Response to 2011-12 and 2012-13 LGF settlement consultation

The government published the provisional Local Government Finance Settlement for 2011-12 and 2012-13 for consultation on 13 December 2010.  London Councils submitted this response to the consultation on Monday 17 January.

The response to the consultation highlights the following points:

• Extent of cuts - London’s formula grant funding will be cut by 17 per cent in real terms over the two years of the settlement. The front-loading of these cuts presents further challenges, exacerbated by the Government’s refusal to increase capitalisation levels for redundancy payments. There is some measure of relief that cuts are proportionate to those of the other regions, though it must be noted that London authorities bear their share of cuts on an already diminished baseline following unfavourable settlements in previous years.
• Area Cost Adjustment (ACA) - London Councils is opposed to changes in the way CLG estimates the ACA, which penalises councils in high-wage labour markets such as London. Exemplifications suggested that this could cost London £100m before damping. London Councils has shown that these changes are bias against high wage authorities.
• Resource Review - London Councils looks forward to engaging in the Local Government Resource Review to find solutions that give more autonomy to local government. This will also provide the opportunity to address the complexity and lack of transparency of the current formula grant system.
• Academies - London Councils is extremely concerned at the lack of consultation on the method used to topslice funding from formula grant to reflect new academies. New academies do not reflect the cost saving to councils implied by the calculations, nor is there any attempt to match the reduction in each authority’s funding with the expected geographical distribution of new academies in 2011-12 and 2012-13.
• Concessionary travel - London Councils had called for and welcomes implementation of the proposals in respect of concessionary travel. This will go some way to addressing the historical underfunding of this service in the capital.
• Grant floors - London Councils is not opposed in principle to the banded floor system, but would like to see more consultation on the definition of ‘grant dependency’ which is used to allocate authorities to each band.