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Local Government: More power for councils – but much less money

The good news for council bosses is that they are being given more freedom to spend money as they think best. The bad news is that there will be less of it to spend – much less.

By a long way, the biggest percentage cut in any departmental spending is at the Department of Communities and Local Government, headed by Eric Pickles, which will see 51 per cent of its budget disappear over four years.

About 18 per cent of this is the product of the new government'sphilosophy of "localism", which says that more decisions should be made at local level. About £1.8bn a year worth of services currently run from Whitehall, including responsibility for adult social care, are to be handed over to local councils.

Councils are to be given direct control over council tax benefit for the first time – although the sting in the tail is that the £4.2bn budget for the benefit is to be cut by 10 per cent.

There is also to be a bonfire of the regulations that "ringfence" money that the Government distributes to local councils to make sure that it is spent in the way the government thinks is wise. All those restrictions will disappear from April, except the ring fencing of grants for schools and public health.

The amount of data councils have to collect and pass on to central government is also to be cut. There are 4,700 local area targets on which the councils can stop reporting to Whitehall. These changes will be welcome in the town halls, although it may cause resentment when there are different qualities of service across different sides of a local government boundary.

The rest of the news will be utterly grim for councils and their employees, because the government grants that make up about half their income are to be slashed. The Treasury says that the grants will be cut by 7.1 per cent a year for four years, which means that by 2014, councils will have lost 14 per cent of their income. Labour fears that the impact will be worse than that.

And the Government is expecting councils to save money by sacking employees. Dave Prentis, general secretary of the public sector union, Unison said: "Libraries, day care centres, elderly care services and residential care are already being cut and the cost of meals on wheels and home care services are rising."

The Treasury has put aside £200m to meet one-off costs of personnel changes in 2011-12. There is also an agreement to freeze council tax this coming year.