Despite welcoming additional funding announced in the 2022 Autumn Statement and 2023/24 Local Government Finance Settlement councils are still under intense financial pressure. Councils face ongoing inflationary and pay pressures alongside spiking demand and market challenges in areas such as children’s social care and temporary accommodation.
Letter to Jeremy Hunt
Rt. Hon Jeremy Hunt MP
Chancellor of the Exchequer
1 Horse Guards Road
13 October 2023
Ahead of your statement in Parliament on 22 November we wanted to write to you about the current financial pressures facing councils. Despite welcoming additional funding announced in the 2022 Autumn Statement and 2023/24 Local Government Finance Settlement, councils are still under intense financial pressure. Councils face ongoing inflationary and pay pressures alongside spiking demand and market challenges in areas such as children’s social care and temporary accommodation. This is happening at a time of low financial resilience across the sector following a 27.0 per cent real-terms reduction in core spending power1 since 2010/11. Government support is needed urgently to ensure local financial and service sustainability.
The Autumn Statement provides a valuable chance for you to set the direction on some of these major areas and we urge you to take that opportunity. Our submission includes a range of measures that the Government should consider, but we wanted to draw your attention to three key areas where we feel Government action is vital:
- Addressing funding sufficiency and certainty issues faced by councils.
- Taking steps to strengthen the local government workforce.
- Strengthening councils’ role in key national policy areas such as housing and net zero.
It is also crucial that the Government takes steps in the Autumn Statement not only to set the future direction on key local government issues, but also to recognise there are some pressures that cannot wait as many councils are struggling to meet needs and still balance their budgets. For example:
- Rising costs and demand pressures in children’s social care – budgets up by 13.6 per cent in 2023/24 compared to 2022/23 with further upward pressure on in-year spend.
- Escalating costs of home to school transport for children with special educational needs and disabilities – budgets up by 23.3 per cent whilst pressures continue.
- Increasing costs of homelessness services with multiple contributory factors, including asylum and resettlement, pushing budgets up by 19.9 per cent with pressures ongoing.
These pressing challenges, and others we set out below, require immediate support from Government alongside a broader set of actions to secure the long-term financial sustainability of the sector.
Councils’ financial pressures and needs must be seen in the context of the huge contribution that councils already make and of their potential to do more to support the delivery of public services. The Local Government Association (LGA) has set out a vision for local government rooted in the fact that councils touch the everyday lives of people and places. Councils have the legitimacy to work with residents and across public services to find ways to best meet communities’ needs, to drive change and make services better. Public services can be delivered faster, better and more efficiently at a local level. For example:
- Local climate action could hit net zero by 2050 while saving around £140 billion compared to national approaches.
- Every £1 invested in a new social home generates £2.84 in the wider economy with every new social home generating a saving of £780 a year in housing benefit.
- £1 spent on alcohol treatment services locally provides a return of £3, with local addiction support services saving our health and social care system £2 billion every year.
However, councils currently lack the financial stability to fulfil their potential. In fact, the scale of the challenge currently means that council finances are under pressure like never before.
This letter sets out the acute financial pressures councils face, and the steps we feel the Government needs to take to address this situation. We provide appendices on three key areas of council activity that are experiencing sharp financial and/or demand pressures: adult social care and winter pressures; children’s services; and housing and homelessness services. We also provide an appendix on how councils can help deliver net zero more efficiently than national programmes.
Current financial pressures
Recent spikes in inflation, the National Living Wage and energy costs have placed substantial pressure on council finances. Our analysis shows that by 2024/25 cost and demand pressures will have added £15 billion (28.6 per cent) to the cost of delivering council services since 2021/22. Local government received additional funding in 2023/24 and there is a commitment to a further uplift in 2024/25. Despite this we estimated in July that councils were facing funding gaps of £2.0 billion in 2023/24 and £900 million in 2024/25. But following an updated inflation forecast from the Bank of England in August our analysis now shows funding gaps of £2.4 billion in 2023/24 and £1.6 billion in 2024/25. These gaps relate solely to the funding needed to maintain services at their current levels. The implication here is that councils do not have enough funding simply to stand still.
A key issue is that while annual average inflation peaked in 2022/23 at around 10.0 per cent for the economy as a whole and is forecast to fall to an annual average of around 6 per cent in 2023/24, this is not necessarily the case for all councils. Where councils purchase goods and services through annual contracts these contract prices will often be uprated in 2023/24 based on inflation over the preceding 12 months. For these contracts councils will experience peak inflation in 2023/24.
Furthermore, in 2022/23 many councils had to deal with unfunded in-year pressures through one-off measures such as the use of reserves. While one-off measures helped plug the gap in 2022/23 this was only temporary. Councils will have had to identify new recurrent savings or income to address these unfunded 2022/23 pressures in their 2023/24 budgets.
