1. Governance
May 29, 2019updated 28 Jul 2021 2:08pm

Councils are using their reserves to plug funding gaps. Here’s what that means

By Richard Watts

Local government is part of the fabric of our country. Councils are the ones who can 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.  

But the money local government has to maintain these vital services is running out fast.

Councils have experienced disproportionately large reductions in government funding over this decade, in comparison to the rest of the public sector. Councils will have lost almost 60p out of every £1 the government had provided for services.

But what does this actually amount to? The bigger picture is that councils in England are now facing an overall funding gap of £8bn by 2025. And this is just to stand still and incorporate additional demand, and does not even take into account important improvements in local services and councils’ prevention and early intervention work. 

Very often it is those who are most vulnerable and need support across a range of services to improve life chances that rely on our local services the most. Pressures are growing in children’s services, adult social care, and efforts to tackle homelessness. This is leaving less and less money for councils to fund other services, like fixing potholes, improving roads and transport links, bus services and cleaning streets. 

It is unsurprising that more and more councils are struggling to balance their books. Money is increasingly having to be diverted from optional services, which help build communities people want to live in, to plug growing funding gaps, while some councils have already been forced to cut their services back to the legal minimum “core offer”. 

Some councils are facing a choice between using reserves to try and plug funding gaps or further cutting back local services in order to balance the books. This is unsustainable and does nothing to address the systemic underfunding that they face. Ongoing funding gaps facing local services are simply too big to be plugged by reserves. 

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Reserves are used to make long-term investments, such as job-creating regeneration schemes, infrastructure projects and creating school places as well as to invest to save, for example in technology. Use of reserves can also help councils manage growing financial risks to local services, which is increasingly important given the financial uncertainty they face. 

Without a doubt, the Spending Review will be make or break for vital local government services. 

That is why the Local Government Association has launched its #CouncilsCan campaign to build support among the public, councils, parliament and central government for long-term investment in local government at that Spending Review.  

Local government needs a sustainable funding system which provides the resources councils need to deliver local services. With the right funding and powers, councils can continue to lead their local areas, improve residents’ lives, reduce demand for public services and save money for the taxpayer.

But while the funding is critical, our campaign is not just about asking for more money – it’s about highlighting how councils can achieve the best for their communities with the right powers and investment. In many cases councils have already got proven track records of how they have managed to keep successful local services running through improvement and innovation despite a lack of funding.  

And while these many examples show how councils are doing what can with what they have, many efficiencies and savings have now been made and the right powers and funding are needed for councils to make a positive difference to residents’ lives and continue to reduce pressures on the rest of the public sector.

Without urgent changes, it is the people who rely on and value council services that will suffer. Councils make our communities places we want to live in and people rightly look to their council to support them and their family and to be at the heart of their community. This campaign wants at put the issues councils are facing to the top of the government’s agenda. It is crucial that the government addresses the issues councils are facing in the upcoming Spending Review. 

Richard Watts is a Labour councillor for the London Borough of Islington and the chair of the Local Government Association’s Resources Board.

For more information on the #CouncilsCan campaign click here.

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