This guide seeks to highlight additional financing options to help sustain the sector and showcases learning from a number of councils who are already doing this.
Councils are facing a perfect storm. Rising energy prices, inflation and national living wage pressures are set to add £3.6 billion in unforeseen extra cost pressures onto council budgets in 2024/25. Increasing demand for statutory services like social care is adding to the burden. So, what does this mean for the future of discretionary services like public sport and leisure services and what additional financing options exist to support councils’ ambitions to maximise the benefits it brings to their communities?
This guide seeks to highlight additional financing options to help sustain the sector and showcases learning from a number of councils who are already doing this. It reinforces:
- the social value and contribution of public sport and leisure services to health, wellbeing and to communities
- how understanding and measuring social value outcomes can secure funding by integrating provision with essential services, particularly health systems
- the need to ‘invest to save’
- how spatial planning tools can help ensure developments unlock investment and ensure provision meets future needs
- how additional provision can secure social investment.
It builds upon the seven recommendations made in the ‘Securing the future of public sport and leisure services’ report by the LGA, Association for Public Service Excellence (APSE) and the Chief Cultural and Leisure Officers Association (CLOA) which highlighted the main changes the sector needed to make to secure its future and support communities.
Councils voluntarily embrace the provision of sport and leisure services without specific funding to do so. Local government currently spends £1.1 billion per year on sport, leisure, parks and green spaces, playgrounds and community halls making it the largest public funder of these services and biggest provider of facilities. Historically, the sector has responded innovatively to funding pressures by developing new sources of income from commercialising some of the ‘products’ such as charged-for fitness classes or cafes. This marginal profit has been necessary to cross-subsidise parts of the service and has supported the need for councils to balance budgets in other service areas such as social care. It has also enabled councils to subsidise facilities for grassroots sports clubs and keep services affordable for all parts of the community.
However, financial pressures on the service have been building for many years, this has been exacerbated by COVID-19 which has had a crippling impact on leisure providers. On top of this many facilities have reached the end of their lifespan and recent increases in energy prices is leaving many sports and leisure services and facilities at risk of closure.
Despite the financial pressures, the pandemic also highlighted the value that communities place on leisure and park services and being active. It helped councils to connect with communities in new and innovative and increasingly virtual ways. It shone a spotlight on the social value of sport, leisure and physical activity and its contribution to wider policy objectives such as levelling up health and wellbeing, tackling inequalities and placemaking.
There is a clear need for councils to seek out alternative methods of financing sport and leisure services to create long term sustainability and to deliver on national and local policy objectives. Capital investment into community sport and leisure facilities should create the conditions for their long-term viability, aiming to operate facilities without subsidy. Strong leadership and recognition of the social value of sport and leisure will be central to unlocking alternative sources of funding for its provision.
While there is no ‘silver bullet’, identifying and sharing solutions, collaborative working across sectors and departments, integrating services and embracing a variety of delivery models will be needed. Continuing to develop the case for sport and physical activity to deliver against wider social outcomes is essential, indeed a necessity. The new Sport England ten year strategy moves sport and physical activity further into this space, supported by targeted funding to deliver their vision.
The challenges facing the sport and leisure sector
Analysis by the District Councils Network (DCN) showed a £411 million revenue loss during 2020/21 for leisure centres run by districts alone as a consequence of COVID-19 lockdowns, this figure rises to nearly £600 million if other councils are considered (September 2021).
Increasing energy costs
The LGA and ukactive briefing note on rising energy costs on the leisure sector (April 2022) demonstrates the impact rising energy costs is having on the sector using the following real life example. In April 2021 electricity was 14.2p kw. In mid-March 2022 it peaked at around 50p kw and in April 2022 it was 30p kw. At the April 2022 level electricity is 211 per cent above April 2021 levels. Similarly, in April 2021 gas was 2.32p kw. In mid-March 2022 it peaked at 21p kw and in April 2022 it was 11p kw making it 474 per cent above April 2021 levels. Based on the figures cited in the above example, this could result in unforeseen additional energy costs of between £70,000 and £130,000 being incurred per month for a council with four sites.