This means that while the economy is forecast to be on the downward slope in terms of cost pressures in 2023/24, this is not necessarily the case for councils. They remain firmly in the eye of the inflationary storm in 2023/24 and will continue to be so in 2024/25.
Service pressures in the general fund
Data published by the Department for Levelling Up, Housing and Communities (DLUHC) shows that in response to current cost pressures councils budgeted 11.6 per cent more in cash terms for service provision (excluding education services) in 2023/24 than 2022/23. This is the largest annual increase in the last 10 years (excluding COVID-related spending). This is likely to reflect the economy and sector-wide inflationary and wage pressures set out above. But there are individual service areas with specific cost and demand dynamics that are exerting markedly higher cost pressures.
Children’s services: Children’s social care is increasingly cited by councils with this responsibility as their key source of financial pressure and overspend. Anecdotal evidence suggests that a central issue is the lack of supply of certain placement types for children in care. Budgeted spend on children’s social care increased by £1.5 billion (13.6 per cent) in 2023/24. This is a continuation of a trend of spiralling costs in this service area driven partly by continuous growth in the number of children in care since 2009. The increasing complexity of cases and growing competition for a limited supply of placements means the cost of supporting children has also increased. While the number of children in care increased by 13 per cent from 2016/17 to 2021/22, spend on fostering and residential placements increased by 39.6 per cent over the same period.
Home to school transport costs for children with special educational needs and disabilities (SEND) are also increasingly a key pressure owing to the growth in the number of children with Education, Health and Care Plans. Councils increased their 2023/24 budgets for SEND home to school transport by 23.3 per cent compared to 2022/23. Budgeted net spend in 2023/24 is £1.4 billion, a 137 per cent cash terms increase since 2016/17.
- Adult social care: The Government provided additional funding for adult social care in 2023/24, but it is likely this will do little more than allow councils to stand still given their ongoing cost and demand pressures. Budgeted spend on adult social care increased by £2.5 billion (12.8 per cent) in 2023/24. Department of Health and Social Care (DHSC) data shows that average fee rates for external home care increased by 9.6 per cent and supported living by 8.4 per cent from 2022/23 to 2023/24. A key driver is likely to be the 9.7 per cent increase in the National Living Wage in 2023/24.
- Housing and homelessness: Our member councils have raised significant concerns about frozen Local Housing Allowance rates, the rising cost of living, the closure of Afghan bridging hotels, wider asylum and resettlement pressures, and an insufficient supply of affordable housing. These are driving increases in homelessness and reducing councils’ ability to source suitable accommodation. Spend on homelessness services is budgeted to increase by 19.9 per cent in 2023/24. Government data published in July shows that more than 104,000 households were in temporary accommodation at the end of March 2023 – the highest figures since records began in 1998. There are also more than 1.2 million households on council housing waiting lists.
Despite the substantial increases in budgeted spend for 2023/24 there are already signs of in-year pressure in councils’ budgets. DLUHC data shows that in the first three months of 2022/23, when inflation was beginning to rise rapidly, 38 per cent of single tier and county councils increased their full year forecast for total service spend (including education) by at least 1 per cent. At the same point in this financial year, despite economy-wide inflation falling, 50 per cent of single tier and county councils have made a similar forecast increase of 1 per cent or more. This amounts to a total increase of £1.4 billion in projected service spend by these councils above their budgets set only three months previously. On average these councils have higher levels of spend on social care and homelessness to date, relative to their original budgets, compared to other councils.
This indicates that many councils are still facing growing cost and demand pressures that are outstripping available resources. Many councils faced the same challenge in 2022/23 which resulted in overspends mitigated by the use of reserves, which in turn exerted additional pressure on their 2023/24 budgets. If councils overspend and rely on reserves for a second year in a row this will make the budget setting process for 2024/25 exceedingly challenging.
Pressures outside the general fund
The pressures faced by councils extend beyond their general funds. There is growing evidence of pressure in councils’ capital programmes, Housing Revenue Accounts (HRAs), and Dedicated Schools Grant (DSG) high needs budgets.
- Pressure on capital programmes: Local authority capital programmes are under pressure due to:
- The rising price of construction materials. The construction output price index for new work and repairs and maintenance rose by about 15 per cent in the two years to June 2023.
- Rising interest rates lead to increases in the cost of borrowing. Councils now need additional revenue funding to pay for higher borrowing costs. PWLB rates at the end of August 2023 were more than 4 percentage points higher than two years earlier. Increases in costs can affect the viability of the business case for a capital project.
- Pressure on Housing Revenue Accounts: Our research estimates that the 7 per cent rent cap imposed for 2023/24, whilst supporting tenants in the short-term, will lead to a cumulative deficit to council HRAs of £664 million after two years. This comes on the back of 1 per cent annual rent reductions in the social rented sector for four years from April 2016, resulting in an estimated 12 per cent reduction in average rents by 2020/21.
