The government’s new plan for council funding could see local authorities forced to slash services, economists have warned.
Under proposals published in last week’s much-anticipated local government finance settlement, councils could from 2020/21 see grants – including revenue support and public health grants – scrapped.
Instead, local councils would be allowed to retain 75% of business rates – 25% more than under the current system.
But the Institute for Fiscal Studies (IFS) warned that a combination of revenue from business rates and council tax would not be enough to keep up with the rising demand for services.
Researchers calculated that even if council tax bills increased 4% year-on-year, spending on adult social care could increase from 38% to 45% of these revenues by the mid-2020s. This figure could rise to 55% by the mid-2030s.
“This would imply that the real-terms local tax revenues available to other services – such as public health, children’s social services, libraries, housing and refuse collection – would not increase at all during the 2020s and would be falling in the 2030s,” IFS researchers said on Thursday.
The situation would become even more difficult if the social care system became more generous, they added, and could lead to grants paid for by national taxation being reintroduced.
The study comes a week after the government claimed that the change – along with other funding plans – would see councils in England collectively receive an extra £1.3 billion in real-terms.
Communities Secretary James Brokenshire said the settlement would pave the way for a “fairer, more self-sufficient and resilient future for local government”.