Councils face £16.5bn funding gap by 2020

27 Jun 12
The growing costs of councils’ care and statutory responsibilities will wipe out any funding for other services within eight years unless Whitehall provides urgent cash, the Local Government Association has warned.
By Richard Johnstone | 27 June 2012

The growing costs of councils’ care and statutory responsibilities will wipe out any funding for other services within eight years unless Whitehall provides urgent cash, the Local Government Association has warned.

According to the LGA’s projection of town hall spending, published at the start of its annual conference in Birmingham yesterday, councils in England and Wales face a £16.5bn funding gap by 2020.

Money for services such as road maintenance and libraries will have shrunk by 90% in cash terms due to the rapidly increasing costs of adult social care and authorities’ other explicit statutory responsibilities, such as social services and waste collection.

The 28% cut in funding from central government in the current Spending Review had ‘contributed considerably’ to this situation, the LGA report, Funding outlook for councils, said.

It called for an ‘immediate injection’ of funding from Whitehall to meet the costs of the rising demand for adult social care. More authorities should be allowed to develop Community Budgets, it added, and central government should also reduce the statutory demands on councils.

Pilots of Community Budgets, where all funding is merged into a single pot to provide services, have shown they can dramatically lower costs and improve results, the report said. The initial pilots focused on helping troubled families but four new ones covering all public services in a council area are being developed.

The report’s projections are based on what the LGA calls ‘an extremely conservative estimate of likely cost pressures and an optimistic assessment of local government income’. It also assumes that councils will be able to repeat the efficiency savings made in 2011/12, the first year of major government spending reductions.

LGA chair Sir Merrick Cockell said: ‘By the end of the decade, councils may be forced to wind down some of the most popular services they provide unless urgent action is taken to address the crisis in adult social care funding.

‘Efficiency savings won’t go close to solving this problem. We need an immediate injection of money into the adult care system to meet rising demand in the short term, alongside a major revision of the way it is paid for and delivered in future. Local government is best placed to ensure care is provided in a way which offers dignity to the individual and value for money for the taxpayer. It has to be in a position to do that while also delivering the other services local people expect.’

Responding to the report, CIPFA agreed that there was an ‘urgent need’ to tackle the rising costs of care.

Assistant director for local government Alison Scott said: ‘We have yet to see the government’s full response to the Dilnot Commission’s proposals on the funding system for care and support in England. And it is important to emphasise that its proposals do not provide a solution to the long-term funding issues but merely address the contributions individuals should make towards their own costs of care.’