More cuts, more borrowing: what does it mean for councils?

The Local Government Association (LGA) says that council funding will be slashed by a further 36% this year, and observers are concerned for front line services. From what I can see, the Government’s response continues to focus on policy-led funding: whether it’s for combating pollution, boosting house-building or something else entirely. The question is, can these opportunities make a meaningful difference? And, if not, what can councils do?

Assessing the funding gap

The County Council Network has called the continued cuts “unpalatable”, and says that councils will need to find savings of £1bn in order to plug a £1.5bn shortfall by 2020. This will necessarily entail further cuts to public services, including those on the front line. But for some councils, the reality could be even more bleak.

The Public Accounts Committee has already warned that many councils are in a “worrying financial position” due to falling government funding – something that hardly needs reiterating after the bankruptcy of Northamptonshire County Council and warnings issued to Somerset. Newcastle City Council leader Nick Forbes has even launched a petition to try and prevent cuts from pushing council beyond their “breaking point”.

Alternative approaches

The government argues the situation isn’t so bad, and continues to flag its £90.7bn of funding that will be delivered to councils over the next two years. A figure which, they claim, is “a real terms increase in resources.” The trouble is that a lot of government initiatives seem to focus on specific issues.

Some local authorities may successfully win grants to tackle problems like air pollution and housing shortages, but they aren’t available to the majority. As a result, councils who can’t access sufficient funding for other services are forced to make more cuts, or take risks by borrowing more to either invest in property or simply balance the budget.

Essential groundwork

There’s also evidence that this approach is leading to a funding divide between councils. A recent study by Cambridge University found that English councils have suffered an average spending fall of 24%, while those in Wales saw spending decline 12% and Scottish council spending fell just 11.5%. It also revealed major declines in spending in large cities, including in deprived areas, compared to more rural authorities.

Providing funding pots for individual, politicised issues won’t solve this problem. That is why it's more important than ever that councils are provided with fair funding, and supported in their efforts to recoup all unpaid debt – including council tax and business rates – in a timely and sensitive manner. Simply expecting them to borrow more and make deeper cuts while repeatedly applying for individual grants is not sustainable.

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