"Local government spending has already been cut by £1.2bn as part of the £6.2bn spending cuts previously announced for the current year. Yesterday, the Chancellor confirmed unprotected Whitehall departments will  have budgets cut on average by 25% in real terms over the current parliament. These reductions are 5% higher than Labour's last Budget taking cuts from £44bn pa to £61bn pa.  

"The final settlements will be confirmed on 20 October when the Spending Review is published and the detail for local government will only be known then. The ability to mitigate service cuts through Council Tax rises will be constrained next year due to the proposed freeze (costing some £0.6bn in revenue foregone) but the statement suggests that some compensation for this may be made available by central government as an incentive.
 

"Local government staff will be affected through the proposed two year public sector pay freeze for those on over £21k pa (with staff on less getting a flat rate £250 annual increase), along with  the public sector pensions review and the proposal that top salaries be capped at 20 times the lowest salary. Additionally the cuts are likely to lead to job losses with up-front costs to local authorities (perhaps being capitalised) and uncertain impacts on the local economy.

"There was little specifically on the Coalition's aim of greater third sector involvement in delivery of local services but proposals to ease the burden of VAT charges on charities benefiting from shared services may facilitate this. 

"The announcement on restrictions to the level of housing benefit is likely to present challenging implementation issues for local authorities.

"Capital spending will not be cut further than previously announced overall, but projects that contribute significantly to economic growth will be prioritised particularly outside London and the South East with the Regional Growth Fund and some specific transport projects. Despite no overall cut, the capital budget may be reallocated and consequently capital projects delivered by local government with central government funding may yet be impacted differently according to sector and/or location.   

"The proposal to abolish Regional Development Agencies (RDAs) was confirmed today, although they will, in some cases, transform into local enterprise partnerships where Local Authorities will be able to work with the private sector. This is also intended to facilitate greater coordination of investment in transport, housing, regeneration and other aspects of economic development. As part of this reform, proposals will be developed for local authorities to support growth, including options for business rates and Council Tax incentives to allow the fruits of growth to be reinvested locally. Planning is intended to be driven more by local decisions through the use of Local Development Orders.

"Overall there are likely to be significant challenges in prioritisation and in securing efficiencies which will require careful financial planning. Effective coordination across borders, across sectoral boundaries and with the private and voluntary sectors will also be critical to successfully navigating these challenges over the months and years ahead."