- Pressure on Dedicated Schools Grant high needs budgets: Based on survey data from March 2022 from the Society of County Treasurers we estimate that DSG high needs deficits nationally were £1.9 billion in 2021/22 and could reach £3.6 billion by 2024/25.
Councils’ capacity to absorb financial pressures
Ongoing inflation and demand pressures combined with market issues in specific sectors mean that costs are outstripping available resources. Balancing the books in 2023/24 will be challenging and setting a balanced budget in 2024/25 even more so. A fundamental factor underlying this position is the long-term reduction in funding faced by the sector.
Government funding for councils fell by 60p in the pound from 2010/11 to 2019/20, and we estimate that councils’ core spending power fell by 27.0 per cent in real terms from 2010/11 to 2023/24. The bulk of cuts happened in the first half of the last decade and core spending power was at its lowest in real terms in 2016/17. However, since then there has been no marked recovery, and core spending power has stayed relatively flat in real terms since 2016/17 at roughly 25 to 30 per cent less than 2010/11 in any given year. But in this period councils have not only had to deal with the implications of the cuts in the first half of the decade but also meet growing service demand, as outlined above, and deliver new responsibilities.
As a result, the financial resilience of the sector is low and its capacity to respond to financial crises is limited. The ‘easy wins’ and ‘low hanging fruit’ in terms of savings have long since gone. Instead, councils are almost immediately faced with hard decisions about cutting valued services, along with increasing council tax and fees and charges during a cost-of-living crisis.
Some councils have seen growth in their reserves in recent years. This may provide a degree of resilience over the short-term, but this is only temporary. Use of reserves represents one-off rather than recurrent funding. If reserves are used to address unfunded recurrent costs, the pressure is passed into future years. New funding will have to be found in successive budgets to replace the initial use of reserves. If councils use reserves repeatedly to offset recurrent pressures they will rapidly find themselves still having to address unfunded pressures but now also with depleted reserves. Councils should be provided with additional recurrent funding rather than encouraged to use their reserves.
Furthermore, not all councils have seen reserves growth while others have seen growth from a very low base. The apparently buoyant position on reserves for the sector as a whole should not be used as assurance that individual councils will avoid financial failure.
A final challenge facing councils’ financial sustainability relates to the lack of certainty within the local government finance system. Councils’ ability to mitigate the funding and demand pressures they face has been hampered by a financial framework characterised by one-year funding settlements and repeated delays to funding reforms. Councils need greater certainty on funding through multi-year settlements and more clarity on financial reform so they can plan effectively and maximise the impact of their spending over the medium-term.
Service sustainability risks
Despite the financial pressures councils have faced since 2010/11 the vast majority have met their statutory responsibility to balance their books annually. But this does not mean that services remain unchanged and sustainable:
- Council spend is increasingly concentrated in fewer services and on fewer people: As resources have diminished, councils have protected services such as social care (adult and children’s) where there are clearly defined statutory responsibilities and regulatory oversight. But even from 2016/17, when core spending power stopped falling in real terms, to 2023/24, budgeted spend on social care grew by 23.7 per cent in real terms but fell by 7.1 per cent for non-social services (excluding education services). On average (at the median) social care accounts for 63.9 per cent of budgeted service spend (excluding education) in 2023/24 amongst councils with social care responsibilities, up from 56.5 per cent in 2016/17. Ultimately spending is increasingly concentrated on fewer people, so councils are less able to support local and national agendas on key issues such as housing, levelling-up, the cost-of-living crisis, and climate change.
- There are growing concerns over the quality and scale of service provision: Due to financial pressures councils are struggling to provide the services their residents need:
- The LGA Annual Resident Satisfaction Survey shows that the share of respondents that are satisfied with council service provision has fallen for every service area in the survey between 2016/17 and 2023/24 with the exception of waste collection. Satisfaction levels for key services such as street cleaning, road maintenance, pavement maintenance, library services and sport and leisure have all fallen by between 5 and 9 percentage points since 2016/17.
- In children’s social care, Local Child Safeguarding Practice Reviews (undertaken where a child dies or is seriously harmed, and where abuse or neglect was already known or suspected) indicate that many of the issues that undermine the effectiveness of safeguarding practice are to do with serious resource shortages. Separately there is evidence that due to market pressures some councils have no choice but to continue using unregulated placements for under 16-year-olds in care.
- In adult social care, the number of people waiting for a care assessment, a care review or for their support or direct payment to start as of March 2023 remains stubbornly high at 434,243. This includes 82,087 people who have been waiting for more than six months, a 30 per cent increase on the previous year. In 2021 there were 2.4 million unpaid carers providing 20 hours or more care weekly, up by 17.3 per cent from 2011. The Nuffield Trust say this ‘indicates a shift towards unpaid carers supporting people with high care needs who may well have drawn on formal care in the past’.
