House of Commons - Tuesday 20 March 2018
Key messages
- Funding reductions: The National Audit Office (NAO) found that local authorities experienced a 49.1 per cent real terms reduction in central government funding between 2010/11 to 2017/18. We have repeatedly warned of the serious consequences of funding pressures facing local services from unprecedented funding reductions since 2010 and growing demand for services. Inadequate funding for local government has a knock-on effect on other parts of the public sector.
- Funding gap: Councils in England face an overall funding gap that will exceed £5 billion by 2020. The NAO’s report is further compelling evidence as to why the Government must urgently secure the financial sustainability of local government and the 1,300 different statutory duties and responsibilities councils provide.
- Demand and cost pressures: The report acknowledges that, since 2010, councils have faced a range of new demand and cost pressures. The growing demand for services including adult social care, children’s services and homelessness support means councils are increasingly having to divert scarce resources from other local services on which residents rely. At the same time,
- Our assessment of the funding gap relates to current costs and responsibilities and does not account for new costs that are out of local authority control or new burdens imposed through revised central government policy. For example, councils are struggling with cost pressures and new burdens arising from insufficiently funded central government policies, such as paying for the National Living Wage and Apprenticeship Levy, or statutory responsibilities under the Homelessness Reduction Act and unexpected exceptional costs arising from conducting fire safety and major remedial work. We call for the Government to provide sufficient funding to cover these new costs and any future new burdens. Leaving councils to pick up the bill for unfunded government policies, at the same time as managing spending reduction and such growing demand for services, is unacceptable.
- Reserves: The NAO highlights that the dwindling reserves of an increasing number of councils is not sustainable. Reserves are designed to help councils manage growing financial risks to local services and do nothing to address the systemic underfunding that they face. The size of the cuts councils are having to make is simply too big to be plugged by reserves.
- Financial certainty: The report warns about the huge uncertainty over how the Government intends to fund local services after 2020. Core central government funding to councils will be further cut in half over the next two years and almost phased out completely by the end of the decade. The Government needs to urgently address this cliff-edge and the growing funding gaps facing local services. We are calling on the Government to commit to allow local government as a whole to keep every penny of business rates collected to plug this funding gap.