Latest Public Sector News

27.01.17

Flawed local government settlement leaves councils at ‘financial tipping point’

The recent local government financial settlement will leave over two-thirds of councils scrabbling for unexpected savings in 2017-18, pushing them towards a ‘financial tipping point’, council chiefs have warned.

As councils prepare to set their budgets for next year, the LGA has urged government to reverse its unexpected reductions to New Homes Bonus (NHB) payments to local authorities, saying that they must find “genuinely new” money to fund social care.

Communities secretary Sajid Javid’s provisional local government settlement last year failed to directly announce any new funding for social care, instead inviting councils to raise their council tax precept up to 3% and announcing a one-off £241m ‘Adult Social Care Support Grant’ (ASCSG) based on the NHB reductions.

Lord Porter, LGA chairman, said: “Councils need government to reverse NHB cuts next year and fund the ASCSG with new money.

“This would avoid councils from having to make deeper than expected cutbacks to local services in 2017-18 and would provide some short-term support to councils providing social care.”

The LGA’s analysis of the four-year-long settlement suggests that 201 councils will miss out on NHB payments due to the government’s decision to raise councils’ qualifying growth baseline to 0.4% in 2017-18, also reducing payments to five years.

Fifty-seven social care authorities are also set to lose out under the ASCSG, losing more in NHB payments than they are set to gain under the grant, according to the LGA.

The Association has said that the measures will not change the fact that councils face a £5.8bn funding gap by 2020, in part due to a £2.2bn cut in Revenue Support Grant, warning that councils cannot plug the gap alone even if they were to cut all of their discretionary services.

“The government must allow local government to use the extra business rates income it will keep to plug this growing funding gap if local services are to stand any chance of surviving the sheer scale of funding cuts and pressures facing them both now and over the next few years,” Lord Porter added.

Norman Lamb, Liberal Democrat shadow health secretary, echoed the LGA’s calls, saying that local councils are being “gradually starved of cash”.

“If these cuts go ahead, vulnerable elderly people will suffer and services will struggle to meet basic needs such as washing, dressing or getting out of bed,” he added.

A DCLG spokesman said that the government is “determined” that councils continue to work well delivering local services while also making efficiency savings.

“Our historic long-term settlement is giving councils nearly £200bn to spend over the course of this Parliament, and we recently increased social care funding so councils have £7.6bn available over four years,” the spokesman said.

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