The government’s decision to provide additional funding to councils will help ease the financial pressure many are facing, according to the Local Government Association (LGA). But is the capital injection merely a short-term solution?
The government allocation
The government has agreed to make as much as £416 millionavailableto local authorities. This will prevent all councils from being in a position of negative grant funding between now and 2019. Councils will be permitted to increase their Band D council tax rate by £5 per household, providing further relief.
While the announcement is welcomed by the LGA, it has warned that local authorities still face “financial pressure” resulting from changes to funding allocation arrangements. The association believes these changes will continue to effect councils for the following four years.
“Any extra cost pressures,” the LGA said, “such as those arising from rising demand or policies such as the National Living Wage, will have to be funded by councils finding savings from elsewhere.”
The association added that this situation could threaten the provision of local services. As a result, residents could end up paying more council tax in return for less.
Part of a bigger plan
Changes to local authority funding are part of the government’s wider plan to allow councils to keepalllocal business rates by2020. The initiative was launched in part in2013, when councils were permitted to retain half the rates paid by local companies.
While the Treasury claims this will let local government control an extra £13billion within four years, the LGA hassaidthe reform measure “won't solve the long-term funding challenges.” Furthermore, the association stated that “it is absolutely critical” that the new system is effective.
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