Councils set for new funding squeeze

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Rate capping could result in less local services

For the coming year Wandsworth's share of government grant increases by 2.7 per cent - the lowest figure possible under the current system.

The council has to find an extra £8.9 million just to keep up with the effect of inflation on its costs. With the Government's grant only worth
£3.2 million in cash terms, this leaves an inflation gap of £5.7 million for 2007/2008.

Wandsworth, in line with other London councils, is now predicting the real value of Government grant to fall even more sharply for 2008/2009. This could mean the council receiving only a 1 per cent grant uplift in twelve months time - equivalent to an inflation shortfall of around £7.6 million.

The council's most recent budget forecasts had been assuming that this year's 2.7 per cent grant increase will fall to 2 per cent in the following year. This will now be revised down to 1 per cent.

Some London council treasurers are forecasting a grant freeze with no increase from central government in 2008/2009.

Deputy council leader Maurice Heaster explained, "One thing is for sure: the Government is squeezing councils' spending. This will force local authorities to both reduce their spending and raise council tax. Because the Government sets limits on council tax increases this puts enormous pressure on service budgets. Councils are having to plan their spending three years ahead. That means taking account of the likely impact of known Government attitudes to local government funding and second-guessing what will happen to inflation.

"The worry is that if ministers fail to control inflation over the coming year, the £7.6 million gap we are looking at in twelve months time could grow even larger.

"The council is determined to protect its residents from above inflation increases in council tax. We cannot influence what the Government gives us, nor the general effect of inflation on our costs - that is why we have to maintain a firm grip on spending."

The council's proposals for council tax levels in the coming year will be considered by councillors on March 7.

February 14, 2007