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Fri, 22 January 2021

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Tory plans for local government will lead to further cuts to services, say IFS

Tory plans for local government will lead to further cuts to services, say IFS
3 min read

Boris Johnson’s plan for local government could lead to further cuts to council services, according to the Institute for Fiscal Studies.

The leading economic think tank said the funding allocated in the Conservatives' manifesto “would not be sufficient to meet rising costs and demands over the next Parliament even if council tax were increased by 4% a year”.

They said the party’s manifesto announced no additional funding other than £500million a year for potholes, meaning authorities will have to rely on council tax increases and business rates revenues to balance their budgets.

“And, as our annual report showed, revenues from these taxes is unlikely to keep pace with these demands and costs, even if council tax is increased by 4% a year – double the rate of inflation – every year, “ the IFS explained.

“Therefore, unless councils’ productivity improves by more than has historically been the case, either further cutbacks to service provision would be likely, or funding would need to be topped up.”

By contrast, the IFS said Labour’s proposals are “strikingly different”, with an extra £13billion in funding for existing council services, which “would be more than sufficient to meet rising costs and demands even if council tax were not increased”.

The think tank has also looked at the level of cuts to local government since 2010, revealing budgeted revenues to cover day-to-day spending in 2019–20 “will be approximately 18% lower in real-terms than in 2009–10”.

They said after accounting for population growth that equates to cuts of 24% per resident, but the burden has been even worse for those in deprived areas.

The IFS said as a result of the cuts: “Councils’ spending on local services has fallen around 31% in the most deprived areas, on average, compared to 16% in the least deprived areas.”

Chancellor Sajid Javid announced a £1billion increase in grant funding for councils next year in September’s Spending Round.

But the think tank said “even if spent in full, this would still leave spending per person down around 20% compared to 2009–10”.

The IFS’ associate director David Phillips said: "The differences between the parties’ plans for council funding are stark, and imply vastly different future directions for the country.

"Taken at face value, the Conservatives plans wouldn’t meet the rising costs and demands for local services – necessitating a further retrenchment in services or unfunded top-ups to the plans set out."

"In contrast, the Labour Party has allocated more than enough money to meet rising costs and demands, allowing increases in service provision and quality, even without council tax increases – although this isn’t costless, as other taxes would increase substantially under Labour, and these would not just hit the top 5%."

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