Councils to ‘fare worst' in Spending Review

Based on calculations by the Institute for Fiscal Studies (IFS), the real-terms cut to the grant central government gives to local authorities is likely to come to 27.2 per cent for the five-year period up to 2019/20 that the review covers.

This is worse than predicted cuts for the Home Office (25.7 per cent), the Ministry of Justice (25.2 per cent) and the Department for Business, Skills and Innovation (18.3 per cent).

Predictions of the scale of cuts councils face come just a month after the Local Government Association warned that work by children's services departments to protect children from abuse and neglect will struggle to continue at its current level if funding for local authorities is cut further.

The Department for Education (DfE) has previously warned that children's services are likely to be hit hard in the Spending Review.

It is currently conducting a study into the spending habits of children's services departments. It has said that, along with the Department for Communities and Local Government and HM Treasury, it wants to "understand better how local authorities responded to funding pressures over the last parliament and their forecasts for changes in demand for, and expenditure on, children's services in future".

The IFS estimates that, overall, the DfE will fare better in the review.

In light of a government pledged to freeze real-terms resource spending on schools, the IFS calculates that the DfE will face cuts of 6.1 per cent over the period.

Meanwhile allocations for transport, defence and health are all predicted to rise, by 1.1 per cent, 4.1 per cent and 6 per cent respectively.

However the IFS does stress that it should be noted that the central government grant to local government is "just one source of revenue for English local authorities".

"They also raise revenue from council tax and business rates, and these sources of revenue are forecast by the Office for Budget Responsibility to rise in real terms over the parliament," the report states.

"Taking into account this revenue, the spending power of local authorities under the scenario presented above would be cut by substantially less than the [estimated] 27.2 per cent cut to local government."

The report goes on to question whether the spending cuts set to be made at the Spending Review, which will be outlined in parliament on 25 November, are achievable on top of those delivered over the last parliament.

"On the one hand, the coalition government demonstrated the ability to hold down spending, with many departments actually underspending their allocated budgets over the last parliament," the report states.

"On the other hand, further spending cuts (particularly with many of the same departments potentially seeing the biggest cuts again) will get harder as presumably easy efficiency savings have been identified and delivered, while demand and wage pressures continue to increase."