All party response to LG finance settlement

(Copy of letter sent by Worcester City Council to Central Government)

1. The City Council has been prudent and cautious in the light of the CSR07 announcement and previous speculation about the [low] level of grant increases likely to be provided to local government by Central Government this year and for the following two years, and the increase in the cashable efficiency target from 1¼% to 3%.

2. Therefore, the Council’s Medium Term Financial Plan assumes:-

• Formula Grant - 2½% increase each year with risk of this being cash frozen for the five years
• Housing Benefit Administration Grant – 5% reduction each year for next three years (i.e. cash reduction of 2½% p.a.)
• A challenging efficiency agenda which is already well underway; e.g. Revenues and Benefits Shared Service (Worcester, Wychavon and Malvern Hills ), and the Worcestershire Hub
• Maintaining the Council’s policy of Council Tax rises of not more than 2.5% above RPI. (See note at Para 5).

3. Our analysis of the Formula Grant settlement shows;-

• Formula Grant increases of only 1% (£80K 2008/09) followed by two years of ½% (£40K p.a.)
• Reduction of our Waste Efficiency Grant from £82K (2007/08) to £42K in 2008/09
• Housing Benefit Administration Subsidy – cash reduction of 3.9% (2008/09) followed by 2½% cash reduction in the following year(s)
• Homelessness Grant cash frozen at £115K p.a. for the next three years

4. Therefore our overall grant position shows:-

5. Our net budget is approximately £12.96m based on 2½% rises in both Council Tax and Government Grants. However, on top of this we are suffering the following cost pressures:-

Note: In the last four years the Council has maintained Council Tax increases at 2.5%. Had the Council decided to set Council Tax at the “capping limit” in each of these four years and not spend the additional income on new services, the cumulative effect would have been to reduce the budget gap of £1.6m to £1.16 in 2008/09 and a further £1.66m over the following four years.

6. Therefore, the Local Government Finance Settlement has reduced our net budget (like for like) to £12.84m as a result of the cut in Formula grant funding, and this does not address the very significant cost pressures facing the Council, an element of which is as a direct result of government action.

7. The City Council is facing budget cuts of £1.6m in 2008/09 and a further £2m over the following 4 years.

8. This includes significant cuts in services in addition to our challenging agenda for fundamental review of the way we provide services including sharing, better two tier collaboration and other alternative service delivery models.

9. It is the view of the City Council’s Cabinet and supported by all the political groups on the Council that;-

• The settlement is unsustainable; this settlement does not recognise the cost pressures and funding crisis facing districts such as Worcester City Council despite the previous CSR making some recognition of District Councils in the level of the funding settlement over the past 2 years.
• Furthermore, the settlement does not reflect the growing demands of a busy and thriving sub regional centre such as Worcester , and the need and plans we have to improve the well being of local people.
• The Floor for districts is inequitable; the Floor for districts is half that of the County Councils’ and only 40% of that for Police Authorities; this is inequitable and penal to a group of Councils for which small changes in cash grants have a major impact on the bottom line [budgets] and services.
• Government could bring the Floor to same level as others e.g. 2% (would only cost £20m across all district councils) or the governments target inflation rate of 2.7% (would only cost £34m across all district councils).

10. The underlying problem remains that which has challenged us for many years and under both political administrations at the Guildhall namely that we struggle to fulfill the aspirations, expectations and statutory duties placed upon us as the county town (and growing University City) with the financial resources that we are given by way of government grant, what is raised via our element of Council Tax and the other income we can generate locally, e.g. through car parking charges. Whilst all District Councils have different pressures there are not many of our size that have the total infrastructure we maintain, e.g. a fine but expensive to run Guildhall, two Museums and an Art Gallery, three Sports Centres and a Swimming Pool, a network of Community Centres and a wide 'travel to work' area and growing tourist and student population.

• We therefore urge the government to rethink the local government finance settlement in so far as it affects district councils and in particular the financial impact on Worcester City Council. To this end we request a meeting with the Minister for Local Government John Healey to explain our position, the financial deficit we face and in particular to discuss the acute pressures placed on historic urban centres like Worcester which we would  contend have  not been  recognised in the City's  three year settlement.

Yours sincerely