Economy and Infrastructure

06.07.16

Expected £1bn drop in council spending casts doubt on sustainability of core services

Councils’ ability to maintain their core services, such as education and cultural initiatives, have come into question as new figures show local government spending is set to fall by 1%, or £0.9bn, in this financial year.

The figures, published today by the DCLG and the Chartered Institute of Public Finance and Accountancy (CIPFA), revealed that the education services will bear the toughest brunt of council cuts, with its 2016-17 budget expected to drop by 2.2%, or £765m – although a part of this “reflects the shift of local authority schools to academy status, rather than a direct loss of funding from the Department for Education”.

The second most significant fall will be in cultural services, with a drop of almost 6% (£145m), as fire and rescue services trail behind with a drop of 1.3% in spending (£28m).

Just two areas of spending are set to increase, both pertaining to social care: adult services will see an influx of £308m (a 2.2% rise), and children’s spending will grow by £136m (a 1.8% rise).

Overall, regional council spending is set to reduce in all areas of England apart from Yorkshire and Humber. Greater London will see the biggest drop in spending (3%), followed by the East Midlands (2.7%) and the north east (2.2%).

As previously revealed by CIPFA, local authorities are also digging into most of their cash reserves, which, at £21bn, are already down 1.5% on the year before. Over £17bn of this has been earmarked for specific purposes, such as a £2.3bn provision for schools, £174m for public health – which a survey had already warned would significantly deplete existing savings – and almost £15bn for other areas of future local spending.

CIPFA’s chief executive, Rob Whiteman, argued the “battering” councils have taken so far will only get worse. He added that while most people welcome the shift of resources towards social care, this rise in spending actually showed “demand is inexorably rising as the population ages”.

“These figures demonstrate the extent to which councils are suffering, without even taking into account the fiscal consequences of leaving the EU,” Whiteman said. “Given that a Brexit may only compound the pressures, it is essential that local authorities undertake a thorough assessment of their financial resilience.

“CIPFA has developed an assessment method that will tell councils whether they are on track to balance their budgets. Crucially, it will also give the latest in best practice to ensure local authorities can overcome the future challenges.”

Whilst today’s figures cast significant doubt on the viability of essential council services going forward, they come as no surprise: in February, councils had already warned they were anticipating dipping into reserves, as well as having to hike charges and cut frontline services in this financial year.

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