Research by Sport England prior to COVID-19 showed nearly two thirds of leisure facilities are more than 10 years old and require refurbishment and nearly a quarter of all sports halls and swimming pools have not been refurbished in more than 20 years. Many of these older properties are at immediate risk of closure, replacing these facilities could cost in the region of £1.5 billion further down the line.
Making the case for investment
Investing in public sport and leisure services is an investment in ill-health prevention. Findings by Sheffield Hallam University show how physical activity plays an important role in preventing a number of serious physical and mental health conditions and provides the economy with £9.5 billion in value. The breadth and depth of the public leisure offer is significantly different to the private sector, which cannot afford to operate and deliver critical public policy objectives.
The value of public sport and leisure services
Investment in physical activity amounts to:
- £5.2 billion in healthcare savings and £1.7 billion in social care savings
- £20 billion in value from stronger and safer communities including 10,000 fewer crime incidents and £14.2 billion value in improved levels of social trust, belonging and community engagement.
Public sport and leisure facilities are used by:
- sixty-six per cent of NHS cancer pre and post rehabilitation services
- seventy-two per cent of primary schools use public pools to deliver their statutory responsibility for children to learn to swim and water safety skills
- seventy-nine per cent of leisure centres are used in social prescribing (DCN)
- Royal National Lifeboat Institution use public swimming pools to train their lifeguards during the winter months.
Regular physical activity reduces the risk of serious illness and disease by up to:
- thirty per cent for dementia
- sixty-eight per cent for hip fractures
- forty per cent for type two diabetes.
For many councils’, income from commercial services is not enough to generate both the revenue needed for long-term financial sustainability and the capital investment for refurbishing or rebuilding assets such as leisure centres and swimming pools. Investment decisions will need to be balanced to ensure services are reaching individuals facing the biggest inequalities whilst recognising that in the longer term it will cost more if facilities are closed and have to be rebuilt from scratch in the future. If facilities are lost or services are overly focused on income generating activities it will have a devastating impact on added social value activities such as social prescribing, targeted outreach work for less active groups and on community and grassroots clubs who rely on affordable venues. An example is the location of gym equipment in sports halls which could squeeze activities like badminton, gymnastics, basketball and dance. This could have an unintended consequence for activity levels of Black, Asian and Minority Ethnic (BAME) groups because these sports have higher representation from Asian and Black adults.
The impact of COVID-19 on inequalities
- activity levels for black and Asian adults has dropped by almost five per cent since November 2019. Both ethnic groups are 10-14 per cent less active than their white counterparts.
- thirty-four per cent inactive disabled people pre-COVID rising to 39 per cent inactive post-COVID (Activity Alliance)
- people aged 55 and over, those with long-term health conditions or illnesses and people from lower socio-economic groups are less likely to have returned to physical activity in leisure centres since restrictions were eased and then lifted.
What is becoming increasingly evident is that affordable public leisure and sporting infrastructure is critical to keeping communities healthy as they face higher cost of living pressures.
A recommendation from the 'Securing the future of public sport and leisure services' report is for “councils to consider what social outcomes they want to achieve through public sport and leisure services and to design services accordingly. Including activities such as outreach work to support those who are most vulnerable and to fully embed these objectives into procurement activity and contract management processes.”
Creating social value in procurement activities can have a positive impact on communities and wider council priorities. For example, new contracts can build in apprenticeships, outreach work and activities for less active groups or purchasing from local businesses. Demonstrating the social value that will be created through investment in public sport and leisure facilities can also create a compelling case to help secure external investment and deliver on wider council led priorities particularly around placemaking. Understanding what outcomes, you want to be delivered and evaluating and measuring outcomes will be an important part of making the case.
Securing additional financing arrangements
While the current funding opportunities for the public sport and leisure sector is insufficient to tackle the financial deficits the sector faces, it is helping to increase the network of local delivery partners and shift reliance on income generation and embrace different delivery models and increase social value.
Sport England is encouraging sports governing bodies to work through their network of clubs to help address health inequalities with specific funding available from the governing body or Sport England’s network of funded partners. While not all clubs will be willing and able to play a role for reasons such as lack of capacity or skills, some will step up. Councils can play a role in supporting clubs and grassroots organisations to develop their skills to access types of finance that is not open to councils. It will be necessary to target investment in clubs strategically, focusing on those who can achieve specific objectives and align with council outcomes.