- Increasingly unsustainable workforce challenges: Growing workforce issues provide a clear indicator that services are becoming increasingly unsustainable. More than nine in 10 councils are experiencing staff recruitment and retention difficulties. For example:
- In children’s social care Department for Education (DfE) statistics show that the current vacancy rate, the level of children and family social workers leaving during the year, and the sickness absence rate are all the highest in their data series. Children and family social workers report significant increases in their stress levels and workloads over time.
- In adult social care the workforce vacancy rate has risen to the highest level since records began in 2012/13 to 165,000 vacant posts. Turnover rates remain high at 29 per cent. On average, care workers with five or more years of experience are paid just 7p per hour more than a care worker with less than a year’s experience. Four out of five jobs in the economy pay more than jobs in social care.
- Reduced spend on preventative services: As funding has fallen, councils have focused their spend on meeting their statutory obligations. This has led to a reduction in spend on preventative services and a greater focus on reactive, demand-led provision. This is despite the growing body of evidence of the financial and social benefits of prevention. For instance, reductions in spending on preventative services for adolescents is highly correlated with rising rates of 16 and 17-year-olds entering care.
These outcomes show that simply keeping councils on a financial drip feed has not prevented the steady narrowing and weakening of council services. Government should not confuse councils’ ability to balance their books over the short-term with service sustainability over the medium-term.
The need for change
These issues need urgent attention from the Government. We set out a range of asks around the key themes of children’s services, adult social care, housing and homelessness and climate change in the appendices accompanying this letter. But these need to take place within the context of a broader programme of financial support and reform for councils. We are calling for the Government to ensure that all councils have sufficient funding to deliver their 2023/24 budgets, set balanced budgets for 2024/25 and develop medium-term financial strategies that are not characterised by substantial funding gaps. Government also needs to recognise that greater funding is needed to prevent the ongoing decline in local service provision. Funding levels need to be sufficient to allow councils to rebuild local service provision.
Not only will this require the Government to provide additional funding but greater certainty on funding is also needed. Specifically, the Government should:
- Provide long-term funding for local government that reflects current and future demands for services.
- Ensure that funding is sufficient for councils to recruit and retain sufficient numbers of skilled staff and meet the demands of National Living Wage increases.
- Adopt a renewed focus on prevention to address existing and future demand for services such as social care, homelessness support and community safety.
- Provide multi-year and timely settlements for councils to allow them to plan and make meaningful financial decisions.
- Provide clarity as soon as possible on funding streams in the 2024/25 settlement, such as the New Homes Bonus, where there are uncertainties.
- Ensure that when the Review of Relative Needs and Resources takes place that the Review considers both the data and the formulas used to distribute funding and that the Government ensures that overall local government funding is sufficient when new needs formulae are introduced to ensure that no council sees its funding reduce as a result and that there are transitional arrangements for any business rates reset.
- Consider alternative forms of income for local government including an e-commerce levy with the funding retained by local government.
We urge the Government to take these steps to address the acute financial challenges faced by the sector, and to halt the long-term decline in council service provision. Not only will this secure local financial and service sustainability, but it also has the potential to reduce costs falling on other public services and support the delivery of key Government agendas on areas such as housing, levelling up and climate change.
Cllr Shaun Davies
Cllr Kevin Bentley
Leader of the LGA Conservative Group
Senior Vice Chair
Cllr Nesil Caliskan
Leader of the LGA Labour Group
Cllr Joe Harris
Leader of the LGA Liberal Democrat Group
Cllr Marianne Overton
Leader of the LGA Independent Group
Appendix 1: Children’s services
Children’s social care
Key actions Government should take now:
- Meet existing cost pressures in children’s social care, including fully funding placements for unaccompanied asylum-seeking children and care leavers.
- Fund the roll-out of well-evidenced interventions to reduce demand for children’s social care placements and retain and expand placement capacity.
- Introduce rules for the use of agency children’s social workers.
The number of children in care is now at its highest since current records began in 1994, having been rising annually since 2009. The number of children needing support from children’s social care more widely had begun to fall from a peak in 2018 when the Covid-19 pandemic hit, with numbers and rates of children in need and child protection plans now rising again. The complexity of needs of children post-Covid has also increased as observed by Ofsted and social workers. This is placing additional pressure on councils and social workers, with more resource required to support each child and family.
A key pressure is the significant increase in the cost of placements for children in care. Expenditure on fostering and residential placements increased by 39.6 per cent in cash terms from 2016/17 to 2021/22 to £3.8 billion. Over the same period, the number of children in care rose by 13 per cent.
