Local services will continue to decline, warns committee

MPs have argued that a decade of funding cuts and uncertainty over financial settlement for next year has left the majority of council services at breaking point.

The Housing, Communities and Local Government Committee believes that the government has been derelict in its duty to local authorities by failing to set out a funding settlement that addresses immediate service pressures or plan for future challenges, meaning that local services will continue to decline until the government tackles the current £5 billion funding gap.

Urging the government to end its piecemeal approach to local authority funding and revenue raising, the committee says that ministers must provide a financial settlement that adequately supports local authorities to serve their communities and close the multi-billion gap in local authority funding.

The rising demands for social care, for both adults and children, is placing an intolerable financial burden on local authorities. Without new dedicated revenue sources at a local and national level, social care will continue to dominate local authority spending at a cost to other services. The committee stresses that the government must clarify what services it expects local government to provide and be prepared to set a level of funding sufficient to facilitate it, and also consider bringing back the Revenue Support Grant to give extra funding to struggling councils.

In the longer term, local authorities must be given greater freedom to pursue their own solutions to ensure financial stability. The Housing, Communities and Local Government will continue investigating how devolving greater powers and responsibilities, particularly over revenue raising, in its current inquiry into devolution in England.

Clive Betts, chair of the committee, said: “There is a disconnect between the services taxpayers expect their local authorities to provide and the level of service possible under current government funding. People expect well maintained roads, regular refuse collections and cultural services, yet funding rarely stretches beyond meeting the urgent needs of social care services. The largest proportion of spending goes on services that most people do not use. Taxpayers are paying more but getting less, and this comes at a cost to continued confidence in local authorities to provide the services they need. Democracy and accountability in local government is paying the price for central government spending decisions.

“The government has a duty establish a funding settlement that enables local authorities to provide services to meet the needs of their local communities. Over the last decade we have seen a regular chipping away at funding, while adding further statutory obligations for them to meet. This constant stress on local government is now compounded by a failure to even set out how much money they will be allocated in the next financial year. The time has come for the government to get real with local government funding. They must make clear exactly what services they expect to be provided and dedicate sufficient funding for this to be achieved.

“The battle to meet ever increasing demand for social care has left few further sources of revenue to divert towards it and will now need a dedicated funding solution. The haphazard approach to broader funding has equally created an opaque source of revenue, partially funded by tax systems that don’t spread the burden equally. The government’s attention has been elsewhere for too long and it must now establish a system of funding that both addresses immediate need and supports local authorities in meeting challenges of the future.”

Paul Carter, chairman of the County Councils Network, said: “The committee heard from various witnesses, including from the government, that county authorities face the most financial pressure due to historic underfunding and acute demand-led pressures. As our analysis shows, local authorities face a £5.2 billion funding gap next year, with county areas accounting for £2.1 billion of this figure. County leaders are clear that filling this gap will result in further cuts to highly-valued and frontline services, unless extra resource is provided by the government. It is paramount that the new government provides short-term resource, targeted at those areas most in need, in next month’s one-year Spending Review, ahead of a more long term settlement and reforms to adult social care in early 2020.

“We are pleased that the committee have backed CCN’s calls for the Fair Funding Review to be as transparent and as understandable as possible. Whilst we would reluctantly accept a short delay in the review’s implementation, we are calling for a cast-iron commitment from the new government to continue the review through, and to create a new formula that genuinely seeks to rebalance funding between county and urban areas.”

James Jamieson, chairman of the Local Government Association, said: “Councils can make a huge difference to the lives of people and the communities they live in and ensure their local areas thrive and prosper. However, vital local services provided by councils face a funding gap of more than £5 billion next year. A third of councils fear they will run out of funding to provide their statutory services – such as adult social care, protecting children and preventing homelessness, within three years.

“The committee is therefore right to recognise our call for securing the sustainability of local services to be the government’s top priority. The forthcoming Spending Round needs to confirm the continuation of key funding streams such as the Better Care Fund, and guarantee councils will have enough money to meet the growing demand pressures they face next year.

“Only with the right funding and powers can councils meet their legal duties and protect the wide range of other valued local services which also make such a positive difference to communities and people’s lives. We are pleased the committee has also backed our call for the devolution process to be reignited. When councils have the freedoms and funding to make local decisions, there is clear and significant evidence that outcomes improve and the country gets better value for money.”