There are two defined reasons why an approach of developing social outcomes for these services is important:
- the recognised value of sport and leisure to promote health and wellbeing and its ability to address a broad range of inequalities
- the absence of a private sector offer for delivering these policy objectives because it is not viable for the private sector.
To be able to apply these into procurement and contracts councils need to both understand what outcomes they require to be delivered and to measure the delivery of the outcomes. It also creates opportunities to secure funding for sport and leisure to deliver for wider policy objectives.
This section focuses on:
- looking at Social Impact Bonds (SIBs) as a method to explore the social value of sport and physical activity to address a range of policy objectives
- invest to save: how capital expenditure can play a role in improving long term viability for sport and leisure facility and service provision. It uses as examples Public Work Loans Board (PWLB) and how planning models can maximise the benefit of Section 106 contributions plus secure other funding
- how sport and leisure infrastructure and service provision can be repurposed as ‘community hubs’ as part of integrated care systems to deliver healthier communities
- the role for additional provision and how they can secure social investment. Community shares and social impact investment are used as examples.
Public Works Loan Board (PWLB)
What it is
The Public Work Loans Board (PWLB) is a statutory body of the UK government that can provide long term lending to public bodies. Since their introduction in 2003 the PWLB has been a key aspect of council capital investment. Its investment into sport and leisure infrastructure can also enable asset transfer into the ownership of leisure providers.
How it works
The money PWLB lends to councils is secured by the government securing lending from the capital markets. The government can then lend this onto councils, including at a fixed rate, for repayment terms up to fifty years. Providing a long term and cheap form of lending for councils.
Herefordshire Council wished to remove the management fee for their contract with Halo Leisure Services but retain the level of service provision.
A review of existing provision and analysis of future needs was undertaken by Herefordshire council and a business case developed for a programme of capital investment across five leisure centres.
The finance was largely provided by PWLB lending of £8.7 million to Halo Leisure, as part of the agreement Halo Leisure secured a 75 year lease for the centres. Halo also benefitted financially from having management rights for two adjacent car parks which created additional revenue streams.
What are the benefits?
As highlighted earlier, councils are facing immense funding pressures. An option councils may wish to consider is how securing PWLB could enable investment to help create long term solutions for sport and leisure facilities.
Over 63 per cent of main sports halls and 60 per cent of swimming pools are past their expected lifespans or overdue refurbishment (Sport England). As a result, the public leisure estate is not energy efficient and currently accounts for between 10 to 40 per cent of a council’s direct carbon emissions. A key issue will be to address the ageing infrastructure to ensure supply meets future demand and to reduce carbon emissions and reduce and protect the service from future energy price increases.
The availability of sports focused capital funding from national funders is limited, particularly for building new facilities, and the PWLB offers an additional option.
Increasing the wider social value of sports and leisure facilities through investment to enable co-location with other services such as health provision could potentially un-lock funding such as capital investment or on-going revenue from other sources such as the NHS both for and through initiatives such as One Public Estate.
The option for ‘invest to save’ strategy to create efficiencies such as in energy use, to improve financial performance and also increase the ability for the co-location of other services brings several benefits. It can enable the transfer of ownership into community enterprises committed to the provision of sport and leisure with flexibility to adjust their business model according to changing circumstances.
Promoting activity, health and stronger communities through the way towns and cities are designed and developed is essential to meeting the needs of communities and increasing populations.
Embedding Sport England ten principles of Active Design into local planning policy will strengthen objectives for healthy communities and help to unlock investment through on- and off-site housing developer contributions (S106) and Community Infrastructure Levies.
A key principle is the co-location of services and community facilities, which can help to address the aging facility stock as well as responding to future growth. Developing the evidence base remains vital and therefore Sport England Facility Planning Model (FPM) remains a key part of the toolkit available to councils.
What are the disadvantages?
Councils can secure fixed interest rates for the loans but the recent and forecasted increases to interest rates can make PWLB a less viable option for councils. Its future application to provide capital investment into sport and leisure infrastructure is still unknown.
