While February’s final local government finance settlement confirmed a 6.8 per cent cash increase and extra money towards increased employer National Insurance contributions, councils’ finances remain extremely challenging.
The pressures and needs they face must be seen in the context of the huge contribution councils already make and their potential to do more to support the delivery of public services.
Despite the financial pressure councils have been under since 2010/11, the vast majority have met their statutory responsibility to balance their books annually. But this does not mean services remain unchanged and sustainable: council spend is increasingly concentrated in fewer services and on fewer people, with growing concerns over the quality and scale of service provision, increasingly unsustainable workforce challenges, and reduced spend on preventative services.
These outcomes show that simply keeping councils on a financial drip-feed has not prevented the steady narrowing and weakening of council services.
Councils need a significant and sustained increase in overall funding to stem the emerging risk of system-wide financial failure, and to ensure that councils can meet growing demand for the vital services needed by their communities.
In addition, there is growing evidence that the wider local government revenue funding system itself desperately needs reform. We believe a cross-party review is required, which must include a review of council tax, alongside other council funding sources, and consider whether business rates retention represents a viable future funding model.
We should look to build a sector-wide consensus on the nature of any proposed reform.
Ministers have committed to multi-year settlements and are currently consulting on changes to the system that underpins the local government finance settlement, while the LGA continues to make the case for finance reforms, sufficient resourcing, and investment ahead of the Spending Review in June.
Creating a more sustainable funding system for local government has the potential to strengthen the value for money of local spending and, most importantly, improve outcomes for the people and places councils serve.