Figures published alongside the chancellor’s autumn statement show the Department for Communities & Local Government’s local government budget, which funds revenue support grant, will fall by £6.1bn, from £11.5bn this year to £5.4bn in 2019-20.
Over the same period the government predicts locally generated income, from council tax and business rates, will increase by £6.3bn, to £35.1bn.
In his speech, the chancellor said the government’s reforms would mean “local government will be spending the same in cash terms as it does today”.
However, he also confirmed local government would be expected to deliver a greater range of services as the sector moved towards 100% retention of business rates by 2020.
This included the devolution of the temporary accommodation management fee, currently paid through the benefits system, to local government. This would be worth £10m a year, he said.
The blue book published alongside the statement says the government will consult on the move to full business rates retention including whether to “fully fund local authorities’ public health spending from their retained business rates receipts”. The public health grant was worth £2.5bn in 2015-16.
The document also says the government will look at how to “rebalance” local government finance to provide “support to those authorities with social care responsibilities”.
This could include a change in the distribution of business rates and new homes bonus in two tier areas.
Councils will also get powers to spend 100% of receipts from assets they sell, excluding through right-to-buy, while the chancellor said the government would also be encouraging councils to draw down on their reserves.
He added: “This amounts to a big package of new powers, but also new responsibilities for local councils.
“It’s a revolution in the way we govern this country.”
The LGA has calculated that taken together announcements in the spending review, including an additional £1.5bn for the better care fund, will mean a cut of £4.1bn over the parliament.
Local Government Association chair Lord Porter said even if councils stopped all but services for the most vulnerable they could not save enough money to plug the financial black hole they face by 2020.
He added: “This Spending Review was never about just spending less it was about spending smarter. Local government has led the way at finding innovative ways to save money but after five years of doing so the majority of savings have already made.
“Tragically, the Government looks set to miss a once in a generation opportunity to transform the way money is spent across the public sector and protect the services that bind communities together, improve people’s quality of life and protect the most vulnerable.”
Geoff Winterbottom, principal research officer for the Special Interest Group of Municipal Authorities, told LGC early calculations suggested Sigoma authorities would see cuts to their revenue support grant of 24% next year.
Mr Winterbottom said there appeared to be “quite a bit of smoke and mirrors” in the spending review announcements and dismissed the government’s claim that losses in grant would be “balanced out” by growth in business rates and council tax.
The chancellor also confirmed plans to allow social care authorities to levy a 2% precept on council tax to fund social care.
Neil Benn of Pixel Financial Management, advisers to many local authorities and the Chartered Institute of Public Finance and Accountancy, told LGC that “on the face of it” the potential to raise additional income through council tax “changes the picture for upper tier authorities facing huge social care pressures”.
However, he said figures published by the Treasury and the Office of Budget Responsibility today did not match the figures usually reported for income generated through council tax and the local share of business rates, making it difficult to fully analyse the impact of the announcements.
Mr Benn also warned the spending review’s plans to provide funding for social care through a two-thirds cut in the new homes bonus and by rebalancing funding to support social care authorities suggested shire districts would be “hammered” in coming years.