In a newly published press release, the Local Government Association (LGA) is warning that councils will face an overall funding gap of £5.8bn by 2020. The body also says that more than two-thirds of authorities will be worse off than expected in 2017, meaning they'll likely be forced into further cuts to plug the gap.
Local Government Finance Settlement
The warning is a response to Westminster's provisional Local Government Finance Settlement, announced in December, which didn't promise any new funds to local authorities in the financial year 2017-18.
To help cover rising social care costs, the government is proposing to redistribute £241m as part of a revised New Homes Bonus (NHB) plan. However, this single-use ‘Adult Social Care Services Support Grant’ will require council growth of 0.4% before it is triggered – a clause which the LGA says will cost 201 councils essential income that had already been included in their budgets.
Under government plans, councils will also be allowed a one-off council tax increase of up to 3% under a ‘social care precept’, which must be justified to taxpayers.
Impact and implications
A report released this month by researchers LaingBuisson suggests that care homes are already receiving £100 per week less than they need to cover costs, which adds up to a funding gap of £1.3bn per year.
With councils facing their own funding gap, even meeting current payment levels is likely to need further budget cuts, the LGA argues, unless the final Local Government Finance Settlement is adjusted.
Proposals from the LGA include reversing reductions to the NHB, providing new funds to cover the social care gap and allowing councils to use extra business-rate income earned before the end of Parliament.
Perhaps more important for councils, however, is a long-term solution that allows them to accurately forecast and control their budgets. Granting lasting powers to manage council tax costs and access business rate income would be an important budgeting tool to accompany cuts to services and short-term incentives like the NHB.
In the meantime, councils may also benefit from a renewed focus on revenue management. This means ensuring that existing income from council tax and business rates is collected efficiently, using enforcement action where necessary.
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