The report, published today (8 March), claims that despite greater freedoms to increase council tax bills and one-off short-term funds from government, local authorities are struggling to juggle higher demands and cost pressures against significant central government funding cuts of nearly 50% since 2010-11.
Central government funding to local authorities has fallen by 49.1% from 2010-11 to 2017-18. This equates to a 28.6% real-terms reduction in spending power.
Lord Porter, Chairman of the Local Government Association – “The Government needs to urgently address this cliff-edge and the growing funding gaps facing local services.”
Many local authorities are relying on using their savings to fund local services and are overspending on services, which is not financially sustainable, the report states. There was a £901m overspend on service budgets by local authorities in 2016-17.
The report goes on to claim that if local authorities with social care responsibilities keep using their reserves at current rates, one in ten could have exhausted them within three years.
Last month, Northamptonshire County Council imposed strict in-year spending controls as it is at risk of spending more than the resources it has available in 2017-18, which would be unlawful.
There is evidence, according to the report, that these spending reductions are impacting frontline services such as waste collections.
Since 2010-11, 33.7% fewer households have their non-recyclable waste collected weekly, the number of bus miles subsidised by local authorities outside London has fallen by 48.4%, and the number of libraries has reduced by 10.3%.
The Ministry of Housing, Communities and Local Government (the Department) has made improvements in understanding the sector’s financial position since the NAO’s last report in 2014 but, because responsibility for services is spread across departments, there is no single view of how funding cuts are impacting the whole of local authority services, the report states.
Amyas Morse, head of the National Audit Office – “The Government risks sleep walking into a centralised local authority financial system where the scope for local discretion is being slowly eroded.”
At a time when social care spending is being prioritised by local authorities, failing to understand how funding and demand pressures affect the full range of local authority activities risks unintentionally reducing services to a core offering centred on social care.
The government has given local government several short-term cash injections in recent years, but most of this funding has only been available for adult social care. Uncertainty remains over the long-term financial plan for the sector.
The government has confirmed its intention to implement the results of the Fair Funding Review in 2020-21 and to allow local authorities to retain 75% of business rates, but the implications of these changes for local authorities’ finances are not yet clear.
Amyas Morse, head of the National Audit Office, commented on the report: “Current funding for local authorities is characterised by one off and short-term fixes, many of which come with centrally driven conditions.
“This restricts the capacity of local authorities and yet the weight of responsibility to respond to increased demand and maintain services remains very much on their shoulders.
“The Government risks sleep walking into a centralised local authority financial system where the scope for local discretion is being slowly eroded.”
Responding to a report by the National Audit Office on the financial sustainability of local authorities, Lord Porter, Chairman of the Local Government Association, said: “Councils’ ability to maintain local services at a time of inadequate resources and rising costs is already extremely stretched, and the NAO rightly warns about the huge uncertainty over how the Government intends to fund local services after 2020.
“Core central government funding to councils will be further cut in half over the next two years and almost phased out completely by the end of the decade.
“The Government needs to urgently address this cliff-edge and the growing funding gaps facing local services. It also needs to provide the financial sustainability and certainty needed to protect the local services our communities rely on into the next decade and beyond by committing to allow local government as a whole to keep every penny of business rates collected.
“Only with the right level of funding and powers, can councils continue to make a difference to people’s lives by building desperately-needed homes, creating jobs and school places, providing dignified care for our elderly and disabled and boosting economic growth.”