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The precarious state of local government funding

The precarious state of local government funding continues to capture the attention of the media and just this week I’ve read several articles on this topic.

The Institute for Fiscal Studies’ (IFS) recent analysis of local government funding highlighted the extent of government cuts to date. It found that on average local government spending on local services had fallen by 21% since 2009/10 and that the poorest parts of the country had faced the deepest cuts. The report also highlighted significant variation at a service level with local authorities prioritising spending on children’s and adult’s social care and spending less on other services that our communities rely on such as parks, transport and leisure services. These decisions are not taken lightly but are necessary in order to manage reducing budgets and rising need. It therefore doesn’t come as a surprise that the IFS has warned that funding for councils will soon become ‘increasingly inadequate’. Indeed, in recent months a growing number of local authorities have suggested that they may only be able to provide core services in the future.

It’s estimated we will soon be facing a £3 billion funding gap in children’s services just to stand still and separate analysis by the BBC found that several councils will have exhausted their reserves in the next few years, provided nothing changes. Although the level of reserves held by a council can be seen as a sign of financial security it’s important to recognise there are good reasons for holding them. Reserves are necessary to cover any unexpected expenditure and to fund our response to emergencies, such as floods and terrorist attacks. However, in order to meet growing demand for children’s services, we are increasingly having to use this money and divert funding away from other services our communities rely on, such as children’s centres, youth services and libraries. Moreover, we have a long, and growing, list of statutory duties in relation to children, young people and families, few of which are fully funded which only exacerbates the pressures we face. Put simply, there is not enough money in the system to meet the level and complexity of need in our communities.

Local authorities are ‘place shapers’ meaning we want to create great places where people want to live, work, do business and visit. We are ambitious for our communities and want to ensure that the ingredients which enable local people and the local place to thrive are there. Key to this is securing a sustainable financial future for us.

In the forthcoming Spending Review, the Treasury faces some stark choices about the sort of country we will be going forward. We cannot continue as we are, and we can’t afford to lose sight of what’s really at stake here – our local communities and our children’s futures.

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