The perfect storm
Local authorities are finding themselves under extreme scrutiny and pressure, with the end nowhere in sight. With high inflation currently in the UK and individuals and families ‘feeling the pinch’ from the cost of living, it’s no wonder why local authorities have been continually seeing an alarming amount of demand for their services since 2010. A particular area that is seeing those enormous demand spikes is the social care sector, which is known for providing care for and protecting the most vulnerable. This combined with high inflation is causing the cost of temporary and emergency accommodation placements to skyrocket, which local councils and authorities have to absorb. If this wasn’t enough, local authorities have to compete with, the 27 per cent real-term cut in core spending power since 2010. As a result, it could be considered almost impossible for local authorities to respond to the increasing demand, let alone new challenges that arise. To try and combat this, local authorities have been pushed to become more self-sufficient and find new income sources to offset funding gaps. Birmingham City Council felt firsthand what such financial pressures can inflict on local authorities, with the council issuing a Section 114 notice in September 2023 - effectively declaring bankruptcy. So the question is, could an increase in local authority funding stop others from having a similar outcome to Birmingham City Council?
Understanding the challenges faced by local authorities
Arguably, the most obvious challenge faced by local authorities is funding. The lack of spending power and increased need for their services, has caused a cascading effect on how they operate, and there’s more to it than spiraling costs.
Impact on staff
Due to funding cuts since 2010, local authorities were forced to review their services to make further cost reductions where deemed possible. This came even though staff levels had already been significantly reduced to try and balance the books. The immense strain on provided services led to an increased difficulty in maintaining the same service level. The knock-on effect of this was a substantial increase in the workload of the remaining staff, who had to compete with the rising demand, rising workload, and declining staffing levels - further affecting service delivery. The imbalance forced local authorities to go one step further than scalebacks - overhauls. Complete overhauls of “discretionary” services followed, including but not limited to leisure centres, recycling management, and public transport subsidies. For instance, in 2011 Channel 4 reported that “more than 90% of local authorities in England are cutting subsidies to bus services.” In the last decade alone “over half a million local government workers have lost their jobs in the past decade due to austerity.” according to the 2020 Facing Redundancy in Local Government report from UNISON. So it could be expected that staffing levels would be slashed even further if the issue is not resolved - affecting local authority staff even more.
Impact on Public Spaces
Staffing has not been the only area affected by the financial strain placed on local authorities. To help balance budgets, local authorities looked into the selling of various public spaces and areas. This included recreational areas, libraries, and community centres. Due to no fault of their own, the lack of capital had meant that some local authorities were forced into using the proceeds raised from selling off buildings and land to pay for redundancies and vital frontline services, which were being negatively impacted. Unfortunately, with such deep cuts to the budget and an ever-growing demand for services, the capital raised did not last. According to The Bureau of Investigative Journalism, from a selection of 12,000 public spaces sold by local authorities, £9.1 billion was raised. However, this would not even scratch the surface of the funding needed by local authorities, as without taking into account spending on education, £76.4 billion was spent by local authorities between 2022 and 2023 - making the £9.1 billion obsolete.
Impact on services
There is no question that the austerity since 2010 has profoundly impacted services from local councils across the UK. According to a late local government update, in 2023-2024, local government in England will have a core spending power of £60.2 billion, whilst local government in 2009-2010 had a core spending power of £121.3 billion. To put it into perspective - local governments now have less than half the spending power they did in 2010, while demand for local council services has ballooned. But what services have been implicated and by how much? From the fiscal year 2010/11 to 2022/23, per-person expenditure on cultural activities has seen a nearly 50% decline. Road and transportation investments have experienced a substantial 40% decrease while funding for housing has seen a one-third reduction. During this period, libraries and youth clubs have closed, community buses have been reduced and park spaces have been neglected. This has had a huge impact on public wellbeing and has greatly affected those who need frontline local council services the most.
What does our Finance Director, Tom think?
"Local authorities have been facing major financial challenges due to a lack of funding year-on-year. For local authorities to continue to make progress and boost public wellbeing. increased government financial support is imperative." - Tom Gilbert, Group Finance Director @ Rent Connect.
Is more funding the answer?
In short yes. It can be argued that funding is the root cause of the issues that local UK governments are facing today. Increased funding would provide the capital needed to employ more staff to support service delivery, pay for the growing costs absorbed by local councils, also retain and improve owned public spaces. From this, public wellbeing will start to return to pre-austerity levels. However, it should be noted how crucial the right amount of funding is. A minimal amount of government funding won’t have a positive long-term impact and would only benefit local councils in the near term. Interestingly, the government announced £500m of new funding for councils in a parliamentary statement on 24 January 2023. However, there are already calls from some of the largest city councils explaining it’s not enough.