We have significant concerns that these pressures will be further compounded when regulation of semi-independent accommodation for children in care and care leavers aged 16-17 is introduced from October 2023. Research by Newton found that the impact of the new regulations could add £368 million to council spend on semi-independent accommodation by 2026/27, nine times more than the £41 million per year of additional funding from DfE over the next three years.
Furthermore, councils are supporting ever-increasing numbers of unaccompanied asylum-seeking children (UASC) and care leavers, with Home Office funding for these placements failing to fully cover costs. This is especially the case for former-UASC care leavers, who now make up 26 per cent of care leavers aged 19-21.
The Independent Review of Children’s Social Care found that investment of £2.6 billion over four years was needed to reform the children’s social care system and rebalancing spending towards earlier help. To date, the Government has committed £200 million over two years.
Outputs and outcomes
The Competition and Markets Authority, the Independent Review of Children’s Social Care and Ofsted have all highlighted that councils on their own cannot address the challenges in the children’s social care placements market. Without additional support, we will see more children living in placements that do not meet their needs, and we do not believe that the trend for sharply increasing placement costs will end without urgent action. This will mean children’s social care funds are increasingly directed at placement costs rather than broader support and earlier help.
A failure to meet children’s needs not only leads to poorer outcomes but significant societal costs. Research for the Care Review estimated the societal cost of adverse outcomes for looked after children at £9 billion per year, while the ‘Big Five’ children’s charities found that a failure to invest in children’s social care now will lead to approximately £1 billion in additional costs to the Government over the next ten years.
Pressure in children’s social care is also leading to children’s social workers leaving council social work or leaving the profession altogether. DfE statistics show that the current vacancy rate, children and family social workers leaving during the year and sickness absence rate are all the highest in the data series. Children and family social workers report significant increases in their stress levels and workloads over time. A failure to act is likely to see increasing numbers of social workers leaving the profession or moving to agency social work, leading to increased costs for councils and poorer support to children and families, for whom stability of support is key. The Care Review highlighted that the additional cost of employing agency staff is approximately £26,000 per worker per year, meaning a loss of over £100 million per year from children’s social care services.
Solutions and benefits
The Government should meet existing cost pressures to stabilise the children’s social care system to ensure that children are safe and families receive the support they need. This would support councils to reinvest in earlier help, helping to reduce demand for more expensive crisis interventions. We also call on the Government to fully fund placements for unaccompanied asylum-seeking children and care leavers.
It is positive that the Government has committed additional funding to boost fostering capacity and test new approaches to commissioning. However, much of this work will support only a small number of councils, with most councils seeing minimal additional investment while new approaches are tested.
We would like to see immediate investment in programmes where there is already significant evidence that they can both reduce demand for children’s social care placements and retain and expand placement capacity, including:
- Family Group Conferencing (FGC) – evidence suggests that if ‘FGCs were to be rolled out across England, 2,293 fewer children would go into care in a 12-month period, which would save over £150 million within two years’.
- Mockingbird – this would cost around £60 million over two years to roll out and is shown to lead to better outcomes including retention of foster carers.
- Family Drug and Alcohol Courts (FDACs) – separate evaluations by the Centre for Justice Innovation and Foundations found that FDACs both save money for the taxpayer and support more children to stay safely with their parents rather than entering local authority care.
- The Children’s Homes Capital Fund was over-subscribed and is helping to address gaps in sufficiency. We would like to see a further round of funding for this, and for it to be expanded to include supported accommodation.
We also welcome the Government’s swift action to consult on new rules for the use of agency workers and would like to see these rules introduced as quickly as possible. In addition to this, it is vital to consider how we can rapidly increase the children’s social worker workforce and retain those currently in post. Support that would help to address challenges in the short and medium term include:
- £500,000 to fund an extension to the Return to Social Work programme to bring 200 social workers back to the profession
- Government-funded training programmes and bursaries to encourage retraining from other professions
- Funding for children’s social care services to expand administrative support for children’s social workers as well as supervision capacity and training.
Special Educational Needs and Disabilities (SEND)
Key actions Government should take now:
- Provide additional funding to meet the year-on-year increase in demand for Education, Health and Care Plans.
- Provide a guarantee that all council Dedicated Schools Grant deficits will be written off.
- Urgently bring forward legislation that gives councils the powers to lead local SEND systems and to hold health and education partners to account for their work supporting children and young people with special needs.
High needs funding pressures
Dedicated Schools Grant (DSG) and high needs funding pressures are one of the biggest challenges that councils with education responsibilities are currently facing. This is the result of an ever-increasing demand for SEND support and the growing number of children and young people who have an Education, Health and Care Plan (EHCP). Department for Education (DfE) statistics show that at January 2023 there were over 517,000 children with an EHCP, an increase of 9 per cent on 2022. The number of EHCPs has increased every year since they were introduced. We do not believe that the proposals set out in the Government’s SEND and Alternative Provision improvement plan will result in this increase either slowing down or stopping.
