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Councils face grant cuts

Inner London authorities and shire counties could lose millions of pounds in government grants if proposals for a radical shake-up of local authority funding are accepted by ministers.

Councils will face dramatic cuts with education authorities, such as Essex and Cornwall, losing more than Pounds 50 million between them.

But metropolitan districts, outer London boroughs and the new shire unitary authorities could be better off by a total exceeding Pounds 110 million.

Under proposals being considered by the Government, the outer London boroughs of Havering, Barking and Dagenham and Bromley will be among the big winners.

Councils in Greater Manchester and Merseyside would also benefit from the changes which are contained in an independent study, commissioned by ministers, into the area cost adjustment grant.

The Pounds 1.5 billion annual grant, which compensates councils in the South-east and London for their higher than average employment costs, has long been the subject of controversy. Councils in the North say the system is unfair.

But the study, which draws on data in the labour force survey and calculates extra costs on an individual authority basis rather than by region, is unlikely to provide easy answers. Although the metropolitan authorities gain overall, there are still sizeable winners and losers.

The overall effect on the shires, however, is unfavourable. The Association of County Councils has asked the Department of the Environment, which is responsible for local authority finance, to consider further how to compensate authorities for teachers' pay.

Under the proposals, the loser authorities could see up to 7 per cent of their spending power disappear.

Overall, the inner London boroughs would face a cut of more than 1 per cent - equivalent to Pounds 30.6 million - while the shire counties and districts would lose less than half a per cent each, a combined Pounds 82.7 million.

However, the outer London boroughs would gain by a combined 2.2 per cent or Pounds 82.5 million, and the metropolitan authorities would see a slight improvement in their funding - a 0.3 per cent rise worth Pounds 27.67 million.

While the shire unitaries would gain overall by just Pounds 600,000 or 0.03 per cent, a few individual authorities would benefit hugely. Four of the new all-purpose authorities would be among the top six winners - South Gloucestershire, whose budget would rise by 4.4 per cent or Pounds 6.3 million; Bath and North-east Somerset, 4.3 per cent or Pounds 4.7m; North Somerset, 4.3 per cent or Pounds 5.1m; and Bristol, 3.9 per cent or Pounds 11.1m. But the Isle of Wight, the first unitary authority, would have its budget cut by 4.8 per cent or Pounds 4.5m.

In the counties, the top beneficiaries would be Berkshire and Northamptonshire. Counties such as Cambridgeshire and Warwickshire, which have had problems with budgets and had their spending capped, would benefit. But Oxfordshire would lose Pounds 2.4m.

The study team was led by Professor Peter Elliott, of Aberdeen University. Its findings - if accepted by ministers - are unlikely to be implemented before the next general election.

Biggest losers among the counties.

Cornwall 6.7% or Pounds 19.8 million Durham 3.3% or Pounds 12.6m Essex 3.2% or Pounds 31m Staffordshire 2.6% or Pounds 16.22m Hull 2.5% or Pounds 5.5m Biggest losers in London.

City of London 7.6% or Pounds 4.7m Tower Hamlets 1.7% or Pounds 4.3m Westminster 1.4% or Pounds 3.3m Hackney 1.2% or Pounds 3m Kensington Chelsea 1.1% or Pounds 1.6m Biggest losers among the metropolitan authorities.

Newcastle-upon-Tyne 1.5% or Pounds 3.4m Sheffield 1.4% or Pounds 5.7m South Tyneside 1.2% or Pounds 1.5 m North Tyneside 1.2% or Pounds 1.7m Doncaster 1.2% or Pounds 2.7 m Biggest winners among the counties.

Berkshire 3.9% or Pounds 18.3m Northamptonshire 3.4% or Pounds 12.7m Buckinghamshire 3.4% or Pounds 14m Cambridgeshire 2.4% or Pounds 9.8m Wiltshire 1.9% or Pounds 6.4m Biggest winners in London.

Havering 3.5% or Pounds 5.5m Barking Dagenham 3.1% or Pounds 4.2m Bromley 3.2% or Pounds 6.5m Bexley 3.2% or Pounds 5.1m Sutton 3.1% or Pounds 4. 0m Biggest winners among the metropolitan authorities.

Wigan 2.0% or Pounds 4.1m Stockport 1.8% or Pounds 3.2m St. Helens 1.8% or Pounds 2.4m Wirral 1.7% or Pounds 4.5m Sefton 1.7% or Pounds 3.7m

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