Funding crisis: East Midlands councils' future challenges

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Image caption Many local authorities have struggled due to a cut in central government grants

"It's all about taking an opportunity in a crisis," says the outgoing Conservative leader of Melton Borough Council.

Byron Rhodes is taking me around the modern council headquarters. It's full of light. It's busy.

The building has regenerated the area around Melton Mowbray's railway station, once a muddy pot-holed piece of wasteland where those in the know parked for free.

Now the council offices link the station to a park and the town centre.

It was partly paid for with insurance money after a fire destroyed the old offices on the other side of town.

A supermarket moved in to replace it and helped with the money too, putting the council on a firm financial footing.

'Threatened services'

But that was four years ago and the crisis is a different one today. It's being experienced by all local authorities - cuts in central government funding which threaten the services they provide.

Mr Rhodes is also deputy leader of Leicestershire County Council, with responsibility for finance.

Leicestershire is historically the poorest funded council in the country because of a quirk of Whitehall recalculations, going back a quarter of a century since the poll tax, or community charge, was scrapped.

At the moment councils get income from council tax, a share of the business rates, any income they generate themselves from services plus a grant from central government.

Image caption Melton Borough Council's outgoing leader Byron Rhodes said the funding system is "chaotic"

It's the grant cut which is causing them grief.

What's called the "core funding" is worked out by the number of homes multiplied by a set amount. And each authority has a different value set per dwelling.

If we look at Surrey, which is top of the table, the amount will be £1,686 by 2019/20.

Nottinghamshire is mid-table at £1,482, Derbyshire is in the lower reaches with £1,422 per dwelling and then comes Leicestershire at £1,354.

'Partying everyday'

"The funding system is chaotic," says Byron Rhodes.

"It doesn't reflect real need. Look at Oxfordshire which is an interesting example," he says with a glint in his eye.

Could he possibly be referring to the prime ministerial plea to the county council about cutbacks to services there?

"If we had the same funding as Oxfordshire, we'd have £50m a year extra. If we had the same as Surrey, we'd have £100m more. We'd be partying everyday if we had that kind of money."

Leicestershire have been helped with a small share of what's been called transitional funding - about £300m to help councils following pressure from Conservative MPs.

Think back to the vote on Sunday trading. With a majority of only 17 in the Commons, the Conservatives lost the vote when 20 odd rebelled.

Last month there would've been another rebellion, including some of our own Tory MPs in the East Midlands, if something wasn't done to improve the local government finance settlement over the next four years.

Image caption Derby City Council says some of the cuts they are imposing are "devastating"

The money has gone largely to shire counties. Leicestershire got £6.6m spread over two years, enough to save some services from closure.

But it's a drop in the ocean for an authority with a £19m black hole in the budget every year after the latest cutbacks.

Labour have protested that 83% of the councils getting transition funding are Conservative-run. Many Labour-run authorities such as Derby, Leicester and Nottingham, got nothing.

The leader of Derby City Council, Ranjit Banwait, has launched a "fair funding for Derby" campaign. He says the allocation of government funding is unfair and political and the cuts they're having to impose on leisure services and culture are devastating.

"Now they are threatening our ability to protect the vulnerable and our ability to function is under threat," said Mr Banwait.

Back in Melton Mowbray, Byron Rhodes has some sympathy for the Labour council in Derby.

"Derby probably have some greater needs," he says.

Image caption Ranjit Banwait has started a "fair funding for Derby" campaign

But once more he is talking about seizing an opportunity in a crisis.

Leicestershire's finance team are working on a submission to put to the government with good arguments on how to restructure the way funds are allocated.

"We're going to do it. We're going to work up a system which is fairer."

He has the backing of local MPs and is talking to neighbouring authorities.

And with a hand out to Derby, he says: "If they want to talk to us about how to improve things I'm happy to speak to them."

It's a crucial time to get things right. The government is moving to a system where, by 2020, the grant will go.

Councils will instead get an allocation of funds from the business rates instead.

How they come up a formula for doing that in a fair way, which helps those authorities with most need, is the next challenge.

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