The Society of County Treasurers (SCT) conducts regular analyses of council high needs block deficits and the results of their most recent survey, undertaken in March 2022 show that the total deficit facing those councils that responded stands at £1.36 billion, rising to £2.6 billion in 2024/25. Extrapolating those figures for all councils gives an estimated deficit of £1.9 billion in March 2022, rising to £3.6 billion by 2025.
While the LGA has welcomed the decision taken by the Department for Levelling Up, Housing and Community’s (DLUHC) to extend the statutory override on the treatment of DSG deficits to March 2026, we remain concerned that unless major reforms to the SEND system are implemented in the meantime, it will be impossible for these deficits to be managed down. Their return to council budget sheets could result in severe financial pressures for some.
Nor do we believe that the ‘Safety valve’ programme for those councils with the biggest DSG deficits or the Delivering Better Value in SEND programme will result in council high needs deficits being eliminated in the absence of reform prior to March 2026. We are, therefore, calling for the Government to write off all high needs deficits as a matter of urgency to ensure that councils are not faced with having to cut other services to balance budgets through no fault of their own or their residents.
The shape of a reformed SEND system led by councils
Councils share the Government’s ambition of making sure every child with SEND gets high-quality support that meets their needs. The SEND Green paper acknowledged that councils are ideally placed to act as convenors of local SEND systems, bringing together health and education partners to develop local inclusion plans. The Green paper rightly recognises that getting the accountabilities, accompanied by the right levers will be crucial; with the right powers and levers, councils can effectively hold partners to account for their contributions to meet the needs of children and young people with special needs and disabilities. These powers should be accompanied by a backstop duty to co-operate for councils, health and schools, in the delivery of support to children and young people with SEND.
Reforms should focus on three broad themes:
- Structures, including clarity on responsibility for councils, health and education for delivering SEND support to children and young people;
- Levers, specifically ensuring that councils, as leaders of local SEND systems, have the powers to hold partners to account for the work; and
- Sufficiency of funding to meet the needs of children with SEND. Early identification of need and early support, as well as a focus on increasing levels of mainstream inclusion will be central to improving outcomes for children and young people with SEND.
Improving mainstream provision and inclusion levels are central to the success of the proposals set out in the Green Paper. The LGA is calling for the development of a more contractual relationship between councils and schools in the provision of high needs funding, focused on outcomes and holding all schools to account for the delivery of those outcomes.
Appendix 3: Housing and homelessness
Key actions Government should take now:
- Roll-out five-year local housing deals to all areas of the country that want them by 2025.
- Uprate Local Housing Allowance (LHA) rates to the 30th percentile of local rents and introduce an explicit, national-level focus on homelessness prevention (with an associated funding regime).
- Provide a long-term rent deal for council landlords to allow a longer period of annual rent increases for a minimum period of at least 10 years, providing certainty for investment. This should include flexibility for councils to address the historic anomalies in their rents as a result of the ending of the rent convergence policy in 2015.
Councils share the collective national ambition to tackle local housing challenges and create great places for current and future generations. Housing consistently appears in the top ten priorities for British residents. It is mentioned as a key issue almost three times as frequently by 18-34 years old than older age groups.
There are significant ongoing challenges in ensuring that everyone can live in a home that meets their current and future needs – challenges that encompass availability, affordability, security and quality. Our member councils have raised significant concerns about frozen Local Housing Allowance (LHA) rates, the rising cost of living, the closure of Afghan bridging hotels, wider asylum and resettlement pressures, and an insufficient supply of affordable housing. These are driving increases in homelessness and reducing councils’ ability to source suitable accommodation.
The statistics show the very significant challenges that exist across the housing sector. Government data published in July 2023 shows that more than 104,000 households were in temporary accommodation at the end of March 2023 – the highest figures since records began in 1998. There are also more than 1.2 million households on council housing waiting lists. This comes at a huge cost to councils who spent at least £1.6 billion on temporary accommodation in 2021/22.
At the Broad Rental Market Area level, Local Housing Allowance (LHA) rates did not reach the 30th percentile rent in any area in England for 2022-23, because rates are frozen at 2020-21 levels – whilst rents in the UK have grown by 21.5 per cent between March 2020-23. Homes to rent privately are increasingly out of reach for low-income households.
There is an urgent need to take action. The Government must empower local action on housing so that councils have the autonomy, flexibility, powers and funding to make decisions best suited to maximising added value in local housing markets. This will support the range of duties and wider interests that local authorities have in ensuring the most effective functioning of their local housing markets.
