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Growing funding crisis in local government threatens public services

From at Touchstone

A growing funding crisis in local government is threatening the future of local public services in England.

According to new analysis published last week in Austerity Uncovered significant cuts have already been made to statutory adult social care and children’s services – with more cuts to come.

Austerity Uncovered, by the Centre for Local Economic Strategies (CLES) and commissioned by the TUC, looks at that impact of cuts on local authority services and how this affects people and places across the country. The research includes a national report and nine regional case studies (Bedford, Blackpool, Bradford, Derby, Dudley, Islington, Reading and Redcar and Cleveland).

The report shows that we are now only half way through a nine year programme of austerity, when we should have been three quarters of the way through a six year programme – because of changes in the government’s deficit reduction programme.

The government’s original proposals expected austerity to amount to 6.7 per cent of GDP. This is now expected to reach 10.3 per cent, increasing in cash terms from £120bn to £210bn.

By 2015/16 central government funding to local authorities will have been reduced by 37%, and as a result a significant funding gap is forecast, estimated at £12.4bn by the end of the decade. This is likely to have serious implications for the delivery of local services and for the future sustainability of some local authorities. According to the Public Accounts Committee,

Local authorities’ funding continues to be cut yet the number of statutory duties they have has stayed the same, and in some areas, such as adult social care, the demand for services is increasing. If these trends continue there is a risk that the worst-affected councils will be unable to meet their statutory obligations, and that serious questions will arise about the viability of some councils.”

Council Leaders and Chief Executives also seem to share this view. PWC’s annual Local State We’re in 2014 found that nine out of ten Chief Executives and Leaders believe that, within the next five years, some local authorities will get into serious financial crisis, while nine out of ten Leaders and eight out of ten Chief Executives believe that some local authorities will fail to deliver the essential services that residents require.

Worryingly, the Department for Local Government and Communities does not monitor the impacts of funding reductions in a coordinated way, even though the DLGC has borne 46.5 per cent of all departmental cuts. The NAO report, The Impact of Funding Reductions on Local Authorities states:

“the Department (for Communities and Local Government) does not monitor in a coordinated way the impact of funding reductions on services, and relies on other departments and inspectorates to alert it to individual service failures. In consequence, the Department risks becoming aware of serious problems with the financial sustainability of local authorities only after they have occurred. The Department’s processes for assessing the capacity of authorities to absorb further funding reductions are also not sufficiently robust”.

This complacency suggests that DLGC is content for local government to take the brunt of the funding cuts, without consideration of how this will impact on families and communities across the country.

In adult social care 87 per cent of councils now only provide assistance in cases of ‘substantial’ or ‘critical’ need, compared to 47 per cent in 2005–06. Age UK report that the proportion of over-65s in receipt of local authority social care services fell from 15.3 per cent in 2005/06 to less than 10 per cent in 2012/13, 362,000 fewer people.

Some local authorities have responded to cuts by increasing charges to those eligible for support. Age UK show that on average, service users were paying £588 more in real terms in 2012/13 than they were in 2009/10.

While budgets for children’s services have been largely protected to date, there have still been funding cuts of over 4 per cent. Between 2010 and 2013, spending on children’s centres fell by 28 per cent with 580 of the centres closing as a result of local authority cuts.

Funding for youth services, such as youth centres and out of school activities, have been disproportionately cut, with some boroughs making reductions of over 70% – including Waltham Forest, Stoke-on-Trent and Warrington.

Child and Adolescent Mental Health Services (CAMHS) have also been cut. Research by Young Minds found that 77 per cent of Clinical Commissioning Groups froze or cut their CAMHS budget between 2013/14 and 2014/15. Failure to provide these vital services to young people in need is not only detrimental to them and their families, but this will also put pressure on other local services.

In terms of regional impacts, Austerity Uncovered shows that changes in grant funding to local authorities have led to disproportionate cuts to those authorities in the most deprived areas. The latest local government settlement for funding shows that government grants to local authorities were reduced by an average of 2.9% in 2014/15, but in the North East councils face reductions of 3.9% on average.

Common themes emerging from the case studies were a move away from the principle of universal services, with increased use of rationing, targeting and thresholds; significant cutbacks in adult care, particularly home care; and increasing levels of outsourcing of services in some cases.

However, there were also significant differences in approach taken by councils in response to the cuts, with some examples of local authorities working with unions, other partners and communities in order to protect services and inform spending decisions.

Regional examples

Blackpool Council: total expenditure in the council has fallen by around one quarter since 2010. Spending on adult social care has reduced by nearly £13m since 2011/12. Blackpool Council no longer provides a domiciliary homecare service in-house and complex packages which used to be commissioned internally are now being commissioned from the external market. In addition, supported living services for learning disability, physical disability and mental health were all transferred to the external market in 2014.

Bradford Council: over a six year period from 2010, the council’s budget will have been reduced by one third. Bradford has cut £4.37m from support to Sure Start and projects linked to tackling youth crime, teenage pregnancy and drug dependency.

Devon County Council: has had to cut its budget by around £200m between 2009-2017, equivalent to one third. There are proposals to close up to 20 adult residential homes which support 400 residents, primarily with dementia needs, and which employ over 1,000 staff.

Reading Council: experienced a cut of 26 per cent between 2010/11 and 2014/15 and is expected to find further savings of £26m to 2017/18. Reading has increased its eligibility thresholds for adult social care, now only providing services to people with ‘substantial’ needs or higher.

Savings made by local authorities have come mainly through cuts to the public sector work force. Between Q2 2010 and Q2 2014 an estimated 549,000 public sector jobs were cut, and within local government, women in full-time and part-time work were disproportionately impacted.

In mid-2013, the public sector workforce stood at 5.7 million constituting 20 per cent of total employment – the lowest share of employment for four decades. The Office for Budget Responsibility forecasts that by 2019–20 there will be 1.1 million less public sector jobs when compared with 2010–11.

The growing funding crisis in local government has to be urgently addressed. Central government needs to take action in response to the many warnings about the impacts of cuts on local public services, communities and regions, and on the financial sustainability of some local authorities.

Recommendations in Austerity Uncovered include:


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