The LGA has written to the Chancellor setting out local government’s priorities
On 15 March, the Office for Budget Responsibility will provide its next set of public finance forecasts and Jeremy Hunt will deliver his first Budget as Chancellor.
The LGA’s four political group leaders and I have written to the Chancellor setting out where public finance interventions would help councils remain financially sustainable and deliver on shared priorities in this highly uncertain time.
A key area is children’s social care, where we have a record number, and a record proportion, of children in care in England – over 15,000 more than 10 years ago.
Council spending on placements with independent providers grew by 57 per cent between 2016 and 2021, compared to a 15 per cent increase in looked-after children.
LGA analysis, prior to the current high levels of inflation, indicated an existing shortfall of £1.6 billion a year simply to maintain current service levels.
Councils are pleased to have the opportunity to work with government on much needed reform, but the system must have resources to change. Last year’s Independent Review of Children’s Social Care recommended investing at least £2.6 billion over four years, prior to inflation. (see ‘Children’s social care implementation’).
In respect of housing, the future sustainability of housing revenue accounts (HRAs) remains a concern for councils.
LGA-commissioned research shows that the 7 per cent cap on social housing rents, compared with the usually permitted ‘consumer price index plus 1 per cent’ limit, will amount to a cumulative deficit of £664 million after two years.
This, alongside expenditure pressures, will impact councils’ ability to deliver key maintenance and improvement works and retrofit existing stock in pursuit of net zero goals and energy-efficient homes.
Recent analysis by Savills estimates the additional costs to deliver net zero is £23 billion over 30 years. While the £3.8 billion Social Housing Decarbonisation Fund is welcome, it falls a long way short.
Long-term funding certainty would enable councils to support the rollout of an ambitious national retrofit programme across all tenures. This could be helped by ‘blended’ finance models, using energy cost savings to help fund investment in net zero.
The Building Safety and Fire Act, while welcome, introduces significant additional expenditure.
LGA-commissioned research estimates that the cost to achieve compliance with the Act across the entire HRA council housing stock will be £7.7 billion between 2023 and 2030.
Meanwhile, there are not enough affordable homes to meet current demand, with more than 1.2 million households on waiting lists and almost 95,000 households in temporary accommodation.
Councils need long-term certainty on powers and funding to help support an ambitious build programme of 100,000 high-quality, climate-friendly, affordable homes a year.
Not only would this provide safe, secure homes for those most in need, it would improve the public finances by £24.5 billion over 30 years, including a reduction in the housing benefit bill and temporary accommodation costs.
With the number of private rented evictions increasing, the cost of living continuing to rise and more Ukrainian arrivals presenting as homeless, councils are increasingly concerned about a national homelessness crisis.
Latest figures for England show 120,710 dependent homeless children living in temporary accommodation, with 2,320 of these in bed-and-breakfast places.
Councils are warning us that these numbers are set to rise if ministers fail to address housing shortages. The Government needs to review local housing allowance rates, prioritise a significant increase in social housing, and develop a cross-departmental homelessness prevention strategy that addresses the drivers and levers of homelessness.
The Government used its 2022 Autumn Statement to provide extra funding for adult social care and accepted the LGA’s ask for funding allocated towards the now-delayed charging reforms to be used to address inflationary pressures facing councils.
Local government has always supported the principles underpinning adult social care reform and wants to deliver those changes effectively, but underfunded reforms would exacerbate significant ongoing financial and workforce pressures.
Ultimately, the new funding falls significantly short of the £13 billion we have previously calculated is needed to address the severity of the pressures facing the service.
These go beyond inflation and delayed discharges and include rising demand and the need to ensure councils can meet all of their statutory duties under the Care Act 2014.
It was also disappointing that the Government continues to rely on council tax and the social care precept to increase funding for adult social care.
Public leisure and culture services play a vital role in the health and wellbeing of communities, targeting the most vulnerable and those in areas of highest health deprivation.
While many universal services face challenges from the rising cost of living and energy prices, pressures are felt acutely in the leisure sector: 40 per cent of council areas are at risk of losing or seeing reduced services at their leisure centres before the end of this month, rising to nearly three-quarters before the same time next year.
Closures and reduced services would have a significant knock-on effect on other services, in particular the NHS and social care, and risk supportive investment during the pandemic being wasted.
The Government must acknowledge that the public leisure, sport and physical activity sector is an energy-intensive, vulnerable sector; provide financial support towards energy and cost-of-living rises; and increase capital investment to create modern and energy efficient buildings.
Devolution to local leaders, with real power genuinely devolved and backed by sustainable funding, is the most efficient and effective way to address the current fiscal crisis and secure a path to long-term prosperity.
The Government should pilot a new approach to public service investment, building on the experience of whole-place community budgets and the troubled families programme, by asking areas to come forward with radical proposals to bring together budgets and public services under the leadership of local government (see ‘Levelling up’).
For example, the current skills and employment system is fragmented and unable to adequately address current labour market and productivity challenges, with £20 billion spent on at least 49 nationally contracted or delivered schemes or services, managed by nine Whitehall departments and agencies.
Giving democratically elected local leaders the power to join up careers advice and guidance, employment, skills, apprenticeships, business support services and outreach in the community could save millions of pounds, improve people’s skills and help more into work.
Net zero is creating a new era of opportunity and councils want to act decisively and quickly to seize the opportunity across housing, transport, energy and nature recovery.
“Significant uncertainty remains beyond 2024/25 that continues to hamper planning”
UK Research and Innovation found that council-led approaches to hitting net zero targets cost a third of a centralised approach and deliver twice the social and financial returns.
The Government should now accelerate action by bringing forward and consolidating funds into single place-based allocations for all councils linked to an agreed set of local net zero actions, free of national restrictions.
And a package of support is needed to bolster councils’ capacity and capability to meet their aspirations for local climate action, including working with the LGA to expand how the sector can lead its own development.
Finally, the Government has said it will not implement the Review of Relative Needs and Resources and a reset of accumulated business rates growth in this Spending Review period, and that it remains committed to improving the local government finance landscape in the next Parliament.
When the review does happen, it needs to consider both the data and the formulas used to distribute funding. The Government also needs to ensure that overall local government funding is sufficient to ensure that no council sees its funding reduce as a result.
The Spending Review 2021 and Autumn Statement 2022 provided some welcome assurances on future funding levels at a national level for the next two years.
But significant uncertainty remains beyond 2024/25, which continues to hamper councils’ financial planning and financial sustainability.
Councils need a multi-year settlement that supplies sufficient funding for statutory services. This is crucial for councils to plan budgets effectively, manage future risk, and improve the financial resilience of local government.
There should also be a move away from piecemeal pots of funding allocated through wasteful competitive bidding processes.
Government should instead adopt a place-based approach in which funding is aligned with local needs and opportunities.