Councils need a long-term national commitment to support a council house building renaissance and improvements in existing stock. The Government itself recognises that there is a significant unmet need for social homes. An expansion of council housebuilding would provide a counter-cyclical boost to housing supply; offer a pathway out of expensive and insecure private renting towards home ownership; reduce homelessness; tackle housing waiting lists and support the growth of green skills and net zero supply chains.
Long-term certainty on powers and funding could help councils scale up to deliver an ambitious build programme of 100,000 high-quality, climate-friendly social homes a year. It would also improve the public finances by £24.5 billion over 30 years, including a reduction in the housing benefit bill and temporary accommodation costs.
Backing local action on housing
Councils will need access to varying policy and fiscal interventions to reflect local housing markets including:
- Continued access to preferential borrowing rates through the Public Works Loan Board (PWLB), introduced in the Spring Budget, to support the delivery of social housing and council borrowing for Housing Revenue Accounts.
- Further reform to Right to Buy which includes allowing councils to retain 100 per cent of receipts on a permanent basis; flexibility to combine Right to Buy receipts with other government grants; the ability to set the size of discounts locally; and the ability to recycle a greater proportion of receipts into building replacement homes.
- A long-term rent deal for council landlords to allow a longer period of annual rent increases for a minimum period of at least 10 years, providing certainty for investment. This should include flexibility for councils to address the historic anomalies in their rents as a result of the ending of the rent convergence policy in 2015.
- Roll-out of five-year local housing deals to all areas of the country that want them by 2025 – combining funding from multiple national housing programmes into a single pot. This will provide the funding, flexibility, certainty and confidence to stimulate housing supply, and remove national restrictions which stymie innovation and delivery.
- Increases to the grant levels per home through the Affordable Homes Programme, to mitigate inflationary pressures that have increased the cost of building new homes. This means councils need grant funding to fund a larger proportion of a new home.
- Government support to set up a new national council housebuilding delivery taskforce, bringing together a team of experts to provide additional capacity and improvement support for housing delivery teams within councils and their partners.
- Uprating of LHA rates to the 30th percentile of local rents and an explicit, national-level focus on homelessness prevention (with an associated funding regime). This should address the drivers and levers of homelessness, enable councils to avoid residents reaching crisis, and reduce demand for temporary accommodation and emergency homelessness responses.
More broadly, the current self-financing council housing regime which has been in place since 2012 also needs to urgently be reviewed. This will ensure a greater understanding of the current and future capacity of Housing Revenue Accounts (HRAs) to deliver on agendas that impact on council housing, for example building safety, fire safety, decarbonisation, housing quality, new supply and regeneration.
The self-financing settlement in 2012 distributed debt to stock-holding councils on the assumption that anticipated rent income would be sufficient to fund works to raise all homes to the Decent Homes Standard (DHS) and maintain them there, and to pay off debt over a 30-year period. The settlement is now ten years old, and its underlying income and expenditure assumptions have both been superseded.
Income within the HRA is not only now lower than that provided for in the self-financing settlement, but this income is now expected to cover both higher costs and higher standards of stock and service delivery. Our research estimates the 7 per cent rent cap imposed for 2023/24, whilst supporting tenants in the short-term, will amount to a cumulative deficit to council HRAs of £664 million after two years. This comes on the back of 1 per cent annual rent reductions in the social rented sector for four years from April 2016, resulting in an estimated 12 per cent reduction in average rents by 2020/21. The additional costs to deliver net zero, compared to what is currently provided for in HRA business plans is £23 billion over 30 years. The sector-wide requirement to achieve building safety standards for tall buildings and buildings housing vulnerable residents is also estimated to be £7.7 billion. Other additional unanticipated expenditure costs include an updated Decent Homes Standard, the professionalisation of social housing staff and the future requirement for councils to pay for the cost of social housing regulation.
Whilst councils have strong ambitions to increase the numbers of council homes available to those most in need, they also need to deliver vital investment to improve and regenerate their existing stock. The current financial climate and national policy framework mean that trade-offs need to be made between a wide set of competing priorities.
A long-term sustainable funding framework for social housing is vital to ensure that councils have the ability to invest in and regenerate their housing stock, and to fulfil local and national ambitions of ensuring that everyone has access to a safe, secure and high-quality home.
Appendix 4: Delivering net zero
Key actions Government should take now:
- Put in place a national climate action framework with policy, regulatory, and investment certainty up to 2050, with milestones and a clear role and the core funding for councils leading local climate action.
- Back local climate action by devolving approaches on ten missions: public trust, retrofitting social and fuel poor homes, public buildings, local energy generation and grid investment, whole place transport, jobs and growth, the natural world, placemaking, rapidly escalating adaptation action, and attracting private finance.
- Translate these missions to delivery through an evolving set of Local Climate Action Agreements underpinned by multi-year, place-based funding allocations which are reviewed and adapted over Spending Review periods up to 2050.
