It is this number which is falling substantially – by 27 per cent – over the next four years as a result of the spending review. The deepest cuts are in some of Britain’s most deprived regions, reflecting their heavier dependence on this central grant.

I’ve checked with DCLG and the cut to the formula grant this year will still be, on average, about 10 per cent, despite council pleas to Mr Pickles not to “front-load” the cuts to the first year of the four-year period. Some local authorities will be cut by 17 per cent in the same period.

To illustrate my point, visit this official breakdown and take one council at random: Wakefield. Supposedly its budget is falling by just 4.7 per cent between this year and next. Except the formula grant is dropping from £159m to £139.8m – which is a drop of 12 per cent in spending from central government. Many other councils are in a similar situation.

It will probably take a day or two for councils, or the LGA, to work out the full details of grant cuts across the whole of local government; it should make an interesting read.

(There is also another £85m for the coming year as a transition grant for those councils which depend heavily on the central grant. It’s still miniscule compared to the £29bn total, however).

* There is no obvious pattern to cuts in “specific grants” over the period, although I notice that Manchester’s will fall from £88.5m to £55.4m – a drop of 38 per cent.