“We are not making cuts to local authorities. What we have done is given them more revenue raising power.”
The Chief Secretary to the Treasury, Liz Truss, was a popular speaker among delegates at this year’s Conservative Party Conference.
She generated a fair bit of publicity with attacks on Labour’s plans for the media, and a call to increase speed limits to 80mph to boost the economy.
We think she slipped up when she told the BBC’s Newsnight programme that the government was “not making cuts to local authorities”.
In fact, local authorities in England have experienced historic funding cuts under the Conservatives.
The main public spending watchdogs say the government is still cutting the money it gives to councils.
And figures from the Treasury suggests real-terms reductions in councils’ overall spending power will continue until 2020.
There can’t be any serious dispute that since 2010, Conservative-led governments have made deep cuts to the money that local authorities get from central government.
Earlier this year, the National Audit Office put out this report, which says Whitehall funding for councils in England fell by 49 per cent in real terms between 2010/11 and 2017/18.
Councils raise money from council tax, as well as the grant from central government, but rises in council taxes have not offset the cuts.
The NAO calculates that if you take into account council tax rises, local authorities have still seen a fall in their “spending power” of 28.6 per cent in real terms between 2010/11 and 2017/18.
The Institute for Fiscal Studies has done a slightly different calculation: it says councils spent 24 per cent less on services per person in 2017/18 than in 2009/10.
These are national figures and they hide significant differences between types of council.
The IFS says: “The most deprived authorities, including Barking & Dagenham, Birmingham and Salford, made an average cut to spending per person of 32 per cent, compared to 17 per cent in the least deprived areas, including Warwickshire, Wiltshire and Dorset.”
This reflects the way the cuts were introduced in 2010.
Poorer councils tended to get a bigger slice of their money from central government (because their residents were less affluent and paid less council tax).
Wealthier councils did better from council tax and were less reliant on money from Whitehall.
So a cut in the money from central government tended to have a bigger effect on more deprived local authorities.
The politics of this was not lost on opponents of the Conservatives. Look at the examples the IFS quoted. Barking and Dagenham, Salford and Birmingham – the hardest hit – are all staunchly Labour inner-city councils. Warwickshire, Wiltshire and Dorset – which took a smaller hit – are Conservative-run counties.
Both the IFS and the NAO say that overall council budgets may have flatlined over the last two years or so.
But this is explained by the government allowing local authorities to raise council taxes, ring-fencing money for adult social care and allowing councils to keep part of the local business rates, they say.
The NAO says “reductions in spending power have largely levelled off” thanks to council tax rises.
The IFS agrees, saying: “Central government funding for councils is still falling – it is above-inflation increases in council tax that mean overall budgets are just about treading water.”
And both point out that this is in the context of rising demand for services and rising costs for councils, so a flat budget is having to be stretched further.
We asked the Treasury for a response to this story, and they said: “The 2018/19 Local Government Finance Settlement confirmed the third of a four-year settlement for local councils over the Spending Review 2015 period.
“This settlement ensures a 2.1 per cent increase in cash terms in local government Core Spending Power between 2015/16 and 2019/20 – £44.7 billion in 2015/16 and £45.6 billion in 2019/20.”
An increase of 2.1 per cent in cash terms (not allowing for inflation) over five years will almost certainly mean a real-terms cut, depending on future rates of inflation.
There can be little doubt that Conservative-led governments have presided over deep cuts to the money they gave to councils since 2010.
The only defence of Liz Truss’s comments we can think of is that councils’ spending power has stabilised in recent years.
But the Treasury still appears to expect real-terms cuts to council budgets until 2020, according to the figures they gave us. And budgets are still way down compared to 2010.
It is true to say that the government has increased councils’ power to raise money for themselves – although this is still limited.
There is still a cap on council tax rises, even if it was relaxed in 2017, and the government still sets business rates centrally, even if it is allowing councils to keep more of the money raised locally.