LOCAL SERVICES FACE ALMOST £6.5 BILLION FUNDING GAP BY 2025

Local services in England face an overall funding gap of almost £6.5 billion by 2025, new analysis by the Local Government Association ahead of the Budget reveals today (6 Mar).

By the middle of the decade the funding gap facing vital adult social care services supporting older and disabled people alone will reach £3.9 billion – making up almost two thirds of the overall gap.

It comes as next week’s Budget marks 90 days since the General Election.

The LGA is calling for the Government to use the Budget to urgently progress the cross-party talks on the future of adult social care, pledged by the Prime Minister to start within the first 100 days of his new government.

It also needs to pave the way for the Spending Review to provide a long-term, sustainable funding solution for our local services. Every pound invested by government in council-run services will benefit communities, improve lives and relieve pressure on other services like the NHS and welfare.

The Government responded to the LGA’s call to provide councils with desperately-needed new funding this year, alongside council-tax raising powers and the continuation of key government grants.

This has halved the funding gap councils face in 2020/21 compared to last year. It means councils will be able to meet extra demand and cost pressures they face.

Having lost nearly £15 billion in central government funding in the last decade, many councils continue to face significant challenges when trying to set budgets this year and protect services from further cutbacks.

After a reduction in the funding gap in 2020/21, LGA analysis shows that rising cost pressures and unprecedented demand for services – in particular adult and children’s social care and homelessness support – will see the funding gap facing councils in England rise again from 2021/22 before it reaches almost £6.5 billion by 2025.

The LGA said councils also need urgent clarity about the timing and implications of the planned Fair Funding Review and how the Government’s fundamental review of business rates will impact on reforms to allow local government to keep more of business rates income collected locally.

Business rates account for around a quarter of all council spending power. Communities cannot afford one of the main methods of funding local services to be dragged through years of debate and wrangling.

It is imperative that the Government works closely with local government as part of its review of the business rates system and that the impact on how local services are sustainably paid for must be one of its central considerations.

Cllr James Jamieson, Chairman of the LGA, said:

“This year’s positive funding settlement will help councils meet the rising cost and demand pressures they face this year. This means more older and disabled people able to live the lives they want to lead and more of our most vulnerable people can be supported.

“This is only a one-year settlement.

“Councils continue to face severe funding and demand pressures that continue to stretch local services to the limit and a funding gap that could reach almost £6.5 billion by 2025.

“The Budget and the Spending Review need to provide a sustainable, long-term funding settlement for councils which means they can improve services and not just keep them going.

“With long-term investment, councils can protect local services, improve the lives of their communities and meet the significant ongoing pressures they face both now and in the future.”

The LGA’s Budget Submission sets out how it can unlock the ambitions of councils to further deliver high quality services, maximise the growth potential of their local areas and help the Government deliver on national priorities. It can be read here.

The LGA’s new report – The lives we want to lead; towards change, towards hope – sets out the main issues that need to be addressed to ensure that people can live the lives they want to lead, and the kind of action councils want to see from government. A copy is available on request. This includes making the case for the value of social care in its own right; funding to secure the short- to medium-term and pave the way for future reforms and more investment to support prevention and wellbeing. We also need changes from the NHS to further support a greater emphasis on prevention and wellbeing; and consideration of any long-term reform proposals against a set of key tests, such as their clarity, fairness and whether they pool the financial risk of care costs amongst the population at large.

By 2025, local government in England will face an almost £6.5 billion funding gap. The LGA methodology is available on request.

£8 BILLION FUNDING BLACK HOLE BY 2025 WAS ESTIMATED IN 2019

Last year (1 Feb 2019) the Local Government Association launched a campaign to influence the 2019 Spending Review by warning about the growing risk to vital local services if the Government does not take action to secure the financial sustainability of councils.

However, the LGA said that, with the right funding and powers, councils can continue to lead their local areas, improve residents’ lives, reduce demand for public services and save money for the taxpayer.

Between 2010 and 2020, councils will have lost almost 60p out of every £1 the Government had provided for services.

Some councils are being pushed to the brink by this unprecedented loss of funding and an ongoing surge in demand for children’s services, adult social care services and homelessness support. This is on top of having to absorb other cost pressures, such as higher national insurance contributions, the apprenticeship levy and the National Living Wage.

More and more councils are struggling to balance their books, facing overspends and having to make in-year budget cuts.

Councils provide more than 800 services to residents in their local area – some of these are legal duties they have to provide whilst others are optional powers they can use depending on local priorities.

Money is increasingly having to be diverted from these optional services, which help build communities people want to live in, to plug growing funding gaps, while some councils have already been forced to cut their services back to the legal minimum “core offer”.

With councils in England facing an overall funding gap of £8 billion by 2025, local government leaders fear many more will have to take similar action.

That could mean many cherished local – but discretionary – services such as the maintenance of parks, improving food hygiene and safety, certain bus services, cultural activities and council tax support for those in financial difficulty – face being drastically cut back by councils across the country.

To illustrate the point, the LGA has produced a list of 7 popular discretionary services that councils might need to consider reducing in order to meet their statutory duties:

Local government leaders are also clear that the scale of the funding gaps and demand facing children’s services, adult social care and homelessness support mean scaling back discretionary services will not be enough to protect the ability of councils to provide dignified care for older and disabled people, protect children, and support those experiencing or facing homelessness.

Cutting these discretionary – often preventative – services is also a false economy as they can help alleviate pressure on statutory services. Other parts of the public sector, such as the NHS, are also then forced to pick up the pieces. For example, parks and leisure facilities can help improve the health and wellbeing of residents.

With sustainable funding, councils can make a difference to people’s lives by building desperately-needed homes, creating jobs and school places, providing dignified care for our elderly and disabled and boosting economic growth.

LGA Chairman Lord Porter said:

“The money local government has to provide vital services is running out fast and huge uncertainty remains about how councils will pay for services into the next decade and beyond.

“If the Government fails to adequately fund local government then it will be our local communities and economies who will suffer the consequences. It will be those who rely on vital adult social care to live independent lives, rural bus routes to get out and about, council tax support to ease financial burdens and those who value clean streets, green spaces and roads fit for the purpose.

“The Spending Review will be make or break for vital local services and securing the financial sustainability of councils must be the top priority.

“This is the only way to ensure councils can meet their legal duties to provide dignified care for our elderly and disabled, protect children, and prevent and reduce homelessness and protect the wide-range of other valued local services which also make such a positive difference to communities and people’s lives.”

Just to stand still and deliver the same services currently being provided today – which have already been significantly cut in the last decade – the LGA estimates that councils would need an additional £8 billion more than they are expected to have in 2024/25.

Funding gap facing local services in 2024/25

Pressures are growing in children’s services, adult social care, and efforts to tackle homelessness. This is leaving increasingly less money for councils to fund other services, like fixing potholes, cleaning streets and running leisure centres and libraries.

The number of looked after children continues to increase to the highest level since the 1980s, with a total of 75,420 children in the care of councils in England. The number of children supported through a child protection plan to keep them safe from harm increased by more than 2,700 over the past year – the biggest annual increase in four years.

Councils receive almost 5,000 requests for social care every day. But care home and home care companies are struggling to stay afloat. Over the last six months, more than 8,300 people have been affected by care homes or home care providers either pulling out of contracts or closing completely.

Local authorities are currently housing more than 80,000 homeless families in temporary accommodation, including more than 120,000 children.