Funding outlook for councils from 2010/11 to 2019/20: preliminary modelling

published by © Local Government Association

26 June 2012

Councils were cut earlier and harder than the rest of the public sector as the Government began to implement its deficit reduction policy. If the same pattern of cuts to the public spending is replicated in the next Spending Review, councils will not be able to deliver the existing service offer by the end of this decade. Fundamental change is needed to one or both of:

  • the way local services are funded and organised
  • statutory and citizen expectations of what councils will provide.

The Local Government Association (LGA) has modelled all future sources of council revenue, including grants, local taxes, fees and charges, investment income and reserves drawdown to the end of this decade on assumptions that offset grant cuts against the potential for growth in other revenue sources. Our income forecast is optimistic.

We have also modelled future service spending demand, assuming that efficiencies could make it possible to reduce spending in real terms over the whole decade. Our demand forecasts err on the side of caution.

On these assumptions, our model shows a likely funding gap of £16.5 billion a year by 2019/20, or a 29 per cent shortfall between revenue and spending pressures.

We have also modelled the funding available for individual services within the projected resource constraint. On the assumption that demand in social care and waste are fully funded, other services face cash cuts of more than 66 per cent by the end of the decade.

Assuming that capital financing and concessionary fares are also funded in full, the modelled cash cut for remaining services rises to over 90 per cent.

We need to face up to what that means. Local government is the most efficient part of the public sector and will maintain that record, but efficiency is not enough. Without money and reform, there is no solution. Future sustainability starts with social care funding reform, allowing a genuinely free conversation between councils and local residents about how much tax they want to pay and what services they want to receive in return, and rethinking the structures of local public services as a whole.

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16 August 2012

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