Cuts Watch #246: Council services could be £20 billion underfunded by 2015
In a submission to the Treasury, the Local Government Association has warned that frontline services face a shortfall of £12.5 bn in 2013/4, rising to £20 bn by 2014/5. The gap will be created by rising demand for services, combined with cuts in government grants. The LGA believes, however, that a radical devolution of funding powers – “local budgets” – could save £100 bn. The demand pressures include:
- Social care. Local authorities currently spend £14.4 bn a year, but demographic change will raise this by 4 per cent a year, to £20 bn by 2015.
- Education. The number of school age children is expected to rise by 3 per cent by 2014.
- Children’s services. There are rising numbers of children with special educational needs and child protection costs are rising sharply.
- Waste collection and disposal. Costs excluding capital investment are likely to rise from £3.4 bn to £4.3 bn, mainly because of rising disposal costs.
- Economic development. The investment needed to meet the country’s infrastructure needs has been estimated at £50 bn a year for the next decade.
- Flooding. From next year local authorities will have new responsibilities.
- Travel. Spending on concessionary travel and subsidies is expected to rise by 20 per cent between 2008-9 and 2013-4.
- Equal pay and pensions. Equal pay will eventually cost an extra £4 bn (but over a longer timescale than 2015) and pension contribution rates are likely to rise.
At the same time, the LGA expects a 20 per cent reduction in most central government grants to local government.
According to the Local Government Chronicle (paywall) the £20 bn shortfall is based on a “realistic” scenario, but even a “benign” scenario produces a shortfall of £16 bn. LGC also quotes LGA Finance Director Stephen Jones pointing out an important consequence of the fact that central government support accounts for a larger share of some councils’ budgets than others:
If you look at funding apart from schools funding, what you find is that in Hartlepool about a third of that comes from the grant that is likely to be subject to these very big cuts.
In Hertfordshire it’s only a quarter. If the government made a uniform cut in those unprotected areas then places like Hartlepool would be hit disproportionately hard.