Parties unite to challenge council budgets Councillors gamble on budget challenge

Conservatives join countrywide revolt over capping. Nicholas Schoon reports
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Tory councillors on Shropshire County Council are expected to join their Liberal Democrat and Labour colleagues on Friday in defying ministers and setting a budget £6m above the Government's capping limit.

Shropshire's rebellion is a gamble; the council says it must break the limit to avoid savage and damaging cuts in education and other services. If it fails and the Government compels it to reduce its budget, it will be faced with spending an extra £300,000, re-billing council taxpayers as well as making the cuts it is seeking to avoid.

Today, Conservative councillors in Gloucestershire are also expected to join Liberal Democrats in voting for a budget £4m above that county council's capping limit.

These counties are opting for rebellion in the face of the harshest financial settlement for local government in decades. Long and fraught meetings are taking place throughout Britain as 514 councils finalise their budgets and set the council tax.

We have heard and seen it all before at this budget-setting time of year; the demonstrations outside town halls, the talk of redundancies, library closures and higher home-help charges for disabled and elderly people.

Clever accounting devices, a drawing down on reserves and a few minor trimmings have come to the rescue of many councils in the past. It has left them open to accusations of crying "wolf". But most councils expect to see a real fall in their spending.

``Don't forget that the third time the boy called `Wolf' it was the real thing,'' says Dr Chris Game of Birmingham University's Institute of Local Government Studies.

The money councils get from government is rising more slowly than inflation - in England it is going up by just 0.8 per cent. The proportion of their income they raise themselves through local taxation is now just one-fifth; 10 years ago it was half. Their ability to protect budgets through rises in council tax is severely curtailed by the threat of capping. At the same time councils have to find the extra money to meet pay increases and cope with rising numbers of schoolchildren and the elderly.

English councils will spend £45bn in this financial year, which is just coming to an end. The Government wants them to spend £43.5bn in the next - a 3.3 per cent cut. The situation is similar in Scotland and Wales.

As usual, the councils will end up spending more than the Government wishes them to - but by very little, and certainly not enough to avoid cuts. On average, they are allowed to raise their budgets by only 1.7 per cent. Any more and they are capped.

Most councils find their budget-setting process dominated by the capping limit the Government has set for each. They end up raising the council tax - the only major part of their income which remains under their direct control - by just enough to bring them up to that limit. This year that implies an average council tax rise of 6 per cent.

The Secretary of State for the Environment, John Gummer, makes no apology for what he calls a ``rigorous'' settlement. A quarter of public spending goes through local government and it must be tightly controlled to fight inflation. He says there is still scope for dismissing pen-pushers and making efficiency savings. What enrages councillors, including many Tories, is that other central government departments have been given larger increases this year: health gets 3.8 per cent, social security, 3.7. ``Conservatives in local government are in despair at this settlement,'' said Councillor Rita Taylor, Tory chairman of the Association of District Council's finance panel.

Many fear local government is in a spiral of decline, with this year's settlement representing a couple of extra twists. The prospect is of councils becoming mere administrators of contracted out local services, with funding and service standards determined by central government.

After the Thatcher years the councils no longer build houses and have lost millions of tenants to the right-to-buy policy. They have seen all of their further education responsibilities taken away and more than 1,000 schools have opted out. Their power to raise tax from local businesses, which accounted for almost a third of their income, was removed with the onset of the short lived poll tax.

Audit Commission research found that in the six years since 1987 the number of council managerial, clerical and administrative staff increased while overall numbers fell. This is a trend also seen in the private sector and is partly due to local government becoming increasingly an overseer of services put out to tender.

The fact that little more than a third of the electorate bothers to vote in local elections reflects the marginalisation of organisations which were once great powers. The most many councillors hope for is an end to the capping regime and the restoration of their right to decide the rates paid by local businesses.