London councils to slash services in cash squeeze

KEY council services face the axe because of low levels of government funding announced today.

More than two thirds of London's 33boroughs will receive an increase in their budgets of just 1.75 per cent, putting their finances under severe pressure. All of the boroughs will receive funding levels of below inflation, at 4.5 per cent, from the Government.

Rubbish collections, schools, housing and social services could all suffer from the below-inflation settlement.

Their income is topped up by council tax but several authorities have already committed to low or zero council tax rises, meaning services and staff are under threat.

One council has already made a promise to cut council tax by three per cent, with other boroughs expected to make announcements in the new year.

Tory-controlled Westminster, Wandsworth and Kensington and Chelsea councils are among the boroughs which have agreed to plans by shadow chancellor George Osbourne for a council tax freeze.

Mayor Boris Johnson has also announced a freeze for City Hall's share of the household bill. Tony Travers, from the London School of Economics, said: "Many councils, especially Conservative ones, will be put in a very difficult position because they have committed themselves to low or zero per cent rises, but they will find themselves receiving a funding increase of under two per cent when inflation is nearer to four, so I would predict some reduction in employment. It's not going to lead to council tax hikes, but inevitably to cuts in services in whatever form councils choose to make them."

But local government minister John Healey praised the efficiency savings that had been made by London councils - more than in any other region.

He cited Westminster's new cashless parking payment system, which has reduced theft of revenue, and the use of external contractors in Hackney.

Mr Healey told the Commons that new regulations meant councils would not have to cut this year's budget if they had funds stuck in collapsed Icelandic banks.

He added that while London authorities had made considerable efficiency savings, nationally efforts to cut costs were "not good enough" and another £500 million a year needed to be found.

The funding arrangements are part of the Government's three-year funding plan for local authorities, which was agreed last year. Only four London authorities - Barking and Dagenham, Enfield, Redbridge and Newham - will receive an increase of more than three per cent.