Local government finances: running out of cash

Councils across England are facing having to make unprecedented cuts to services in the coming years, after coronavirus left them with multimillion-pound black holes in their funding.

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At the beginning of the pandemic, central government was very much in carry on as normal as far as the (non-) financing of local government was concerned:

Britain is off the graph for centralisation. Its local government now has a mere 1.6% of GDP for its spending, against 6% in Germany, 12% in France and 15% in Sweden. In the eye of Whitehall, anything beyond London is now “regional”, never local.”

Budget 2020 and local government – Vision Group for Sidmouth

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Subsequent promises of ‘making it local’ have not materialised:

“It has to be local – and ideally with central government support. The only problem being that this govt, like pretty much every other, is clearly not keen on letting go, whether on planning or tackling the current crisis.”

Build back better – but locally – Vision Group for Sidmouth

Planning and local democracy – Vision Group for Sidmouth

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A fortnight ago there were warnings what this lack of investment would bring:

Councils across England are facing having to make unprecedented cuts to services in the coming years, after coronavirus left them with multimillion-pound black holes in their funding.

The cost to local authorities of the pandemic has been revealed as £1.1bn to £2.2bn, prompting leaders to describe their financial situations as the worst they have ever seen. Early intervention and prevention projects for vulnerable families, as well as recycling schemes, are among the cutbacks most likely to be in the firing line as local authorities seek to claw back cash to avoid meltdown. And council taxpayers will be asked to stump up more, with bills increasing by as much as 5 per cent, just as household incomes have been squeezed by job losses and instability.

Covid crisis will force councils to make ‘deep cuts’ to services to plug funding shortfall of up to £2.2bn | The Independent

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This has been further confirmed over the weekend:

Throughout the coronavirus pandemic, warnings have been clear about the threat to local councils and their ability to provide services.

BBC analysis in 2020 showed nine out of 10 major local authorities in England did not have enough cash to cover their spending plans this year, and coronavirus could lead to them going £1.7bn over budget.

Now, a committee of MPs has criticised the Treasury for its “worryingly laissez faire attitude” to the state of local government finances, warning of a “significant risk” that Town Hall debts could drag down the “whole of government”.

The department says it provided “a significant funding uplift for councils” at last year’s Spending Review, on top of additional funding “to ensure they can continue to deliver essential local services as we tackle the impacts of the pandemic”. And the government has confirmed local authorities will be able to raise council tax by 5% to help – something Labour leader Sir Keir Starmer has called “absurd”.

But the reality is stark – coronavirus pressures have hit councils hard and, as the Public Accounts Committee says in its report, they have been taking on “extremely risky levels of debt in recent years” investing in commercial ventures “in an effort to shore up dwindling finances”.

Here is a snapshot of the financial state of local councils from some of the BBC’s local political editors. It should give you an idea of the kind of dilemmas facing local leaders across the UK, as they battle to balance the books…

English councils battling financial ruin – BBC News

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Here’s a snapshot of the state of the County Council’s finances from this week:

The largest cuts were in bigger, more rural local authorities. Devon county council reduced the monetary value of 655 care packages for working-age adults and nearly 2,000 care packages for over-65s between March and September, more than any other council. 

‘We’re being impoverished’: how English councils have cut care during the pandemic | Social care | The Guardian

Extra spending boost for Devon’s budget but Dedicated Schools Grant deficit rises above £50 million – Devon Live

The ‘fascinating’ responsibilities of Devon County Council | Midweek Herald

Mid Devon’s economy faces ‘seven-year’ Covid-19 recovery | InYourArea News

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And here’s a snapshot of some of the difficulties facing East Devon some five years ago:

Futures Forum: The District Council is trying to “achieve savings/ efficiencies and to continue to protect front line services” – which will probably mean “huge increases in Council Tax whilst rampant developments start to cover our beautiful countryside and Exeter grows exponentially in order to meet the huge Local Plan targets for new homes.”

   
© Vision Group for Sidmouth 2005-2022