Local authorities are set to shelve multimillion-pound capital programmes for improving transport, thanks to changes in the way the Government provides revenue funding.
Buckinghamshire councillors voted this week to delay £18M of local transport plan 2 schemes totalling one-third of their total expenditure up to 2008/09, due to Whitehall providing insufficient revenue to service the supported borrowing.
Hampshire’s cabinet will follow suit when it meets next week, deleting £5.7M of proposed spending on environmental services, while Derbyshire has already had to put £6M worth of transport schemes on hold for 2006/07.
The County Surveyors’ Society predicts the problem would be replicated across England, as nine shire counties responding to a survey said it was ‘uncertain’ whether they could meet the full revenue implications of the borrowing from 2007/08.
Buckinghamshire put its entire capital programme on hold in February when county treasurers learned that the cash would cover only a small amount of the new supported borrowing. Further clarification from the Department for Communities and Local Government was only received last week, and confirmed that the county had an £18M hole over the next three years. Council leader, David Shakespeare, said: ‘We have to go with our heads, rather than our hearts. We either use our budget for increased borrowing costs and make cuts in services, or we put capital schemes on hold until we can afford to finance borrowing for them.’
It was not decided as Surveyor went to press which parts of Buckinghamshire’s programme would be hit. But a proposed bypass of Stoke Hammond/Linslade, which is part-funded by supported borrowing, is in line, as well as smaller integrated transport schemes worth £60M.
Hampshire’s cabinet will consider a proposed £12.5M reduction in the county’s capital programme next week, reversing the authority’s previous policy of taking up supported borrowing approvals in full. Local politicians will be told by officers that the cost of the borrowing would ‘fall entirely on the council taxpayer’ because, being a ‘floor’ authority, Hampshire would not receive the required increases in revenge grant. The simple remedy of the Government restoring the ‘capital adjustment’ that previously ensured all councils received some revenue grant benefit had been discounted by Whitehall.
Graeme Fitton, chair of the CSS finance committee, said the problem had been compounded by the DCLG’s removal of a large chunk of revenue from council control by introducing direct funding of schools. ‘Most counties have managed to fund the borrowing this year to honour existing commitments, but will struggle from next year onwards.’
He predicted that half of the shire counties which are floor authorities would be hard-pressed to take up the borrowing approvals, blowing a hole in LTP2 programmes. The above-floor councils might also receive little benefit from the borrowing approvals.
In a worst-case scenario, the best-performing councils would only be able to take up the maximum of 50% of their allocations that come in the form of direct grant, while poor performers could be left with nothing.
‘The Government needs to provide LTP2 funding in the form of direct grants, but we don’t see much chance of that happening,’ said Fitton.