Funding farce hits town halls

After all, Network Rail’s debt has now soared past the £30bn barrier – and even the most profligate council in Britain has not plunged this far into the red because of chronic mismanagement.

That said, the PAC report highlights – yet again – the hand-to-mouth nature of the financial arrangements which underpin key services like education, and how these are no longer fit for purpose as councils start to pick up the bill for spiralling costs to social care.

The coalition’s response to funding pleas is to point out that it is up to councils and other public bodies to determine their priorities at a local level – a tactic that David Cameron and other Ministers regularly use to brush aside any awkward questions which have been tabled by MPs in the House of Commons.

Yet, while local authorities do now have limited powers to raise additional revenue from the business taxes paid by new firms or a marginal increase in council tax bills, the majority of their budget comes from grants determined by the Department of Communities and Local Government.

However it has become increasingly clear, over the last two decades, that there is little confidence in the rules that determine grant levels. Major northern cities like Leeds and Sheffield appear to have lost out in recent times, even though they are regarded as engineers of economic growth by other Whitehall departments, while rural bodies claim that insufficient regard is given to the cost of providing key services to disparate countryside communities in North Yorkshire and the East Riding.

Given this, the time has come for a fundamental overhaul of finance arrangements – even more so if the Government backs Lord Heseltine’s regeneration blueprint that will empower regional bodies on an unprecedented scale. But the plain truth of the matter is that Ministers will be reluctant to instigate such a process because it might just reveal the extent to which councils have taken on additional responsibilities while cutting their budgets to the bone.