A key challenge facing leisure providers is how to remain viable following the removal of management fees. They can cut the less profitable services, but these often create the social value. An ‘invest to save’ strategy targets capital expenditure to improve financial performance. The use of PWLB is one method, although recent interest rate increases may reduce the situations where it can be successfully applied.
Any PWLB investment will require a strong business case to avoid excessive financial risk. For example, this may lead to the investment focusing on the creation of additional revenue streams at the cost of putting strategic social value at the heart of decision making.
Developer contributions (Section 106 Planning obligations and Community Infrastructure Levy)
Developer contributions is a collective term mainly used to refer to the Community Infrastructure Levy (CIL) and Planning Obligations (commonly referred to as ‘Section 106’ or ‘S106’ obligations after Section 106 of the Planning Act. These are planning tools that can be used to secure financial and non-financial contributions including for sports and leisure facilities, or other works, to provide infrastructure to support development and mitigate the impact of development.
Through the Levelling Up and Regeneration Bill, the Government intends to fully replace CIL and partially replace the S106 system, with a new Infrastructure Levy, which will be the primary mechanism for securing developer contributions. Section 106 agreements will be retained for ‘larger’ sites. The reforms are seeking to remove negotiation of developer contributions from the S106 system, by introducing a non-negotiable, fixed rate. The way these funds are allocated for spend will therefore be an important consideration for councils and putting in place governance arrangements now to help determine infrastructure needs over time and priorities for delivery is strongly recommended to help prepare for this.
What it is
S106 obligations are negotiated between the council and developer to mitigate the impact of a development or to secure local plan policy requirements as part of the development. They are ‘secured’ through planning agreements entered into under section 106 of the Town and Country Planning Act 1990 by a person with an interest in the land and the local planning authority; or through a unilateral undertaking. They are secured as part of the planning permission and as such are legally binding on implementation of the approved development.
How it works
The detail of the S106 is developed as part of the planning process with the objective to address any impact created by the proposed development. The impact may be from increase demand created by the development or for example to mitigate for where a facility may be lost or negatively impacted. The obligations should reflect adopted planning policy and are negotiated on a case-by-case basis.
The S106 agreement is registered as a charge on the public register and potentially HM Land Registry.
An example being where housing developments will create additional demand on existing sport and leisure stock. Subject to the relevant planning policy being in place a S106 obligation might secure improvements to a leisure facility through in-kind works, provision of land or a financial contribution. Where appropriately used planning obligations can contribute a significant financial contribution to delivering a councils facility strategy including by helping secure other sources of funding and finance.
The Government’s permitted development rights policy exempts certain schemes from S106, such as those that are converting from office to residential properties.
Community Infrastructure Levy (CIL)
What it is
Since 2010, authorities in England and Wales have also been empowered to establish a Community Infrastructure Levy (CIL) to help pay for infrastructure, other than affordable housing, to support development. This charge on the development can operate alongside S106. Combined authorities with planning powers can charge a strategic infrastructure tariff in addition to a local CIL. The Mayor of London can also charge a CIL for strategic transport projects.
Local planning authorities set, charge and administer CIL in line with CIL regulations. CIL is a fixed, non-negotiable, charge on most development of 100 square metres or more, or a new dwelling of any size. Payment becomes due from commencement of the development. Exemptions from CIL can be sought in respect of charitable development, affordable housing, self-build housing, residential annexes and residential extensions.
How it works
CIL and S106 are similar in that they are tools to address the impacts of development. But S106 is designed to mitigate the specific impacts of that individual development while CIL is a tool to deal with the cumulative impacts of development on infrastructure. CIL is specifically designed to enable the pooling of contributions from development.
A council, if they wish to apply CILs, following consultation, needs to decide and publish a charging schedule that outlines the charges for types of development.
The money received from CILs can be used for infrastructure which should be publicly identified by the council in their Infrastructure Funding Statements, along with its cost and other funding available.
CILs create a more certain, consistent and transparent method of applying charges for developments. The developers understand with greater certainty the obligation costs they will face, rather than negotiate on a case-by-case basis.
It also provides greater flexibility for councils in how they spend the money received from the development.
