This year’s settlement for Local Government will put more pressure on the system by which it is financed at a time when the Government has gone silent on the issue of reform of that system, according to the Local Government Information Unit. In its analysis of the settlement the think-tank says there are some positives but the next three years will be tough going for many councils.

The LGIU said the announcement contained no surprises but there were, it said, positive elements. For example, it said, as the first three-year settlement, covering formula grant and other grants and regeneration funds, it would mean councils could plan ahead more realistically. There had also been the long awaited reduction in ring-fenced grants.

Janet Sillett, a policy analyst at the LGIU, said the headline increases for councils seemed tight enough and she added, “The increases are reduced if support for PFI is taken out to 1 per cent, 0.1 per cent and a cut of 0.1 per cent. Some councils do worse than others. The London boroughs and shire districts have the lowest increases.”

Although the grant figures were known for the next three years there would be a number of reviews on formula and distribution and the system was clearly not yet seen as settled. “Given that central government still provides the vast majority of local government funding, despite years of review of the system, this is hardly surprising,” Janet Sillett said and added, “So much depends on the details of the formula for individual councils.”

There were major challenges ahead for councils but also for the Government. She continued, “There have been significant devolutionary moves from the Government, but they have gone silent on the ongoing need for reform of the finance system itself. This tight settlement will add to pressures on that system.”