Osborne unveils 10% cut to DCLG funding amid concerns over services

The Department for Communities and Local Government will see a 10% cut in its budget in 2015/16 to £23.5bn as part of the Spending Review unveiled this week by the Chancellor of the Exchequer.

George Osborne insisted that this would be offset by more than £3bn capital investment in affordable housing and a £200m extension of the Troubled Families programme to help 400,000 more vulnerable families.

The Government also plans to put £3.8bn into a pooled budget for health and social care services.

Osborne hailed the Communities Secretary, Eric Pickles, for “setting an example” to his Cabinet colleagues by reducing the size of his department by 60% and abolishing 12 quangos. “He’s a model of lean government,” the Chancellor said. 

Osborne added that local government had “already taken difficult decisions to reduce staff numbers, share services and make savings”.

He paid tribute to Sir Merrick Cockell, chairman of the Local Government Association, “who has been instrumental in showing how they can do this”.

The Chancellor added: “We were told by the scaremongerers that savings in local government would decimate local services. Instead, public satisfaction with local council services has gone up.”

Osborne claimed that when all the changes affecting local government were taken into account – including local income and other central government funding – local government spending would reduce by 2%.

But Sir Merrick warned that the 10% cut – on top of the 33% real terms cut already made to council budgets – would “stretch essential services to breaking point in many areas”.

He said: “While positive steps have been taken to target NHS funding at social care, the fact remains that some councils will simply not have enough money to meet all their statutory responsibilities. Services such as culture and leisure facilities, school support, road maintenance and growth related programmes will bear the brunt of these cuts.”

Sir Merrick added: “No area of spending can be totally immune and some services will be wound down entirely.”

Funding will meanwhile be made available for local authorities that choose to freeze their council tax in 2014/15 and 2015/16. The Government will also set a council tax referendum threshold in each of those years “that gives people a say if their council tax rises by more than 2%”.

The cuts to the DCLG budget are part of measures aimed at reducing current spending by £11.5bn in 2015-16. This will allow an increase in capital spending plans by £3bn a year from 2015-16 and by £18bn over the next Parliament, the Chancellor said.

Further significant measures announced by the Chancellor include limiting public sector pay wards to an average of up to 1% in 2015/16. Whitehall departments will also put in place plans to end automatic time-served progression pay in the civil service by 2015/16.

“In addition, substantial reforms to progression pay will be taken forward or are already underway for teachers, the health service, prisons and the police – ensuring that public sector workers do not receive pay increases purely as a result of time in post,” the Treasury said.

Other key elements of the Spending Review are:

  • The creation of a Single Local Growth Fund, as proposed by Lord Heseltine, worth £2bn a year and that local enterprise partnerships can bid for;
  • Making £335m available for local authorities in 2015/16 “so that they can prepare for reforms to the system of social care funding, including a cap on care costs from April 2016 and a universal offer of deferred payment agreements from April 2015”;
  • £200m for local authorities from the NHS in 2014/15 to allow for investment in new systems and ways of working;
  • An extension of the rebate on water bills in the South West of England;
  • Funding for up to 180 new free schools, 20 studio schools and 20 university technical colleges a year;
  • Protection for schools spending in real terms. There will be additional capital to fund extra school places;
  • An innovation fund of up to £50m for police forces “to work jointly with each other and with local authorities on new and more efficient ways to prevent crime and ensure people feel safe”;
  • An investment of £9.5bn in the UK’s transport network in 2015/16;
  • Examination of the case for Crossrail 2, linking London from North to South;
  • Further reforms to the welfare system worth more than £350m, including requiring all unemployed claimants, and those earning less than the Government expects them to, to wait seven days before becoming eligible for financial support;
  • An introduction of a cap applying to more than £100bn of welfare spending;
  • Spending on health to rise in real terms. An additional £2bn through the NHS for local health and care services “to meet the needs of older and disabled people”.

The Chancellor accepted that the total number of people working for the Government would fall by a further 144,000 by 2015/16. But he expressed confidence that job creation in the private sector would outstrip that fall.

The documents relating to the Spending Round 2013 can be viewed on the Treasury’s website here.