Latest Public Sector News

01.09.15

Spending Review will open £10bn hole in council budgets

Upcoming Spending Review measures will pile an extra £10bn of pressure onto councils and local services, new LGA analysis revealed today (1 September).

It has calculated that critical new government policies, to be announced in November and implemented over the next five years, will cost councils £6.3bn.

They will also face another £3.6bn of “business as usual” issues just to maintain services as they are now, based on demand-led services and inflation pressures on local government services.

The LGA is warning chancellor George Osborne that failing to consider these “unfolded cost burdens” in the upcoming budget review could result in “vital local services being scaled back or lost altogether” – such as social care, child protection, bill collection, and park and green space maintenance.

The LGA’s chair, Cllr Gary Porter, said: “Leaving councils to pick up the bill for new national policies while being handed further spending reductions cannot be an option. Enormous pressure will be heaped on already stretched local services if the government fails to fully assess the impact of these unfunded cost burdens when making its spending decisions for the next five years.

 “If our public services are to survive the next five years, councils need fairer funding and the freedom to pay for them. Only radical reform of the way public money is spent and widespread devolution of transport, housing, skills and health and social care across England in the Spending Review can protect the services which bind our communities together and protect our most vulnerable.”

Porter emphasised the need for devolution by calling for the review to be guided by the “fundamental principle” that communities “know best” how to spend money on their local services.

According to the analysis, cost pressures that councils will face include:

  • Exempting house builders from section 106 & Community Infrastructure Levy payments for 200,000 new starter homes. An average s106 payment of £15,000 per home would result in £3bn of loss over five years;
  • Reducing rents paid by social housing tenants by 1% a year will cost councils £2.6bn;
  • Reserving £1.75bn to cover the high volume of business rate appeals expected when the 2017 revaluation is introduced;
  • Rolling out universal credit for previous housing benefit claimants will make it difficult for councils to collect overpayment debts worth up to £1bn;
  • Introducing the National Living Wage for council staff and care workers over the age of 25 will cost councils £834m a year by 2019-20;
  • Increased National Insurance contributions of £797m a year after the end of state pension contracted out arrangements in 2016;
  • Meeting the “growing gap” between what care self-funders and England’s 37 County Councils’ Network member councils pay care home providers is estimated to cost £630m. The LGA projects the cost impact on England will be roughly double that on a population basis;
  • The extra £172m annual cost of carrying out higher numbers of Deprivation of Liberty Safeguards assessments following a Supreme Court judgement last year;
  • Treating growing cases of tree disease and pests, such as Chalara ash dieback and oak processionary moths, to cost more than £100m.

There are further areas where extra costs will be incurred but “are difficult to quantify”, according to the LGA.

These include changes to support for failed asylum seekers, frozen Local Housing Allowance, the benefit cap, increased demands for children’s services, increased waste recycling targets and the 75% of leisure centres nationwide in need of refurbishment.

The LGA demanded that the Spending Review, set for 25 November, be about “spending smarter, not only about spending less”.

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