Councils ‘face £8bn black hole by 2025’

3 Jul 18

Town and county halls in England will face a funding black hole of almost £8bn by the middle of the next decade, local government leaders warned today.

As its annual conference got under way in Birmingham, the Local Government Association’s said the spending review next year would be “make or break” for local services.

The organisation launched a campaign for greater investment in council services, saying long-term and sustained investment in local government would improve residents’ lives and reduce pressure on other parts of the public sector, such as the NHS.

LGA chair Lord Porter said: “Councils have shouldered more than their fair share of austerity and have tried to reduce any impact on residents.

“But there is only so much they can do and the financial challenges they face are growing.”

He highlighted that councils have cut back spending on early intervention, support for voluntary groups, bus services and libraries, while more were struggling to balance their books.

“If the government allows the funding gap facing councils and the local services to reach almost £8bn by the middle of the next decade then our councils and local services will be damaged beyond recognition,” Porter warned.

“The impact on society – all places, all generations, every person – will be hugely damaging.

“Millions of people will be deprived of the vital local services that help improve quality of life and bind communities together.”

The LGA’s analysis, published today, predicts a £7.8bn funding gap for English councils by 2025. However, plugging this funding gap will only be enough to keep services standing still, not to improve them or reverse earlier cuts.

It notes that, by 2020, councils will have seen a £16bn cut to their core funding since 2010 – equivalent to 60 pence in every £1 provided by the government. It also reminded that 168 councils will receive no more core central government funding at all.

The government is moving towards a system where grant is phased out and councils become more self-funding through business rates. Councils are expected to retain 75% of business rates by 2020-21.

Homelessness and social care, particularly rising numbers of child protection cases, are putting additional pressures on councils, the LGA said.

Chief executive of CIPFA Rob Whiteman said: “The LGA’s warning of a £8bn local government funding black hole is one of the starkest indicators yet of the financial plight councils are facing and to ignore it or not respond appropriately puts at risk many of the vital services that families around the country rely on.”

CIPFA released a consultation on its plans to develop a financial resilience index for local government yesterday. The index would side alongside a new financial management code of practice the Institute is currently working on and would draw on a range of indicators to rank councils according to their readiness to cope with fiscal shocks.

Whiteman added: “What needs to happen now is for councils to gain a clear picture of their financial strengths and weaknesses, to ensure money is allocated responsibly.

“We see it as both our professional and public duty to play a professional part in this.”

  • Vivienne Russell

    Vivienne Russell is managing editor of Public Finance magazine and publicfinance.co.uk

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