Solace warns ministers of council funding crisis

14 May 13
Councils are facing a financial black hole of around £15bn in 2019/20 as a result of rising demand for services, such as social care, and government funding reductions, local authority chief executives have warned.

By Richard Johnstone | 14 May 2013

Councils are facing a financial black hole of around £15bn in 2019/20 as a result of rising demand for services, such as social care, and government funding reductions, local authority chief executives have warned.

In a letter to nine Cabinet ministers, the Society of Local Authority Chief Executives and Senior Managers said this would hamper local services and reduce councils’ ability to promote local economic growth.

In a submission to ministers ahead of the Spending Review on June 26, Solace said this meant there was a need to ‘radically reform’ how local services are provided, including expanding the Community Budget initiative.

Without such changes, councils would be left unable fund services in areas such as the local environment and highways, Solace chair Joanna Killian said.

Ministers must therefore ensure the ‘full force’ of Whitehall is brought to bear on driving a pooled funding approach to all local public services nationwide, she added. Additionally, steps should be taken to ‘fully integrate’ health and social care budgets, with local health and wellbeing boards tasked with ensuring efficient spending.

The submission also urged Local Government Secretary Eric Pickles to remove all restrictions on council tax, such as the 2% referendum trigger on annual increases, to acknowledge ‘the legitimate financial decision-making authority’ of councils.

Killian said these recommendations would ‘go some way to alleviating the short term financial crisis to which local government has been subject’.

She added: ‘The additional flexibilities will enable financial risks to be appropriately managed across local public services, reduce cost shunting and ensure councils are better able to define their own financial future.’

However, even these changes might not provide a ‘long-term sustainable solution’, and a review of the future of revenue support grants provided from Whitehall to town halls should be undertaken, Killian added.

Currently, this grant provides a top-up of some authorities’ retained business rates, and also includes funding for the government’s council tax freeze and localisation of Council Tax Benefit.

Killian said it was ‘essential that the means of redistributing income across local public services be reviewed’ amid funding cuts. ‘Such a review would not only focus on public spending, but would also aspire to increase the share of growth benefits retained at a local level and incentivise the long-term engagement of local partners in economic development.’

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