Backing local climate action
Climate ranks high in peoples’ priorities. Eight in ten people are concerned by it and three quarters want to deliver net zero by 2050. Communities want to see rapid action, to be supported to take their own action, and to feel the benefits of that action.
Change in practice is not always easy; public trust and inclusivity are critical. Councils, rooted in their communities, are most trusted to facilitate this locally, leading public engagement to shape climate action that is positive, supported, targeted, and delivers wide ranging benefits.
Of course, the Government is the most critical partner in leading the transition, and the framework must be set, and the big decisions taken, nationally. But the complexity of transition in our 51 cities, 935 towns and 6,000 villages cannot be micro-managed from a set of desks across departments in Whitehall – climate action is local.
Only councils working locally with partners can embed and connect wide-ranging activity into the everyday lives of people in the real world. Councils have direct influence over a third of emissions from an area, and some impact on over 80 per cent of emissions – in how communities move about, heat homes, and generate and connect to renewable energy.
Devolved models for delivering net zero are more efficient, and more effective. Innovate UK modelled interventions in heat, buildings, and travel, and concluded local action would hit net zero by 2050 while saving around £140 billion, returning an additional £400 billion in co-benefits.
Crucially, councils can target public investment to maximise market growth. Local climate action can be joined-up to build supply chains over time, to develop skills and pathways into jobs, to create market confidence by signalling technical solutions, to enable consumer demand through advice, collective purchasing and neighbourhood models, and to create conditions and programmes attracting private finance, and more.
Councils are already leading some of the most transformative and innovative projects in the world, routinely captured in report after report. They demonstrate over and over the enormous ambition across the country, in key cities and core cities, in districts and counties. But delivery is being held back significantly.
Every sector, and every independent expert intervention, are all united in their calls for national clarity, certainty, and a long-term plan up to 2050 – a long-term regulatory, policy and investment plan. For councils, revenue and policy uncertainty is the most critical barrier to delivering local climate action; it is not just about the level of funding itself but the need the longer-term certainty to plan delivery.
In 2021 the National Audit Office said ‘there are serious weaknesses in central government’s approach to working with local authorities on decarbonisation, stemming from a lack of clarity over local authorities’ overall roles, piecemeal funding, and diffuse accountabilities. This hampers local authorities’ ability to plan effectively for the long-term, build skills and capacity, and prioritise effort. It creates significant risks to value for money’.
Since 2021, the funding environment for councils has only got more complicated and burdensome. Take heat networks for instance, there are four schemes. For retrofitting homes and buildings, there are six schemes. For decarbonising transport, there are nine schemes. For woodland and trees, there are now nine schemes. There are linked schemes for skills, for growth, and even for energy advice to help people navigate the schemes.
Climate action weaves into everything. In seeking to take forward its climate delivery strategy, one council has assessed that it must navigate a total of 57 different funding schemes from 19 different awarding bodies. Altogether schemes would still offer a fraction of the funding needed.
Too many centrally controlled programmes remain inflexible and underspent. Inflationary pressures increase this risk, exposing inflexibilities and risk stifling innovation. For instance, retrofitting costs have increased, but programmes limit funding per property. The Government should give councils full flexibility to use funds to best deliver core outcomes.
Looking ahead, the Government must empower local climate action that can hit targets, mobilise support, and save taxpayers hundreds of billions. We can start by creating a clarity of purpose and of process to move forward in different places that are at different starting points, with different strengths, opportunities, and barriers.
Working with councils the Government should:
- Put in place a national climate action framework with policy, regulatory, and investment certainty up to 2050, with set milestones and a clear role and the core funding for councils leading local climate action.
- Back local climate action devolving approaches on ten missions: public trust, retrofitting social and fuel poor homes, public buildings, local energy generation and grid investment, whole place transport, jobs and growth, the natural world, placemaking, rapidly escalating adaptation action, and attracting private finance.
- Translate these missions to delivery through an evolving set of Local Climate Action Agreements underpinned by multi-year place-based funding allocations which are reviewed and adapted over Spending Review periods up to 2050.
- Introduce a local climate action test ensuring all Government policy and funding decisions contribute to local climate action, to avoid situations such as the social housing rent cap impacting viability of Social Housing Decarbonisation Fund projects.
- Build capability and capacity in councils by working with councils and the LGA on the comprehensive support helping all councils lead, innovate and act on climate change.
- Take immediate steps to avoid further underspending from current programmes, by relaxing red tape around how councils can use existing grants to deliver high level outcomes for carbon reduction and a just transition.
Climate change is a threat to human well-being and planetary health, impacting every aspect of our livelihoods. The choices made today will reverberate for hundreds of years, and local government is ready to play our full role in hitting net zero and building climate resilience.