Grant reduction sparks financial uncertainty: council chief

The cuts to the general grant resource subsidy for Councils whose needs exceed their wealth bases was discussed at a briefing of the Stormont Environment Committee on the Local Government (Finance) Bill.

Mr Campbell was providing evidence on behalf of the Association of Local Government Finance Officers and expressed concern at a reduction in the grant paid by the DOE to compensate councils for the loss of rate income due to statutory derating and to provide extra financial resources for those councils whose needs exceed their wealth base.

The senior Londonderry council officer said he understood there was little room for financial manoeuvre and that the situation was likely to get worse rather than better.

But he warned the cuts to the grant was creating an atmosphere of uncertainty at local Council level.

He told the Committee: “First and foremost, we fully appreciate the severe constraints that public finances are under. Indeed, the situation will get worse. We recognise the economic climate that we are all in.

“The resources grant was ring-fenced for many years. It was kept at a certain level, and councils that were in receipt of general grant resources could, at least, plan within their estimates.

“Our concern, as finance officers in the local government sector, is the large degree of uncertainty. We were advised fairly late last year that it would be cut by 5 per cent, and we have had a further 5.9 per cent cut in year.

“We are all starting to prepare our estimates for 2011-12, but we do not know what the financial resources will be for next year.

“Although everything has to be looked at, the general grant resources are targeted at the councils that have the greatest need; the grant does not apply to all councils.

“Targeting the grant effectively impacts upon councils that have already been recognised as needing the general grant resources in order to keep their rates at a certain level.”

DUP MLA Peter Weir asked Mr Campbell if he believed the formula used to calculate the general grant required reform.

Mr Campbell replied: “I would not go as far as to say that the formula is wrong. However, we recognise that the general grant resources, which will be called the rate support grant in the new Finance Bill, are based on expenditure and a number of other factors, such as targeting social need, the influx of population and sparsity.

“We are saying that, had the RPA gone ahead and led to a lot more functions being transferring from central government to councils, the formula would have had to be reviewed.

“We are not saying that there is anything wrong with the formula necessarily, but a time when significant change was being made to local government would have been an appropriate time to carry out a review.”