Council and democracy

Disastrous Finance Settlement Underlines Fair Deal Importance

4 December 2006

Residents may be shielded from the worst financial burden by the commitment of leading members to curb any increase in Croydon’s element of council tax in 2007/08 to no more than 4%. However, concerns remain that the overall increase could be higher because of the Mayor of London’s own precept increase and an expectation that Londoners will further foot the bill for the 2012 Olympics.

Croydon’s restraint in keeping down any council tax rise will be offset by an inevitable reduction in services.  This is because the grudging grant increase announced on Tuesday is nowhere near sufficient to keep pace with demand for services - especially social care - and comes on top of the mounting inadequacies that have left Croydon shortchanged when compared to funding received by other boroughs.

Despite announcing a package of efficiencies and savings of £16 million so far this year, the council still has an £11m gap to balance the £37 million deficit on the budget for 2007/08.  This week’s local government finance settlement has not helped. Finance officers are already pouring over proposed budgets to establish just how bad the position will be and what further areas may have to be sacrificed now that next year’s financial settlement has been confirmed.

With so much of the council’s spending being prescribed by Government, only the relatively small amount of discretionary spending - on central services, environment, sport and recreation, and grants to voluntary bodies - look likely to offer the prospect of yet more savings.   However, no area of council work will be without a challenge in order to balance the books.

The unfairness of Croydon’s position is underlined by being one of 20 London boroughs receiving the minimum level of Government funding.  This means Croydon will receive only a below inflation 2.7% increase in funding towards the growing cost of providing key services including social services, refuse collection and recycling, and tackling homelessness.  In contrast the national increase is 3.8%.  The average in inner London is 3.6% and outer London is 3.2%.  However, some councils in London have gained increases of over 5%.

Said council leader Mike Fisher: “This appalling settlement underlines the concerns we’ve been expressing since the election in May about the unfair way in which Croydon Council is funded.  We’ve already been robbed and now it feels like we’ve been mugged as well.  We have loudly and consistently expressed our worries about the potential implications of not receiving a fair deal.  Now, our worst fears for residents look like they will be realised.  We have a growing population with changing needs and rising expectations.  We are facing more and more demands from central Government yet that same Government is not providing anything like the basic level of grant support to keep pace with the requirements that they are actually imposing on us.

“We are fighting hard to keep next year’s council tax increase as low as possible on behalf of residents who we know are already feeling the pinch of this punishing tax and have already been voicing their anxiety in large numbers.  The perilous position we have been left in only serves to underline the critical importance of a reform in local government finance.  We desperately need a solution that doesn’t impose a massive hike in household bills and which enables councils to provide a decent quality of service.

“While it may be slightly reassuring to see the Government being rightly recognised as the source of so much public discontent about the provision of council services and escalating level of bills, we derive no pleasure from being prevented from doing a good job for people who live in the borough.”

“Croydon residents will find it intolerable that the burden of responding to nationally-set objectives has to be met by households through their council tax.  Council tax payers should not be expected to pick up the bill for the continuing and systematic under-funding from Government.  The importance of our Fair Deal campaign has never been greater.”

Croydon has calculated that council tax levels will have increased by 95% in the ten years that the present Government has been responsible for town hall funding.  Even a 4% increase in 2007/08 will mean a band D household having to find an extra £0.78 a week/£3.38 month/£40.53 a year with an annual bill of £1053.86 compared to £595.61 a decade ago.

The council’s net revenue budget in 2007/08 is likely to be around £237 million.  This covers services such as refuse collection and disposal, leisure and recreation, and social care.

Funding for all of this comes from council tax (around 55%) and central Government grant.  The 2.7% increase in grant is well below the current rate of inflation which is 3.6%.