How York council’s funding has declined since 2010

According to the Bank of England’s inflation calculator, the council’s revenue budget from 2010 of £118m should now be worth around £173.5m if council services remained the same. However, the City of York Council’s budget for the financial year starting in 2024 is approximately worth just £150m – a £23.5m difference.

Local authorities’ budgets are made up of council tax income, government grants and business rate retention – but councils across the country have seen their spending power drop by about 10 per cent since austerity was introduced in 2010 by the coalition government, according to the Institute for Government.

The Labour-run council’s executive member for finance, Coun Katie Lomas, said: “The conscious decisions of the coalition government in 2010 and subsequent Conservative governments have been to shrink local councils and what services they can provide for their communities.

“We can debate why funding to councils has been cut so significantly, but that it has been for well over a decade is a fact. The £44m in government grant we received in 2010 would today be worth around £64m, and yet the external funding we now receive is only around £35m, leaving us almost £30m short on an annual budget of almost £150m.

“As a Labour administration, we’ll always deliver a balanced budget but the constraints and controls placed on local councils by current central government policy means we are largely managing Conservative national cuts at the local level.

“We’re hopeful a future Labour government will begin to stem this loss of funding and give local government greater long-term certainty over its funding, as well as finding a long-term national solution for the funding of adult social care, which has been put off and put off for far too long.

“Lastly, York is ranked bottom of the national funding table for all public services combined, so we continue to make the case to the government to give York a fair deal, something which is long overdue.”

Henri Murison, chief executive at the Northern Powerhouse Partnership, said: “Council tax now makes up three-quarters of York council’s funding. This will continue to increase year on year as a proportion of the budget, as the council has no choice but to put in place the highest permitted increase of 4.99 per cent without a referendum.

“It is unfair to local people that the costs for vital services for the most vulnerable increase when government funding is insufficient. This leaves less and less money for services that benefit the wider community. Simply put, it is unsustainable that the government continues to put more and more of the burden on such a regressive form of taxation.

“The City of York Council has shown clear leadership to support calls for fairer ways to fund local services. For the York and North Yorkshire devolution deal to succeed, both local authorities need a fair and sustainable way to fund their own services year to year. New powers are needed immediately, including the ability to levy a tourism tax on Airbnb and the wider sector.”

A Department for Levelling Up, Housing and Communities spokesperson said: “We recognise councils are facing challenges and that is why we recently announced an additional £600m support package for councils across England, increasing their overall funding for the upcoming financial year to £64.7 billion, a 7.5 per cent increase in cash terms.

“Councils are responsible for their own finances and set council tax levels, but we have been clear they should be mindful of cost-of-living pressures. We continue to protect taxpayers from excessive council tax increases through referendum principles.”

Despite councils being in charge of their finances, there is a cap to how much council tax can be increased by the government. Other income, including government grants and business rates retention, is also government-controlled. The department for Levelling Up suggested York’s ‘core spending power’ is up to £172.5m for 2024-25, an increase of £11.3m.

However, this includes an assumption around growth in the council tax base – the number of properties charged – and that the council will implement the maximum increase in council tax. It also includes the Better Care Fund, adult social care grants and a whole range of other specific grants.

Of the £172.5m quoted by the government, £113m of it is public-funded council tax.

One figure within the council, who asked to remain anonymous, said: “The key figure to compare this £11m to would be our growth requirement of £23m, so government funding is way below what is actually needed. It’s also a bit misleading for the government to say it’s an above inflation increase just because inflation happened to have dropped when they issued it.”

The decline in government funding is – in part – why the York Council’s most recent budget was mired with cuts and money-saving measures.

The council’s Labour administration may hope that things will change under a Sir Keir Starmer government, but his shadow chancellor Rachel Reeves kept her cards close to her chest when asked how a Labour government would fund councils.

Ms Reeves told the Local Democracy Reporting Service in December 2023: “I think the common theme here is the party that’s in power in Westminster, rather than the party that’s in power in the town hall. After [14] years of Conservative government, you’ve got so many local authorities from all different political parties getting into financial difficulties because of the policies of this Conservative government.”