Ministers in denial about perilous state of council finances, warn MPs

TOWN hall chiefs have warned that funding cuts are leaving local services “on the brink”, but the Government is in a state of denial about the state of council finances, according to the Public Accounts Committee (PAC) of MPs.

The committee has warned that local authority finances “continue to deteriorate” even as demand for vital services is on the rise. MPs are “dismayed” by the Government’s view of what constitutes sustainability in the sector.

PAC has warned the Government that it must plan for the future, rather than rely on short-term cash injections, which “are not good value”.

“The Government is in denial about the perilous state of local finances. It insists the sector is sustainable yet is unwilling or unable to back up this claim,” said PAC’s chair, Meg Hillier MP. “Flimsy assertions have no place in financial planning. The fact Government has bailed out councils with short-term fixes should be evidence enough that all is far from well.”

Over the last eight years, the Government has cut the funding it gives to English local authorities by nearly half, while, at the same time, demand for critical council services has risen: housing is under strain with over a third more people homeless and adult and children social care are confronted with growing demand.

The rate of looked-after children, for example, is at a 25-year high. The cost of adult and children’s social care has forced many local authorities to reduce spending on services in other areas.

Some councils are now in an “extremely worrying” position, according to the committee: overspending their budgets for social care, reducing key services, falling back on financial reserves and increasingly relying on generating other sources of income, which comes with greater risks.

The Ministry of Housing, Communities & Local Government (MHCLG) is relying on a short-term approach to a long-term problem, says the committee. Overall spending by local authorities on services fell by 19.2% in real terms between 2010-11 and 2016-17.

Meanwhile, the Government has had to inject large amounts of additional funding to ensure that the local authority sector can keep going in the short-term: £1.4 billion in the 2018 budget. Yet “disturbingly”, PAC says there is still no sign that the ministry has a “clear plan to secure the financial sustainability of local authorities in the long-term”.

“Government needs to get real, listen fully to the concerns of local government and take a hard look at the real impact funding reductions have on local services. And then it needs to plan properly for the long-term,” Hillier added.

“It is extremely troubling that the Government views the financial sustainability of councils solely in terms of statutory services, rather than full range of services local people need and can reasonably expect councils to provide.

“Cutting youth services, for example, may simply build pressures on statutory services and we expect Government to explain how it takes account of these shunted costs in reaching its conclusions.

“It must also explain why its conclusions differ from those of the Local Government Association, local authorities and other representative bodies seriously concerned about sustainability in the sector.”

Funding cuts are “pushing local services to the brink” said the chair of the Local Government Association’s resources board, Councillor Richard Watts.

“With councils in England facing an overall funding gap of £8 billion by 2025, we are pleased the Committee has reinforced our warning that funding cuts and demand pressures are pushing local services to the brink,” he said.

“The Spending Review will therefore be make or break for vital local services and securing the financial sustainability of councils must be the top priority. If we truly value our local services then we have to be prepared to pay for them.

“We agree with the Committee that the financial sustainability of local government cannot be defined by the ability of councils to just provide statutory duties.

“Pressures continue to grow in children’s services, adult social care, and efforts to tackle homelessness and this is leaving increasingly less money for councils to fund other discretionary services, such as the maintenance of parks, certain bus services, cultural activities and council tax support for those in financial difficulty.

“Fully funding councils is the only way to ensure councils can continue to provide all of the valued local services which make such a positive difference to communities and people’s lives.”



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