Whitehall is considering a crackdown on councils that excessively borrow for commercial reasons as it continues to restrict council tax rises.
Speaking in the House of Commons today, communities secretary James Brokenshire revealed Marsham Street and the Treasury were considering whether ‘further interventions’ were required to slow the commercialisation trend.
Mr Brokenshire said his department shared the concerns of the Chartered Institute of Public Finance and Accountancy (CIPFA), which is already tightening up the prudential code.
Last week CIPFA boss Rob Whiteman said some councils were ‘spectacularly taking too much risk’ and warned that unless that stopped then the ‘whole sector may lose its freedoms under the prudential code’.
However, amid the threat of a crackdown on income generation, Mr Brokenshire said there would be no change to the 3% council tax referendum limit and no relaxation of the amount local authorities can raise through the adult social care precept.
Despite saying that residents would continue to be ‘protected’ from excessive tax rises, Mr Brokenshire confirmed that police and crime commissioners will be able to double the policing precept on bills from £12 a year to £24.
Other announcements included £16m for the rural services delivery grant in 2019/20 to reflect the ‘extra cost of providing services,’ holding the New Homes Bonus baseline at 0.4% and more than £150m to ‘directly eliminate’ the threat of negative revenue support grant.
Mr Brokenshire also announced 15 new business rate retention pilots and a ‘package of support to help councils become more efficient and get better service outcome, with a ‘continuous improvement tool’ to be launched in the spring.
He conceded it had been 'challenging for councils to drive efficiencies' and said he ‘recognised some of the pressures within social care’.
Mr Brokenshire insisted the department had been ‘listening carefully to what councils of all shapes and sizes are telling us,’ adding: ‘2019 is shaping up to be a big moment for local government, drawing together our plans for a new approach to distributing funding and increased business rates retention, as well as the upcoming Spending Review.
'There is so much excellent, inspiring work that is underway in our local communities, and it is right that we get behind it and have faith in the authorities that day in, day out, always deliver.’
Chair of London Councils, Cllr Peter John, said the finance settlement was a 'reminder that austerity is not over for local government'.
Head of local government at trade union Unison, Jon Richards, added: 'Council services are the glue that holds communities together and, as the safety net they provide for the vulnerable is squeezed, the very fabric of our society is under threat.'
Director of think-tank NLGN, Adam Lent, said: ‘This settlement largely confirms the long list of one-off and comparatively small cash boosts that fail to address the lack of financial sustainability that is now a real and present threat to local government.
‘With the NHS eating up nearly all of the Treasury’s projected rise in spending, austerity is most certainly not over for adult social care, children’s services and other core services, and this settlement does nothing to resolve that.’
For more on the provisional local government finance settlement visit The MJ (£).