If you listened to Croydon’s Labour politicians, you’d be forgiven for thinking that the government had slashed its budgets to the point that spending power was reduced to practically nothing.
“The government is reducing funding to Croydon by 75%!” they repeatedly say – but what they won’t tell you is that the amount of money Croydon Council has to spend on public services has actually increased.
How can both these statements be true?
Put simply, the government is giving Croydon Council more control over how it raises and spends its local taxes. Historically the Council raises rates, sends them to the central government, then the government sends them back to the Council in the form of a grant.
Wouldn’t it be better if more of the taxes raised in Croydon stay in Croydon to pay for our local public services?
The system for funding local councils is notoriously complex. They get their income from two main sources - money that the government gives them and money that they raise themselves. When the coalition government came to power in 2010, on average 80% of local government funding came from by central government. Since then, it has fallen and will continue to do so until by 2020 95% of local government spending will be raised locally – cutting out the government entirely.
Why is the government doing this?
The government believes it is better for councils to raise what they spend locally because it will make them both more accountable and less dependent on central government. Openness and transparency are vital to keeping tabs on what our town halls are up to.
So if the government used to provide 80% of council funding and it is cutting that to 5%, does that mean councils are having to cut their spending by 75%? No, because the government is allowing councils to keep the money they collect from business in the form of rates (which until now they have had to pass on to central government) and also because it is allowing councils to increase Council Tax by an extra 2% as long as they spend this money on improving social care.
Where’s the proof?
To assess the impact of what the government is doing on Croydon Council, you need to look not at the change in the grant the council gets from the government, but at the change in the amount of money the Council has to spend - the combination of income from government grant, business rates and Council Tax.
In the last financial year, the amount the Council can spend (core spending power) was £274 million. This year (2018/19) it will rise to £280 million and in 2019/20 to £283 million. By 2020 Croydon Council expects to be spending more than what it is currently spending. If the council increases Council Tax by more than the government expects, it could actually be spending more. You can find all of this in Croydon Council’s own budget report of 26th February - right here on page 41, graph 8.2.
What does this mean for frontline services?
Croydon Council is going to have to work more efficiently but there should be no change in the standards of services that residents receive. In essence, Labour need to deliver better value for money.
Of course, the complexity of the system leaves plenty of room for misleading claims of the type regularly shared by Croydon’s Labour Councillors – this simply means that they avoid taking responsibility for the decisions they’ve made whilst running our borough.
What about Labour’s claims the government sending our money to Surrey Council?
Labour continually say: ‘The government is forcing a 75% funding reduction on Croydon and sending it to leafy Surrey!’ This is misleading in several regards but perhaps the most important truth is that the money that goes out from the government doesn’t belong to Croydon. Does the money going to pay for the latest expansion of East Croydon come from Durham? Does it come from Cornwall? Does it come from Ayrshire?
The argument that government takes money specifically from one authority and allocates it to another is puerile. The people of Croydon are smarter than that.
With local elections coming up it’s vital that residents look beyond the spin. We get how it can be easy to have perceptions confirmed and biases reinforced – but we think you’re smarter than to fall for the misleading statements of Croydon’s Labour-run Council.