William Eichler 21 August 2019

Council services ‘declining’ due to £5bn funding gap, MPs say

MPs have accused the Government of being ‘derelict in its duty’ to local authorities by failing to set out a funding settlement that would ease the pressure on frontline services.

In response, the Government has argued that the problem is with how councils use the money they have. Local authorities are, a spokesperson said, ‘responsible for managing their own resources’.

A new report by the Housing, Communities and Local Government Committee, published today, urges Whitehall to close the £5bn gap in council funding that has grown during a decade of cuts.

The report warns that the rising demands for social care, for both adults and children, is placing an ‘intolerable financial burden’ on local authorities, and that multiple reviews have failed to produce ‘concrete measures’ that might resolve the care crisis.

It also concludes that 10 years of austerity has ‘gutted’ funding in a range of ‘non-essential’ services including transport, housing and culture, and left councils with little choice but to provide ‘bare bones’ services.

‘There is a disconnect between the services taxpayers expect their local authorities to provide and the level of service possible under current Government funding,’ said chair of the HCLG committee, Clive Betts.

‘People expect well maintained roads, regular refuse collections and cultural services, yet funding rarely stretches beyond meeting the urgent needs of social care services.’

Mr Betts also stressed that local authorities are unable to plan for the future if the Government does not make clear what funds they will be receiving.

‘This constant stress on local government is now compounded by a failure to even set out how much money they will be allocated in the next financial year,’ he said.

‘The time has come for the Government to get real with local government funding. They must make clear exactly what services they expect to be provided and dedicate sufficient funding for this to be achieved.’

The committee warned that business rate retention ‘lacks transparency’ and is too complicated to be relied on as a source of funding for services. They urged the Government to consider bringing back the Revenue Support Grant.

A review of the Council Tax system is also ‘long overdue’ because it is a regressive tax disconnected from the true value of properties, according to the committee’s report.

The chairman of the Local Government Association (LGA), Cllr James Jamieson, welcomed the HCLG committee’s conclusions.

‘Vital local services provided by councils face a funding gap of more than £5bn next year,’ he said.

‘A third of councils fear they will run out of funding to provide their statutory services – such as adult social care, protecting children and preventing homelessness, within three years.

‘The committee is therefore right to recognise our call for securing the sustainability of local services to be the Government’s top priority.’

‘Its forthcoming Spending Round needs to confirm the continuation of key funding streams such as the Better Care Fund, and guarantee councils will have enough money to meet the growing demand pressures they face next year,’ he added.

The MPs also called for more devolution of powers to local authorities – a recommendation Cllr Jamieson said he was ‘pleased’ to hear.

‘When councils have the freedoms and funding to make local decisions, there is clear and significant evidence that outcomes improve and the country gets better value for money.’

Cllr Paul Carter, chairman of the County Councils Network, and one of those called to give evidence to the committee in June, stressed the impact a decade of Government cuts has had on the shires.

‘As our analysis shows, local authorities face a £5.2bn funding gap next year, with county areas accounting for £2.1bn of this figure,’ he said.

‘County leaders are clear that filling this gap will result in further cuts to highly-valued and frontline services, unless extra resource is provided by the Government.

‘It is paramount that the new Government provides short-term resource, targeted at those areas most in need, in next month’s one-year Spending Review, ahead of a more long term settlement and reforms to adult social care in early 2020.’

Commenting on the report’s publication, UNISON general secretary Dave Prentis said that the Government was to blame for the funding crisis and warned that Brexit was going to exacerbate the problem.

‘Local councils are in a bad way and the blame lies solely at the Government’s door. With funding in short supply, local authorities have had to cut back services substantially, or axe them altogether,’ he said.

‘While the Prime Minister has pledged cash for police, schools and the NHS, struggling councils need help now. Local authorities still have no idea of their budgets for the next financial year, making it impossible to plan.

‘Yet if the country plunges off a Brexit cliff, it’s under pressure councils that’ll have to pick up the pieces. The Government must give councils resources now, and allow them to borrow and raise more income locally so they can start to repair the damage of a decade of austerity.’

Rob Whiteman, the CEO of the Chartered Institute of Public Finance and Accountancy (CIPFA), said the committee was ‘absolutely right’ in its conclusions.

‘In the immediate term, Government must provide clarity over both its expectations of the sector and the funding position beyond 2020 to allow councils to plan for the future and the continuing rise in demand for services,’ he said.

The chief executive of the think tank Localis, Jonathan Werran, took a longer view and called for more devolution, arguing that local government had become ‘a mere delivery arm for the central state’.

‘With the prospect of an imminent Brexit general election, it is incumbent on the sector to seek to make local government funding and the question of how the nation goes about funding our vital and valued local services an issue of genuine importance to prospective voters on the national stage,’ he said.

‘The opportunity is to bring fiscal devolution out from under the policy shadows and into the light as a key manifesto must for all parties, placing the issue into the centre of a contested policy battleground on the doorstep, from which a strong local state will emerge the winner.’

A spokesperson for the Ministry of Housing, Communities and Local Government said: ‘We’re providing local authorities with access to £46.4bn this year – a real terms increase.

‘Ultimately councils are responsible for managing their own resources and we are working with local government to develop a funding system for the future.’

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