Further information on CILs can be found in the government’s guidance.
CBC had recognised that planned population growth coming from their allocated housing delivery requirement of 20,000 homes would create pressure on the existing sport and recreation infrastructure. They needed to understand how to increase provision to meet the increasing demand.
An evidence-based process using Sport England’s Facilities Planning Model (FPM) was applied to identify the best approach to addressing the changing facility needs. It led to the redevelopment of an existing leisure centre and the creation of a new centre.
CBC secured over £36 million for the two projects including developer contributions, council investment and other borrowing plus £3 million in funding from Sport England.
Investing in modern, high quality leisure facilities ensured CBC, through its third-party operator, would create a sustainable business model that would grow usage and income across the estate. The planning modelling informed the optimum mix of the modernisation of existing stock and the provision of new.
In 2021 Sport England updated the FPM modelling which reinforced the evidence in CBC’s Facility Strategy, helping it to move forward with other priority recommendations in their facility strategy.
Healthier communities: Securing new revenue streams
The wider application of sport and leisure is not new, most leisure centres already help to tackle health inequalities including via social prescribing and targeted, inclusive activities and working in partnership with public health teams.
A challenge will be to integrate sport facilities and provision into new ‘Integrated Care Systems’ to pool resources, secure revenue by co-location of services and for wider service delivery. However, the direction of travel and the intended purpose of the new, albeit complex health and social care reforms brings opportunities to embed physical activity into new partnerships and to access to new revenue streams. As does Sport England’s new ten-year strategy ‘Uniting the movement’ which aims to ‘transform lives through sport and physical activity’ and sets out how sport and leisure can help address social objectives.
It will not be a ‘one size, fits all’ approach and will require a range of delivery mechanisms and partners and influencers. Sport and leisure need to understand and influence new Integrated Care Systems (ICSs), social prescribing opportunities through Primary Care Networks (PCN) and work with public health teams and health professionals and with VCS’ who provide targeted ‘sport for impact’ programmes that deliver council social policy objectives. It should be recognised how social enterprises can fill spaces, often created by budget cuts, to deliver targeted outcomes for wider council service delivery. Future investment into facilities needs to integrate sport and leisure into the wider eco-system.
Understanding and influencing the new health and care system
The new Health and Social Care Act 2022 is meant to improve health and care services through better integration and to tackle growing health inequalities. It makes all 42 Integrated Care Systems (ICSs) statutory bodies giving them responsibility for funding, performance and bringing organisations together to plan and deliver joined up health and care services to improve the lives of people who live and work in their area. ICSs are tasked with tackling complex challenges such as:
- improving the health of children and young people
- supporting people to stay well and independent
- acting sooner to help those with preventable conditions
- supporting those with long-term conditions or mental health issues,
- getting the best from collective resources.
Each ICS covers a population size of 1-3 million, it is not co-terminous with council boundaries meaning more than one council can fall into an ICS area. While strategic at-scale planning is carried out at the ICS level, places will be the engine for delivery and reform at place and neighbourhood level.
ICS’ are made up of an Integrated Care Board (ICB) these are NHS organisations responsible for the NHS budget and the provision of health services in the ICS area. They are expected to work closely with all health and wellbeing boards (HWBs) in their area and to take account of local health and wellbeing strategies.
The Integrated Care Partnership (ICP) also sit within ICS’, they are committees between the ICP and all upper-tier councils that fall within the ICS area. They bring together a broad alliance of partners, membership is determined locally. The ICP is responsible for producing an integrated care strategy on how to meet the health and wellbeing needs of the population in the ICS area.
Primary Care Networks (PCN) bring together GP practices with other primary and community care organisations to join up health and care services at neighbourhood level. They serve populations of around 30–50,000 patients. They are the channel for social prescribing link worker resource and in many cases will host the link-worker service. Some PCNs are still in development, but more mature networks are now able to deliver more joined up care for patients by developing multidisciplinary teams.
The extent to which ICS has developed varies across the country, with some more established and with better partnership working in place than others. This may be a challenge for outside influencers but there are certainly opportunities particularly around the contribution sport and leisure makes to tackling the more complex challenges facing ICSs.
