Chancellor Philip Hammond has rejected the Local Government Association’s (LGA) estimate of the scale of what he described as the “so-called funding gap” faced by local authorities.
In February, the LGA said that councils face a shortfall in funding of £3bn next year, rising to £8bn by the middle of the next decade.
However, speaking before Parliament’s Treasury Select Committee this week, he suggested that the LGA had overestimated the size of the financial pressure facing councils.
He told the committee: “I don’t accept the LGA figures.
“We will be, in the course of the spending review, setting forward budgets for local authorities.
“I do accept there is a funding challenge but I don’t accept the numbers you have quoted from the LGA.”
Hammond was challenged strongly by committee member, Labour MP Wes Streeting on the comment.
Streeting said: “It is good that you have figures in Treasury. But it’s not good that you are not prepared to explain why you think your figures are better than the LGAs or indeed what your figures are.”
Responding, the chancellor said: “I am simply not familiar with the LGA figures. I don’t recognise the magnitude of the so-called funding gap.”
Explaining further, Hammond said: “For someone to posit a funding gap there has to be a hypothetical level of funding posited.
“No doubt the LGA has constructed a model of the level of funding they believe is the appropriate level of funding, have then measured the gap between that and the level of funding that is available to local authorities in aggregate and defined the difference as a funding gap.”
He indicated that he saw the LGA calculations as a lobbying position, and said he understood why they would want to argue for more funding for the sector.
“It is perfectly proper for them to take that approach as a way of presenting to the government the case for additional funding for local authorities in the run up to the spending review,” he said.
“We will certainly look at the evidence that the LGA presents.”
However, the chancellor indicated that the chances of a three-year Spending Review settlement being arrived at this year are rapidly diminishing.
In March, he told Parliament that he intended to launch a full three-year review to be concluded alongside the autumn Budget, “assuming a Brexit deal is agreed over the next few weeks”.
However, last month, Prime Minister Theresa May agreed an extension to the deadline for Brexit until 31 October.
Hammond told the committee this week: “We will keep an open mind about how the process should unfold throughout the next few months.
“If we are going to do a full three years’ spending review we need to formally start the process before the summer recess, carry it on through the summer and bring it to a conclusion around the time of the autumn budget.”
The chancellor rejected a suggestion from Scottish National Party committee member Stewart Hosie that the government could give councils some certainty over specific budgets, such as housing.
“It would be possible but I don’t think it would be a good idea at all,” Hammond said.
“The point of a spending review is an opportunity for government and Parliament and society more widely to debate priorities and to look at how we allocate scarce resources across the vast range of potential avenues…
“So setting allocations for a single department or a single subset within a department would pre-empt what should be a proper balancing discussion across the range of public expenditure.”
The LGA declined to respond to Hammond’s comments when approached by Room 151.
