Local authorities demand more cash to offset next year’s budget shortfall

    Councils are facing a £1.5bn black hole in their budgets for
    next year, according to local government leaders.

    The Local Government Association said the deficit would lead to
    massive council tax hikes in 2006-7 unless the Treasury provided
    emergency funding to meet the gap, as it had done for 2005-6.

    The claims came alongside a survey revealing that the £637m of
    extra funding, announced in December, alongside capping threats,
    had kept council tax rises in England down to an average of 4 per
    cent.

    The annual poll by the Chartered Institute of Public Finance and
    Accountancy means most councils should escape capping, which
    ministers threatened they would enforce against councils that
    increased taxes by more than 5 per cent.

    LGA chair Sir Sandy Bruce-Lockhart said: “With the help of late
    one-off funding from the chancellor, councils have done everything
    in their power to keep the lid on tax rises this year, but we are
    left with a funding black hole next year.”

    The LGA said councils were facing increased demand and provider
    costs for adult services and ongoing pressures in budgets for
    looked-after children, while there remain concerns that the
    Children Act 2004 will not be fully funded.

    But its claims followed news of increased costs for providers, as
    the government announced two rises in the minimum wage last
    week.

    With many care staff earning on or just above the minimum wage,
    providers said the increases – from £4.85 to £5.05 this
    October, and £5.35 next October – would significantly inflate
    their cost bases.

    English Community Care Association chief executive Martin Green
    said: “The knock-on effect of further rises may be unsustainable
    for many independent care homes, especially for the smaller
    providers.”

    Frank Ursell, chief executive of the Registered Nursing Home
    Association, said it would be “cynical hypocrisy” for the
    government not to fund the rises through increased funding to
    councils.

    The furore comes against the backdrop of the Wanless review of
    older people’s funding, commissioned by the King’s Fund, which is
    due to be published in time to influence next year’s comprehensive
    spending review.

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