Reduced services predicted as price for education boost

Council spending: The Budget offered hope of a little more leeway for local authorities, but they remain under heavy pressure
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Public Policy Editor

Higher council tax and reductions in services were predicted yesterday by Frank Dobson, Labour's local government spokesman, as ministers changed council capping rules in an attempt to ensure that the extra pounds 774m for education actually reaches schools.

Capping rules have been set so that the extra amount councils can spend is at least as much as their share of the extra cash for education, plus the pounds 235m intended for the police, the pounds 63m - a 1.1 per cent increase, well below inflation - set for social services and an extra 1.5 per cent, or pounds 17m, for fire services.

But in allowing county councils and the new unitary authorities to increase spending by their share of that sum, or 3 per cent - whichever is the greater - and allowing metropolitan authorities and the outer London boroughs a 2 per cent increase or the extra cost of the fire, police, education and social services spending, ministers have cracked down hard on district council spending.

The standard spending assessment - the amount the Government believes councils should spend - has been cut by 2.5 per cent, while they will be capped if spending is increased by more than 0.5 per cent. No extra spending at all has been allowed for highways.

The Department of the Environment said the capping regime reflected ministerial priorities of boosting education and the police during what had been a "very tough" spending round across the rest of government.

The settlement could also lead to sharp council tax increases in London, with inner London authorities limited to a 1.5 per cent spending increase but set, along with other councils in the south-east, to lose pounds 150m because of adjustments designed to take into account regional differences in earnings. These have narrowed between the north and the south during the recession.

Government spending figures allow councils overall an increase of 3.3 per cent or pounds 1.4bn on total standard spending - the amount the Government believes they need to spend. But local authorities said yesterday they were already spending pounds 2.1bn above the level the Government specified for last year, so that the increase does not even bring them up to existing levels of spending.

But while John Gummer, the Secretary of State for the Environment, is allowing councils a 3.3 per cent increase in the amount he believes they need to spend, Government grant to local government is rising by only 2.8 per cent. On top of that is the ring-fenced extra allocation of pounds 418m for community care, a recognition of the rising numbers of elderly people.

Martin Pilgrim, Under-Secretary for Finance at the Association of Metropolitan Authorities, said last night: "We might just be able to protect education and the social social services from further cuts this year. But we will not be able to protect other services."

The Local Government Information Unit, a group funded by local authorities and trade unions, predicted the package would lead to council tax rises averaging 7 per cent - or around pounds 40 on the average pounds 543 council tax for Band C houses in England.

The local authority settlement came as Stephen Dorrell, Secretary of State for Health, announced health authorities' allocations for the coming year. Most will get a real terms increase of 0.5 per cent from the extra pounds 777m being distributed, although two, including Camden and Islington and Manchester, are to face a spending freeze.