70% of Council income to be raised locally

The Communities and Local Government Secretary Eric Pickles announced a further spending cut for local council today. It is modest. Councils will, on average, have 1.7% less "spending power" in the next financial year than this one. That is a smaller cut than the last couple of years.

Mr Pickles acknowledged that, in general, councils have coped well:

Local government has shown great skill in reducing its budgets. Committed local authorities have protected front line services. Little wonder then that at a time of retrenchment satisfaction in council services has gone up.

Perhaps more significant than the further grant cut is the change to Business Rates which means that councils will be raising more of their money locally.

Mr Pickles said:

This settlement recognises the responsibility of local government to find sensible savings and make better use of its resources.

It marks a new settlement for local government based on self determination and financial independence. A move from the begging bowl to pride in locality.

It begins the biggest shake up of local finance in a generation.

We are shifting power from Whitehall direct to the town hall.

From April, authorities will directly retain nearly £11 billion of business rates instead of returning them to the Treasury.

Striving councils will benefit by doing the right thing by their communities.

If they bring in jobs and business they will be rewarded.

Similarly, New Homes Bonus remunerates councils for building more homes.

Next year the Bonus will be worth more than £650 million and even more in 2014-15.

Under our reforms an estimated 70 per cent of local authority income will be raised locally compared to a little over half under the current Formula Grant system.

A giant step for localism.

Predictably the Labour Party have protested that the spending cut is unfair - without saying what else they would have cut instead or how they would have changed the basis on how the level of grant is calcultaed.

Mr Pickles added:

Concerns that the poorest councils or those in the north would suffer disproportionately are well wide of the mark.

The spending power for places is in the north compares well to those in the south.

For example, Newcastle has a spending power per household of £2,522 which is over £700 more than the £1,814 per household in Wokingham.

We've also maintained the system of ‘damping’ – where Government sets a ‘floor’ below which council funding will not fall.

This year's average grant reduction for the most dependent upper tier authorities will be less than 3 per cent, compared to 8.7 per cent for the wealthiest. That's more support and protection than last year.

I can also confirm today that local authorities will be able to use the receipts from assets sales raised from 2012-13 onwards to fund outstanding Equal Pay claims.