SALFORD MAYOR CALLS FOR FAIR FUNDING FROM GOVERNMENT

Salford Mayor Paul Dennett has written an open letter to the Chancellor of the Exchequer Jeremy Hunt in advance of the expected budget announcement on Thursday 17 November 2022, to raise concerns on local authority funding and the impact on the city.

The concerns highlighted include proposals to lift the 1% cap on the adult social care precept and 1.99% cap on council tax increases without a referendum.

Mayor Dennett said:

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“Such a move would suggest that the government are considering further council tax increases to help finance the £33 billion in planned spending cuts, whilst also signaling a further U-turn on the government’s manifesto commitment to protect local tax payers from council tax increases beyond 2.99%.”

Mayor Dennett has argued that in the last seven years the Treasury’s expectations of council tax contributions, within government’s core spending calculations for local government, have massively increased nationally by almost one third, at the same time core funding from the government reduced by £6.3 billion.

The Local Government Association has previously estimated that by 2020 councils will have lost 60p out of every £1 the government had provided to spend on local services. 

In Salford, in real terms, these changes have equated to a £232 million reduction in the council’s revenue budget as a consequence of cuts to funding from government and un-funded budget pressures, seeing a reduction of 53 per cent in central government core funding support since 2010. 

Mayor Dennett said:

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“Council tax is also an incredibly uneven and unfair mechanism through which to raise funds and plays out very differently in different areas of the country. In wealthy Surrey, a one per cent increase in council tax would raise around £7 million. In Salford, the 18th most deprived local authority in the country according to the government’s own index of multiple deprivation (IMD), the same rise would raise just over £1 million.”

This year, councils are having to battle to cover unforeseen extra inflationary cost pressures, energy prices rises and estimated increases to the National Living Wage since budgets were set in March. 

Mayor Dennett continued:

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“The Local Government Association’s own analysis of the funding gap is that it will rise to £3.4 billion in 2023/24 and is also expected to rise further in 2024/25 to £4.5 billion, primarily caused by inflation including soaring energy costs and wage costs caused by a rising minimum wage, and related un-funded pay awards from the Treasury.    

“Asking local residents to pay more in council tax is a hugely regressive and even inhumane response to the government's self-imposed spending restraints. It will cause huge suffering for millions of people, residents and families that are already struggling after 12 years of austerity and disproportionate local government cuts and more recently as a consequence of the cost-of-living and inflationary crises.”

“I implore you and your fellow Cabinet colleagues to reconsider your planned increases to the adult social care precept and council tax, and any further cuts to local authority budgets. Such cuts could have a disastrous, and potentially lethal effect on local authorities up and down our country and more importantly on people’s lives and the residents, communities and businesses we seek to serve and represent in local government.”

 

Mr Dennett’s full letter to the Chancellor of the Exchequer Jeremy Hunt is below: 

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The Rt. Hon. Jeremy Hunt MP

Chancellor of the Exchequer

Sent via email

16th November 2022

Dear Chancellor of the Exchequer,

I am writing in advance of the expected budget announcement on Thursday 17th November 2022, to raise my concerns with proposals to lift the 1% cap on the adult social care precept and 1.99% cap on council tax increases without a referendum. Such a move would suggest that government are considering further council tax increases to help finance the £33bn in planned spending cuts promised by yourself, whilst also signaling a further u-turn on the government’s manifesto commitment to protect local tax payers from council tax increases and government’s commitment to ensuring councils undertake a referendum as a local democratic check and balance if they increase the adult social care precept and council tax beyond 2.99%.

Council tax has been one of government's central mechanisms for devolving responsibility for central government cuts to local government since austerity began in 2010. Since 2015, the Treasury’s expectations of council tax contributions within government’s core spending calculations for local government have massively increased nationally by almost one third, or £9.7 billion, at the same time core funding from the government reduced by £6.3 billion equating to 30% of 2015/16 funding levels. The Local Government Association have previously estimated that by 2020 councils will have lost 60p out of every £1 the government had provided to spend on local services.  In Salford, in real terms, these changes have equated to a £232 million reduction in our revenue budget as a consequence of cuts to funding from government and un-funded budget pressures, seeing a reduction of 53% in central government core funding support since 2010. 

Council tax is also an incredibly uneven and unfair mechanism through which to raise funds, and plays out very differently in different areas of the country. In wealthy Surrey, a 1% increase in Council tax would raise around £7 million. In Salford, the 18th most deprived Local Authority in the country according to the government’s own index of multiple deprivation (IMD), the same rise would raise just over £1 million. Salford already has significant challenges with non-payment of council tax owing to levels of poverty, household income and consequently affordability pressures, which are all being further exacerbated as a consequence of the cost-of-living crisis and inflationary crises we’re facing and the previous government’s mini budget. There is already a law of diminishing returns for the poorest areas of the country in raising council tax rates, as larger and larger numbers of individuals are finding it impossible to make-ends-meet.  The number of people accessing Salford’s Council Tax Reduction Scheme, which supports our most vulnerable residents, reached 26,588 by the end of 2020/21.

This year, councils are having to battle to find an extra £2.4 billion to meet unforeseen extra inflationary cost pressures, energy prices rises and estimated increases to the National Living Wage since budgets were set in March.  The Local Government Association’s own analysis of the funding gap is that it will rise to £3.4 billion in 2023/24 and also expected to rise further in 2024/25 to £4.5 billion, primarily caused by inflation including soaring energy costs and wage costs caused by a rising minimum wage, and related un-funded pay awards from the Treasury.

Asking local residents to pay more in council tax is a hugely regressive and even inhumane response to the government's self-imposed spending restraints - and will cause huge suffering for millions of people in our country, residents and families that are already struggling after 12 years of austerity and disproportionate local government cuts and more recently as a consequence of the cost-of-living and inflationary crises.

Austerity is a false economy. As services from local government and other government bodies have collapsed in this country, demand for services has sky-rocketed requiring costly countermeasures, which could often have been avoided had budgets not been so thoroughly slashed. A key example of this is the collapse in social and council housing provision - which is now being supplemented to the tune of billions of pounds each year in exponential increases in housing benefit payments and the use of temporary accommodation, the procuring of hotels, hostels and B&Bs to house Britain's growing army of homeless families and the public financing of a myriad of initiatives to tackle the consequences of a broken housing market. What we are witnessing is no less than the slow-motion collapse of an entire arm of the British state, local government, hollowed out after a decade of relentless cuts to services.

I implore you and your fellow Cabinet colleagues to reconsider your planned increases to the adult social care precept and council tax, and any further cuts to local authority budgets. Such cuts could have a disastrous, and potentially lethal effect on local authorities up and down our country and more importantly on people’s lives and the residents, communities and businesses we seek to serve and represent in local government. 

It is critical that as part of the forthcoming Autumn Statement on Thursday 17th November 2022 that government looks to reverse the 12 years of austerity and the disproportionate impact that it has had on local government by effectively supporting local government with the cost-of-living and inflationary crises that the sector is facing as part of the front-line of public services across England. Foisting this burden onto local tax payers through regressive taxation isn’t the way forward. Increases need to be urgently made to the Revenue Support Grant that local authorities receive.