Government is “in denial” over local authority funding, as demand for services increases

Derek du Preez Profile picture for user ddpreez February 5, 2019
A report by the influential Public Accounts Committee has said that local authority finances continue to deteriorate. Whilst not specifically a ‘digital’ problem, the context is important.

MPs on the influential Public Accounts Committee have expressed dismay at the government’s position on local authority financing, stating that it is in “denial” over the state of council finances.

The Committee’s report comes a day after MPs voted to approve the government’s latest local government settlement, which will add approximately £1.3 billion to local authority spending in the next financial year. However, this is local government’s estimated “spending power”, not the guaranteed government grant, which will all by approximately £1 billion.

The BBC has estimated that council budgets would shrink by almost 6%, after an already severe period of austerity and funding cuts.

Whilst this is not specifically a ‘digital issue’, it’s important to understand the context that local authorities are operating within. It’s no secret that there is an increased demand for services across local government, with digital often being touted as a key way to drive improved service and increased efficiency - but funding is an important factor that needs consideration.

Diginomica/government has long covered the struggles and successes of digital progress across local government. The key thing to note is that ‘local government’ cannot be viewed as a whole. It’s a diverse sector with lots of disparate organisations and diverse needs. However, there is increasing demand from local organisations to work closely with the Government Digital Service to co-develop services.

The Public Accounts Committee today said that the government has cut the funding that is given to English local authorities by nearly half over the last eight years - whilst at the same time demand for critical council services has risen.

Some councils are now in an “extremely worrying position”, overspending their budgets for social care, reducing key services, falling back on financial reservists and increasingly relying on generating other sources of income.

It adds that the Ministry of House, Communities and Local Government, the department responsible, is relying on a short-term approach to a long term problem.

Public Accounts Committee Chair, Meg Hillier MP, said:

“The Government is in denial about the perilous state of local finances. It insists the sector is sustainable yet is unwilling or unable to back up this claim.

“Flimsy assertions have no place in financial planning. The fact Government has bailed out councils with short-term fixes should be evidence enough that all is far from well.

“Government needs to get real, listen fully to the concerns of local government and take a hard look at the real impact funding reductions have on local services. And then it needs to plan properly for the long-term.

“It is extremely troubling that the Government views the financial sustainability of councils solely in terms of statutory services, rather than full range of services local people need and can reasonably expect councils to provide.

“Cutting youth services, for example, may simply build pressures on statutory services and we expect Government to explain how it takes account of these shunted costs in reaching its conclusions.

“It must also explain why its conclusions differ from those of the Local Government Association, local authorities and other representative bodies seriously concerned about sustainability in the sector.”

Key findings

The report out today highlights a number of key findings and recommendations, which include:

  • Central government financial support for local government continues to be characterised by one-off, short-term initiatives, which do not provide value for money, rather than a meaningful long-term financial plan for the sector.
  • The Committee wants the Department to work with local authorities to collect and analyse evidence on the impacts of value for money and the implications for service users.
  • The Department has an “unacceptable lack of ambition” for the sector, with no aspiration for improving local finances beyond ‘merely coping’, the Committee said.
  • The government does not know what its minimum expectations are of the full range of services that local authorities are expected to provide.
  • The Committee is “deeply dismayed” that the department views the financial sustainability of local authorise solely in terms of a small set of statutory services rather than the full range of services local people need.
  • The government repeatable state that the local authority sector as a whole is sustainable, but refuses to publish evidence about how it has reached these conclusions. The Committee finds this unacceptable.

The Local Government Association, which describes itself as the ‘voice’ of local authorities, has come out in support of the Committee’s report and findings. Cllr Richard Watts, Chair of the Local Government Association’s Resources Board, said:

“With councils in England facing an overall funding gap of £8 billion by 2025, we are pleased the Committee has reinforced our warning that funding cuts and demand pressures are pushing local services to the brink.

“The Spending Review will therefore be make or break for vital local services and securing the financial sustainability of councils must be the top priority. If we truly value our local services then we have to be prepared to pay for them.

“We agree with the Committee that the financial sustainability of local government cannot be defined by the ability of councils to just provide statutory duties.

“Pressures continue to grow in children’s services, adult social care, and efforts to tackle homelessness and this is leaving increasingly less money for councils to fund other discretionary services, such as the maintenance of parks, certain bus services, cultural activities and council tax support for those in financial difficulty.

“Fully funding councils is the only way to ensure councils can continue to provide all of the valued local services which make such a positive difference to communities and people’s lives.”

A grey colored placeholder image