Innovation and changeDigital TransformationCouncils to face £8bn funding black hole by 2025

Councils to face £8bn funding black hole by 2025

The Local Government Association (LGA) has warned that local services in England will face a funding gap of almost £8bn by 2025.

The Local Government Association (LGA) has warned that local services in England will face a funding gap of almost £8bn by 2025.

On the day more than 1,400 local government leaders, councillors and ministers gather at its Annual Conference in Birmingham, the LGA is launching its campaign to highlight the problem ahead of the Spending Review to build the case for investment in local services.

The LGA said that the Government’s next Spending Review will be “make or break” for local services, already under huge funding pressure. It presents the opportunity for long-term, sustained investment in local government that would improve the lives of residents and reduce the pressure on other parts of the public sector, such as the NHS.

Funding cuts

By 2020, local authorities will have faced a reduction to core funding from the Government of nearly £16bn since 2010. That means that councils will have lost 60 pence out of every £1 the Government had provided to spend on local services. Next year, 168 councils will receive no more core central government funding at all.

In a new report on local government funding, published today, new LGA analysis estimates councils in England face a funding gap of £7.8bn by 2025. Plugging this gap would just keep services standing still and does not include any funding needed to improve services or reverse any cuts made to date.

Innovation

Councils have responded to the financial challenges they face by finding new and innovative ways of operating, such as sharing services and digital transformation, while still delivering the vital services their residents rely on. Despite the best efforts of local government, the LGA is warning that this is no longer enough to protect the local services which are “on the brink of collapse” and facing huge and increasing demand pressures.

For example, local authorities are currently housing 79,000 homeless families in temporary accommodation, including more than 120,000 children. Last year saw the biggest annual increase in children in care since 2010 and councils are now starting 500 child protection investigations every day. Councils are receiving almost 5,000 requests for social care every day. Over the last six months, more than 8,000 people have been affected by care homes or home care providers either pulling out of contracts or closing completely.

In his 2018 Spring Statement, Philip Hammond committed to increasing public spending if public finances continue to improve. Local government leaders say the Chancellor’s Spending Review must recognise the urgent need to focus on fairer funding for local services.

Damaged beyond recognition

LGA Chairman Lord Porter said: “We’ve reached a point where councils will no longer be able to support our residents as they expect, including our most vulnerable – let alone help the country to prosper. Councils have shouldered more than their fair share of austerity and have tried to reduce any impact on residents. But there is only so much they can do and the financial challenges they face are growing.

“Councils now spend less on early intervention, support for the voluntary sector has been reduced, rural bus services have been scaled back, libraries have been closed and other services have also taken a hit. More and more councils are struggling to balance their books and others are considering whether they have the funding to even deliver their statutory requirements.

“If the Government allows the funding gap facing councils and the local services to reach almost £8bn by the middle of the next decade then our councils and local services will be damaged beyond recognition. The impact on society – all places, all generations, every person – will be hugely damaging. Millions of people will be deprived of the vital local services that help improve quality of life and bind communities together.

“But by properly funding local services and giving councils the powers to work on behalf of their communities, local government can be the driving force for a new chapter in our country’s history. It would ensure residents can live with dignity, achieve their goals and aspire to do more than just get by, as well as helping to reduce pressures on the rest of the public sector.”

New models

Commenting on the report, Simon Fletcher, managing consultant at Agilisys said: “As part of the work Agilisys does with local authorities, I spend a lot of time visiting councils nationwide, discussing the challenges they face. Nine out of 10 tell us their issues are lack of money, rising demand for children’s and adults’ services and greater expectations of residents. I often see first-hand the exciting ways some are developing opportunities and adopting new principles in response. But not all are. I hear many stories about councils that are not coping with austerity, cannot see a way to set balanced budgets in the coming years, do not know how to respond to the rising demands and expectations of citizens and have no capacity for forward-looking, place-shaping, leadership.

“These councils often rely on reserves to buy time, yet seemingly do little with the time bought; reduce or cut key services; close important local amenities, which will never return; and are still focused on blaming central government for an admittedly ruthless period of austerity, which started nearly 10 years ago.

“The differences between how councils are responding to what are very similar challenges are becoming more and more stark. What can be learnt from the approach that councils such as this year’s ‘Council of the Year’ London Borough of Barking & Dagenham have taken? And what are the next steps for local government to take to successfully embrace change, create new opportunities, enhance services, develop new skills and accelerate innovation?

“One thing we know is that imposing costs savings and looking for efficiency gains is no longer a sustainable model for change. Transformation as we know it is evolving. Now is the time for local government to adopt new models of change with the needs of its citizens at the very heart.”

The full report can be downloaded here.

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