Local councils 'face average 4.4% cut'

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Town halls in England will face no more than an 8.9% reduction in their spending power next year, Communities Secretary Eric Pickles said today

Setting out the financial settlement for councils for the next two years, Mr Pickles said the average reduction in spending power for 2011/12 would be 4.4%.

But he did not give the exact figures for cuts to councils' revenue support grant in his statement to the Commons.

The figure was not immediately available from the Department for Communities and Local Government.

Shadow communities secretary Caroline Flint asked why the precise cuts to the revenue support grant had not been released.

She also questioned the spending power formula used by Mr Pickles, which also includes money raised from council tax and NHS funding to help with social care.

She described the settlement as "the most devastating cuts in funding for a generation".

Mr Pickles told MPs he was focusing on local government total spending following lobbying from the Local Government Association (LGA).

He said: "As far as possible I have given the LGA what they asked for. I have made sure that no authority will face more than an 8.9% reduction in spending power for either 2011 or 2012/13.

"The average reduction spending power for 2011/2012 is 4.4%."

He said: "This will be a progressive settlement and fair between different parts of the country."

But Ms Flint said: "You are imposing unprecedented cuts on town halls the length and breadth of the country.

"Today we find out what the Government really plans to devolve to local councils - the most devastating cuts in funding for a generation and the blame for difficult decisions."

Mr Pickles claimed the progressive approach of the Government meant more money was being channelled to those areas of the country that had the highest levels of need.

He had sought to insulate parts of the country most dependant on central government funding by creating four separate grant bands for councils.

These bands would set different limits for their reductions and thereby protect councils against the sharper grant reductions they would otherwise have faced, he told MPs.

Mr Pickles also said there would be a transitional grant of £85 million for 2011-12 and £14 million in 2012--13 designed to help with the withdrawal of the Working Neighbourhoods Fund.

Turning to the announcement on the reduction of the spending power of councils, Mr Pickles said: "To fund this I have transferred an extra £30 million of my department's budget to local government for 2011/12.

"I have also provided a grant of £85 million for 2011-12 and £14 million in 2012-13 to fund councils who would otherwise see sharper rises."

He said £650 million would be set aside so every council could freeze council tax without hitting local services. The department would provide councils who froze council tax with the equivalent of a 2.5% increase in funding.

He added: "The Government also wants to ensure council taxpayers are protected against authorities and impose excessive council tax rises.

"We will introduce powers for residents to veto excessive council tax increases through a local referendum. In the meantime the Government will take capping actions against councils who propose excessive rises."

Mr Pickles confirmed that should the police authorities of Nottinghamshire and Greater Manchester decide not to freeze their increases they would not be able to impose an increase of more than 2.5% in 2011/12.

He said the settlement supported the Government's commitment to funding social care and included £650 million of NHS funding in 2011-12.

Turning to the Government's Localism Bill, published today, he said: "Despite all the action we have taken, I recognise local government still faces significant challenges. The vast majority of local councils have been making sensible plans to address these.

"To support them I am restoring real power to local councils, ending Whitehall interference, cutting red tape and the burdens of inspection and regulation.

"The Localism Bill will deliver a new democratic settlement to councils, overturning decades of central government control."

He added: "The Bill will fundamentally change councils' freedom to act in the interest of their local communities through a new general power of competence.

"This will give councils the legal reassurance they need to innovate, drive down costs and deliver more efficient services. I am also giving councils much greater control over their budgets."

This included the ending of most ringfenced budgets and allowing councils to borrow against future business rate receipts, he added.

To support councils in protecting frontline budgets £200 million would be provided to help councils modernise and cut back office costs.

Mr Pickles claimed the current funding formula provided "no incentive" for councils to invest and he would set up a review of business rates.