I will be setting out ‘headline’ proposals for Preston Council’s budget for 2017-21. This is a job we normally do in February, so it’s certainly an ‘extraordinary’ budget…but I have been asked more than once if it really is an ’emergency?’Advertisement
Let’s look at the circumstances…
In December 2015, we had formulated the budget for February 2016 and beyond, and then the government told us that they are phasing out the grant that they have given to councils since…well, since forever.
We had used figures produced by the Local Government Association to predict the reduction in government grant, so the nil return took many councils by surprise. We had half a hunch it was coming eventually but the cuts have become like nursing a very sick relative…you know the end is near but it’s still a shock when it finally arrives.
There has long been recognition that local services should be subsidised from general taxation. Council tax only covers half the cost of the services councils provide. If Preston had to run solely on council tax and business rates receipts under current redistribution rules, there simply wouldn’t be enough money to do the job.
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In 2010/11, Preston Council was in receipt of £19million of government grants, that’s not much different to our entire budget for next year. Some of the grants we used to receive were recognition that Preston has more than it’s fair share of people on low incomes, living in poor housing, with multiple health issues. That funding is a distant memory having vanished in 2011.
The government did recognise that the abolition of centralised funding would be difficult and created a pot of money to help some councils with the transition; Preston didn’t get any of this money.
So last December, within a matter of days, we went from having a balanced budget forecast to having a £3.4million a year deficit. The council’s auditors soon got on the case. Local government is highly regulated, despite the fact we have delivered more public sector savings than any other part of government since Austerity began; and we are not allowed to operate with such a deficit.
It is this Emergency Budget, a £3million pounds saving programme delivered six months early, that is satisfying the Auditor that we have got plans in place to tackle the deficit. The government also requested that a four-year efficiency plan be published last week just to guarantee the reduced funding offer until 2019. There are many councils struggling to achieve these requirements.
The end of the Revenue Support Grant is not the only reason we had to act fast though. The uncertainty over two other major income streams means we must be ready should the situation get even worse.
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Business Rates (which are collected by Preston, given to government, for only 50% to be given back, using a formula that would leave Albert Einstein scratching his head) are also changing. The proposal is to give business rates back to the locality in their entirety – so we can’t lose right?
The worry here is how business rates will be split between the two tier authorities, ourselves and Lancashire County Council. Given that LCC are in such difficulties and they are responsible for major items like social services and education, it’s possible that we could get a worse share of the pot than before.
The other income stream under review is New Homes Bonus. This was created when the government first slashed the grant funding in 2011 and is linked to the number of new houses built in the area. The funding is based on a council tax multiplier and the government want to reduce the multiplier, possibly by half.
It was clearly a situation that required urgent action; an Emergency Budget.
But like in all emergencies, we’ve taken remedial action to deal with the immediate situation. More detail on how we plan to rescue vital services from the government’s axe will emerge in the coming months. It may be the end of Revenue Support Grant, but for us, it’s another beginning, another long, hard road back to the new normal, whatever that will look like.
Councillor Martyn Rawlinson is the cabinet member for resources and finance, and represents the Fishwick ward