Council’s funding shortfall warning

Funds raised through business rates and council tax will not be enough to make up the future shortfall from government funding, town hall chiefs have been warned.

A report covering the period 2019/20 to 2023/24 says Rochdale Council’s need will be ‘greater than the resources it can generate’ due to rising demand for services and significant changes to how the authority is funded.

The medium-term financial strategy forecasts that by 2023/24 the gap in resources will grow to £29.5m from what is currently a balanced position.

Rochdale Council currently keeps 99 per cent of business rates raised in the borough as part of a four-year pilot scheme which began in 2017 and also included the other nine Greater Manchester authorities.

As part of this settlement it has seen two main sources of government funding removed – the Revenue Support Grant (RSG) and the Public Health Grant (PHG), but business rates top-ups ensure it should not lose out on cash as the scheme is intended to be ‘fiscally neutral’.

The report’s projections are based on a continuation of 100 per cent business rate retention, but it is not known if this will be the case for pilot areas from 2021, as the government is planning to implement a 75 per cent rate for other local authorities.

There are also concerns that changes to how business rates are calculated could result in councils no longer being fully ‘topped up’ to compensate for a drop in government funding.

And like other councils, Rochdale is also unable to raise its council tax beyond certain levels without calling a referendum.

Currently this stands at two per cent for general services and six per cent over three years (2017/18 to 2019/20) for adult social care.

It is unclear whether the Government will allow authorities to charge an additional adult social care precept from 2020/21 onwards, and the lack of clarity on future funding is another headache for town hall bosses.

The report reads: “The review of the medium term financial strategy has been undertaken against a background of significant reductions and changes in grant funding and increasing costs due to service pressures.

“These factors could jeopardise the council’s sustainable financial position unless budget savings continue to be delivered alongside the delivery of the council’s corporate priorities.”

It adds: “The period covered by this financial strategy will continue to present our council with some of the most significant operational and financial challenges ever experienced by those leading and managing the delivery of local services. Managing our money well is now more important than it has ever been.”

Council leader Allen Brett has urged the government to move away from its vision of self-reliant local authorities and provide the necessary funding for vital services.

He said: “Rochdale’s position isn’t unique as, like many other councils, our funding from central government has been drastically reduced since 2010 with more cuts to follow.

“To address this problem the government needs to urgently find a long-term solution to the social care funding crisis, scrap its damaging austerity policies and abandon the absurd idea that councils like Rochdale can raise enough money locally to pay for services.

“The government cannot expect us to continually do more with less, so it’s now time they stumped up the cash and ensured the vital frontline services we provide our residents are protected.”

Nick Statham, Local Democracy Reporter