An “existential crisis” for English Councils

It has been many years since Councils have felt they had enough funding to provide the services that their residents need. For most of this century they have been cutting many non-essential and non-statutory services, such as youth clubs, and they have been outsourcing some essential services to cheaper and, in some cases, inexperienced and inadequate providers. And the cuts have happened year on year, so what seems unthinkable one year becomes a reality the next.

The core Council services are around housing and social care, for adults and children, plus a number of environmental services such as recycling and waste collection. Social care supports the most vulnerable, from essential care for the elderly and those with disabilities, to support for families in crisis and providing for looked after children. Most Councils also support an active volunteer sector with its increasing provision of food banks, as sure indicator that all is not well with society.

Throughout all this the Westminster government has been adding extra responsibilities to local government, but not the funding needed to meet them, all the while passing the blame onto Councils.

Councils get the bulk of their income from Council tax, business rates and central Government grants. The latter consists of the main revenue support grant, plus ring-fenced grants which simply pass through the Councils accounts and directly out to recipients, such as housing benefits and school funding. The formula for allocating the revenue support grant is shrouded in mystery, but seems to be based on historical assessments of need rather than current need.  It has also reduced on average by 50% in recent years, and some Councils get precisely zero in revenue support.

Council tax itself presents many problems for Councils trying to balance the books. It is only a progressive tax up to a certain level. Owners of properties in the highest tax band H, which could be worth millions, pay just double the tax of those on the median band D. So the presence of very expensive homes does not mean substantially higher income for the Council. And yet they are often cited as the reason for the small or non-existent revenue support grant. So we have the apparent anomaly in Kingston, where I live, where the Council is one of the lowest spending Councils per capita in London but has the highest Council tax rate (and receives zero revenue support grant) – try explaining that on the doorstep.

The increase in the amount that can be raised from Council tax is often capped by Government, reducing the Council’s ability to raise sufficient funds. However most would be reluctant to raise Council Tax by much more than the cap, if they were allowed, because they know what the impact will be on low-income residents.

Many Councils have been raiding their reserves, which are in place in case of emergencies such as a pandemic, but not to shore up regular spending needs. Others have been looking at marginal sources of income, such as parking charges, although this can have unintended consequences if retail footfall suffers as a result.

So Councils have been squeezed very hard for many years. Indeed some have been very close to bankruptcy. The Local Government Association has just released a report which shows that Councils in England face a collective shortfall of £2.4bn this year. On top of the year-on-year cuts in real terms they are now having to factor in general increases in the cost of living and huge rises in energy prices.

It seems that 88% of all Councils are planning to uses reserves this year to meet the extra costs.  Last week two Tory-run Councils warned Rishi Sunak that they are facing bankruptcy and that raising the cap on Council tax will not solve the problem.

The LGA has just launched its #SaveLocalServices campaign arguing that reserves should not be used to fund budget gaps.

Cllr James Jamieson, the Chair of the LGA is quoted as saying:

Local government remains the fabric of our country but many of the vital services we provide face an existential crisis. Inflation is not going to come down overnight; reserves can only be spent once and a local service cannot be cut twice.

Rising demand for services – and the extra costs to provide them – means that even having the same funding next year as they had this year would leave councils having to make significant cuts to services, such as care for older and disabled people, protecting children, homelessness prevention, leisure centres and bin collections.




* Mary Reid is a contributing editor on Lib Dem Voice. She was a councillor in Kingston upon Thames, where she is still very active with the local party, and is the Hon President of Kingston Lib Dems.

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  • Tristan Ward 16th Nov '22 - 6:21pm

    The Tory leaders of Kent and Hampshire _ the Council at risk of bankruptcy referred to – are argumg that services such as libraries and ho w to school transport are “outdated.”

    Essentially they are asking for the freedom to close down every library, and make every parent take their children to school in a car rather than on a school bus.

  • Massimo Ricciuti 16th Nov '22 - 7:23pm

    Well said, Mary!
    So actually also in Italy. We have to rebuild a new inclusive cultural and social way. It seems nobody cares about that. How can our sons look at the future? How to help our old parents? We have to work town by town…

  • David Garlick 17th Nov '22 - 11:13am

    I have argued for some time that ‘you get what you pay for’ and that is never more true than in local Govt. The Tories, and us in coalition, limited Council Tax rises. The Conservative ambition is that everything that can be privatised should be and that those left behind.. tough luck. Get on your bike and geta job/better job. The fact that there is no one to carry out the work seems to have escaped them.
    Where now is the question. The legacy is the need to increase spending at a time of economic downturn. thankfully it is the self same Conservatives who are going to put up taxes nationally and locally to everyones dismay. We may criticise but only with the addition of ‘What We Would Do is…’

  • Ruth Bright 18th Nov '22 - 4:23pm

    So timely Mary. Thank you.

  • Now seems a good time for councils to have a genuine conversation with residents about funding. True, those who rely on councils most can least afford council tax. Councils could do a lot more to consult with residents over libraries, road and street maintenance, leisure centres, youth services etc. I see little alternative so some sort of means testing for some of these if they are to survive.

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