Future funding outlook for councils from 2010/11 to 2019/20

The updated funding outlook model reveals that the financial blackhole facing local government is widening by £2.1 billion a year and will reach £14.4 billion by 2020.

The analysis also reveals that the blackhole is growing at a rate £100 million a year faster than it was this time last year, indicating that the current funding system is broken and that a radical overhaul of the way services are provided and paid for is required across the entire public sector.

The Local Government Association has updated its funding outlook report to incorporate the additional 10 per cent real-terms cut to council funding for 2015/16, which was announced on 26 June 2013. This cut comes on top of the 33 per cent real terms cut which will be made across the current comprehensive spending review period. The model also incorporates the widening of the health budget to allocate £2.1 billion to adult social care services in 2015/16.

With our ageing population pushing up demand for adult social care services such as home care for the elderly and infirm, and the cost of providing councils two next-biggest-cost statutory obligations of children's social care and waste management also set to rise, the analysis shows that these three areas of spending will soak up an ever-larger share of council budgets.

The model shows that the money available to deliver all other local services, including leisure and cultural facilities, school support services, fixing the roads, building new homes and promoting economic growth will shrink by 46 per cent by 2020, down from £26.6 billion in 2010/11 to £14.3 billion by the end of the decade.

The model is based on an optimistic view of future council funding, conservative estimates of increases in the cost of and demand for services, and extremely ambitious assumptions on councils' ability to discover ever-efficient ways of working.

The analysis shows that if councils use their financial reserves to cover the cuts, this invaluable safety net will be exhausted within three years and no money will be left to cushion the impact of future cuts. This would also mean that the funding shortfall in 2020 would be larger than if reserves were not used at all. This is because the funding trajectory remains unchanged, while the money available to cushion the cuts or deal with unexpected costs will have already been used up.

Town hall leaders warn that the scale of cuts will have inevitable consequences on services right across the board. In response, local authorities will have to reduce care services and tighten eligibility criteria, placing a greater strain on our hospitals and emergency rooms. Cuts to the money available for infrastructure and growth projects will curb the economic recovery, reducing job opportunities and increasing welfare costs. Reduced spending on leisure and cultural facilities will reduce the quality of life in many areas.

The suite of reports comprises the main report, three supporting papers that illustrate the future funding outlook of various types of authorities, and a technical annex which explains the assumptions we used in our modelling.

Future funding for councils reports

Future funding outlook for councils 2013

Future funding outlook of AnySingleTier

Future funding outlook of AnyCounty

Future Funding outlook of AnyDistrict

Technical annex

8 July 2015

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