The austerity that has made thousands of British people worse off in recent months is about to get a good deal worse. In a damning letter to the Government, the leaders of 30 local councils across the county (including eight from the Midlands) warn of a collapse of local services unless more money is provided.
The Autumn Statement was loudly praised in some quarters for the tax cuts announced by Chancellor Jeremy Hunt but it contained no new money for local government beyond an inflation-adjusted package. It will do nothing to help councils meet their salary obligations after the rise in the living wage.
Local government has seen a 27% real-terms cut in core spending power since 2010 leaving councils lacking the resilience they need to meet new challenges. As the Local Government Association(LGA) warned in a letter to the Chancellor, councils “do not have enough funding simply to stand still.”
As we have already seen, two local authorities, Birmingham and Nottingham, have announced they are effectively bankrupt. The crisis could deepen. The Local Government Association (LGA) has stated that as many as one in five council leaders in England are likely to declare council bankruptcy in the next two years.
Barry Lewis, finance spokesperson for the County Councils Network (CCN), said: “The majority of the County Councils Network’s member councils will now have no choice but to increase their planned level of service reductions, reduce investment on growth-creating capital projects, and levy higher council tax rises: all of which impact our residents.”
The implications of this cannot be overstated. We’ve taken a look at the position of two authorities in our area.
Lincolnshire
Lincolnshire epitomises Conservativism. The county council has loyally followed and implemented every aspect of government policy since the austerity programme began in 2010. When they start to squeal therefore, you can be sure that things are bad and about to get worse.
Like every other council, they have core responsibilities to fund. They are starting to find this a struggle. The council’s policy is to maintain reserves of between 2.5% and 3.5% of their total budget. At the start of the current financial year, that was expected to be £16.4mn with no increase expected over the year.
In his commentary on the budget for the financial year 2023/24, the council leader Martin Hill warned of a challenging financial situation. In spite of their prudence, the council expected to have a budget shortfall in the 2023/24 financial year of over £7.5mn. This deficit will be covered by drawing down from their reserves. While a slight improvement was expected for 2024/24, further shortfalls would occur in the following two years.
Michael Gove recently said the total finance settlement for 2024/25 of £64bn would provide an above-inflation increase in funding for local government, with the average council seeing a real-term increase in their core spending power. He also told councils to “consider how they can use their reserves to maintain services over this and the next financial year”. The council has been lobbying hard but unsuccessfully for a fairer settlement, especially for roads maintenance. However there seems little prospect of any change in the short term; “The indications are that the long-awaited ‘Fair Funding’ review will be deferred until at least 2025.” There will come a point soon when, even in Lincolnshire, those reserves will have run out.
What does this mean for residents? At best, it’s likely to see no noticeable improvement if the Government doesn’t provide more money. While the council is proud that it keeps council taxes low, it also gets “one of the worst allocations of government grant”. It’s noticeable therefore that in this document, the council was also very concerned about making commitments they’d be unable to meet because of “continued uncertainty in our levels of future funding”. That’s small comfort for those who live in the county which has pockets of high deprivation and many small communities with limited access to amenities.
Immediate challenges are looming. The roads budget is already under pressure having lost £12mn of government funding. Some £5mn has been offered by Westminster over the next two years but that means a shortfall of £2mn. The already poor state of the county’s roads is likely to worsen.
Meanwhile in the same week as a major flood inundated parts of the east coast ten years ago, and not long after Storm Babet wrought further flooding havoc, news emerged that the sea defences were in a worse state than had been realised and major remedial work would be necessary. Extra funding from the Department of Food and Rural Affairs (Defra) “as part of the £200mn Flood and Coastal Innovation Programme” will barely touch the sides.
Derbyshire
The story in Derbyshire is similar, but worse. The Conservative-run council has revealed a predicted £46mn hole in their finances. The leader of Derbyshire County Council (DCC), Barry Lewis, is under fire from opposition groups for failing to lobby either the government or his own party.
In September, Mark Kenyon, director of finance, reported to the council that it was on course to overspend this year’s budget by £46mn. Since then, that forecasted deficit has been reduced to £33mn, largely thanks to measures already taken. On-going drastic actions, including a near-complete hiring ban (except for essential roles) and a freeze on all but non-essential spending, have yet to have an impact.
Some of the £13mn saved so far has come from savings in adult social care (£1.5mn), highways and transport (£2mn) and corporate services (£3.3mn). The rest has come from the council’s reserves. In fact, for this year’s budget, DCC has taken £55mn from its reserves. Now there is only £28mn left which the finance officers are looking to avoid using any further.
DCC says that avoiding impact on adults and children supported by social care services is of paramount importance. However, the council has not specified which essential and/or statutory services need to be safeguarded. Meanwhile, the forecasted cost of child social care has spiralled upwards, even since September.
When asked if he felt the council would be able to save £33mn by the end of March, Mr Kenyon replied, “I honestly couldn’t tell you”.
Consequences
Residents of Derbyshire are likely to suffer significant knock-on effects.
Adult social care
One possible option would mean more than halving the threshold at which people are eligible for adult social care support. The council is considering reducing the current level of £50,000 to £23,250. Only those with less than this may be eligible for subsidised care, leaving thousands concerned about how they will pay for support.
Libraries
The status of the county’s libraries has been precarious for some time. In 2018, DCC tried to hand over the running of 20 of them to volunteers. However, that scheme largely failed and now the council says it will have to look at “co-location, relocation, digitisation and self-service”. It seems inevitable that some local libraries will close.
Environment
The council is reducing – even halting – work relating to cutting its carbon footprint. DCC has committed to becoming carbon neutral by 2032 and to help Derbyshire as a whole get to net-zero emissions by 2050. These goals now look increasingly at risk.
Capital spending
Work has been stopped on the Chesterfield-Staveley Regeneration Route project, the county’s most expensive infrastructure scheme. Last December, the cost of the scheme rose from £130mn to £166mn.
Maintenance
The freeze in recruitment has already led to slower response times for building repairs and clearing trees and fallen branches from roads and properties, despite the severe disruption the county suffered during the recent Storm Babet. The budget for winter road maintenance may also be exceeded if this winter is above ‘average severity’ (i.e. if temperatures are colder than experienced in the past five years) which will only add to the black hole. Derbyshire is notorious for the poor quality of its roads, having the highest number of potholes of any region in the UK.
The Conservative-controlled council recently voted against a requirement to provide regular finance reports at full council and finance scrutiny meetings so it will be difficult for the public to know what progress is or isn’t being made.