Sport for Confidence and Roefield Leisure are examples of the contribution sport and leisure providers can make to help address health inequalities when they are adequately funded and resourced. Sport for leisure also demonstrates how social enterprises can play a role that extends beyond one council through a scaled-up model of provision.
Each participating leisure centre has a dedicated residential occupational therapist and coach working together to deliver the strategic outcomes and offer a programme of activities for anyone facing barriers to accessing sport and physical activity.
Sport for Confidence partner with a range of organisations, all with an interest in using physical activity to deliver health benefits. Additionally due to their status as a social enterprise they secured social impact investment to fund their growth.
Sport for Confidence has recently received five year’s funding, totalling over £1 million, from Sport England to sustain their work across Essex and London and to extend geographically. It is part of £550 million being invested by Sport England via a new funding model for sport and physical activity to help address health inequalities.
Roefield Leisure is a leisure centre set in the heart of the Ribble Valley. The charity, Ribble Valley Sport & Recreation, operates the leisure centre.
In January 2021, Roefield Leisure formed a mutual partnership called Ribble Valley Health and Wellbeing partnership with Longridge Community Gym and Hyndburn and Ribble Valley CVS to support the needs of the communities during and after the COVID-19 pandemic. The objective being that by sharing of skills, networks and knowledge the partnership will strengthen and support the health, wellbeing and fitness across the Ribble Valley.
The charity has a good track record of delivering positive community and wider social outcomes, strengthened by the formation of the health and wellbeing partnership. There are contracts in place to deliver health and social initiatives including programmes such as Holiday Activity Food, GP referrals and social prescribing schemes. Its ‘Let Live Life’ scheme aimed at those with a health condition, for people over 50 years old and those adversely affected by COVID-19 has proven very successful and in direct response to the community needs.
Top tips for councils
- Be able to quantify the social value contribution of sport and leisure to other policy objectives and service delivery. It can be from national benchmarks such as HM Treasury Green Book but also internally from individual teams and departments.
- Understand the social outcomes to be delivered from sport and leisure provision.
- Improve partnership working with the network of local sport VCS and incentivise their delivery to be aligned to needs.
- Ensure capital investment through a robust evidence base creates the foundation for long term viability, meeting future demand and sport and leisure infrastructure to deliver wider policy objectives.
- Utilise PWLB to support the growth and viability of leisure providers and sport VCS.
- Consider how best to use community asset transfer to secure additional funding, protect community sport infrastructure and to enable improved revenue generation for local sport and leisure provision.
- Encourage the re-positioning of sport and leisure infrastructure as an integral part of integrated care systems.
- Recognise it is not a ‘one size, fits all’ approach with different local situations and opportunities but there are a range of methods of securing new funding and finance for sport and leisure provision.
The solutions outlined are not revolutionary, rather they are examples of models where additional funding and financing sources have been used to retain provision, encourage additional delivery models and to better align and integrate service provision across internal and external partners.
Partnerships with leisure providers, across different council services and with a range of local providers from the VCS and health sector is essential to making scarce resources stretch further and developing provision that meets the needs of local communities and address shared objectives. Understanding the evidence base for the contribution sport and leisure services make to a wide range of policy objectives and championing this is a key driver for sustainability and improving outcomes.
In summary, the application of additional finance, including social investment methods, will help councils to enable sport and leisure to deliver on wider policy objective and retain its ongoing provision, making it fit for purpose and sustainable.
Community Asset Transfer: A community asset transfer is the transfer of an asset from a public authority to a VCS group. It is generally considered to include long term tenure, such as over 25 years, for the asset.
Community Benefit Society: Community Benefit Societies are a type of cooperative, owned by their members, where the primary beneficiary is the community. Similarly, to other cooperatives they are driven by values and principles such as a democratic and open membership and member participation. They are in the vast majority of cases ‘one member, one vote’.
Community shares: Is a form of raising investment unique to cooperatives, raised by its members to deliver benefit to their community. The shares cannot be traded but can be repaid to the members by the cooperative.
Social impact investment: Is investment intended to deliver social impact alongside financial returns to the investors.
Social investment: Is investment that seeks to deliver a social as well as financial return.