London boroughs' budgets on a knife edge due to £500m budget shortfall

 From London Councils

Boroughs in the capital will need to make over £500m of savings next year to balance their budgets, new analysis from London Councils reveals.

Based on its latest survey of council finances, the cross-party group warns that nine in ten London boroughs expect to overspend on their budgets this year – estimated at over £400m in total across the capital.  

London Councils says boroughs face a perfect storm of prolonged high inflation, fast-increasing demand for services, and insufficient government funding – leading to a growing risk of financial and service failures.

Growing pressures on adult and children’s social care, as well as the capital’s worsening homelessness crisis, are the biggest drivers of boroughs’ overspends. London Councils estimates that almost 170,000 Londoners – equivalent to one in 50 residents of the capital – are currently homeless and living in temporary accommodation arranged by their local authority. Boroughs expect to overspend on temporary accommodation by £90m this year.

Ahead of the government’s Autumn Statement in November, where the Chancellor will set out his future spending plans, boroughs are calling for urgent action to boost support for local services and stabilise council finances.

London Councils has launched its key priorities for the Autumn Statement, which include:

• An overall funding increase of at least 9% (in line with what was received last year).
• Investment to reduce homelessness, including through uplifting the Local Housing Allowance and Homelessness Prevent Grant.
• Reforms to the broken local government finance system, such as giving councils longer-term funding settlements and more devolved powers.

Cllr Claire Holland, Acting Chair of London Councils, said:

“Borough finances are on a knife edge – with grim implications for the future of local services in the capital.

“The combination of higher costs due to spiralling inflation, skyrocketing demand for services, and insufficient levels of government funding leaves boroughs in an extremely precarious position. The pressure is relentless – we face a £400m shortfall this year, which rises to £500m next year unless the government provides more support.

“Councils play a vital role in their communities providing essential services and in tackling so many major challenges, such as addressing homelessness, unlocking economic growth, and making faster progress towards net zero.

“The government must use the Autumn Statement to bolster council finances. This will be crucial for helping boroughs stabilise budgets and sustain London’s local services.”

London boroughs’ resources remain almost a fifth (18%) lower than in 2010, despite there now being almost 800,000 more Londoners – broadly equivalent to a city the size of Leeds). This has been exacerbated by over £1bn in unfunded and underfunded new burdens over that period, such as the government transferring responsibility to local authorities for financing Council Tax Support and a host of other measures.

London Councils also highlights a recent report from the independent Institute for Fiscal Studies think-tank that found London local government funding is 17% lower than its estimated relative need – by far the largest gap of any region in England.

London boroughs in 2023-24 will face the most challenging financial outlook they have experienced since 2010. Tough choices ahead.

A Parliamentary Briefing by London Councils ('The Voice of London Local Government') sets out in stark terms the choices (or lack of them) that local council, including Brent, will be facing next financial year:

London boroughs have suffered from chronic underfunding for far too long. Boroughs’ overall resources are now 22% lower in real terms than in 2010 – even though there are now 10% more Londoners (almost 800,000) to serve.

The Covid-19 pandemic added £3 billion of financial pressures to London boroughs in 2020-21 and 2021-22 but these were largely funded by national government. However, the high demand pressures in many services haven’t subsided, especially within homelessness, services for children with special educational needs and disabilities, children’s social care, and – most significantly – in adult social care. The impact of long covid, interaction with the huge NHS backlog, and increasing delayed transfers into adult social care, is leading to overspending.

Outer London boroughs, as the lowest funded authorities per capita in the country, have particularly few resources to alleviate these growing pressures.

Rising inflation and cost-of-living pressures

The energy crisis, soaring inflation, the increase in the National Living Wage and cost-of-living pressures on residents have added huge additional financial pressures to London boroughs’ budgets.

Despite the 7% increase in core spending power from the 2022-23 local government finance settlement, London boroughs need to make up to £400 million of savings this year.

That funding gap will almost double to more than £700 million next year (2023-24), based on the plans set out by the government’s most recent Spending Review. The scale of the challenge is colossal.

For context, £700 million is equivalent to:

• What London boroughs spend in total on public health each year (£703m)
• More than London boroughs spend on homelessness and housing services (£615m)
• Retrofitting 27,000 homes to help achieve London’s net zero goal
• Delivering 46,000 apprenticeships to boost young Londoners’ skills and employment opportunities
• A year of care for 64,000 Londoners in nursing homes.

Local authorities are highly dependent on central government funding. There is no realistic way that boroughs could currently raise the £700 million through other means. If boroughs were to try raising the £700 million from London’s council taxpayers, council tax bills would need to rise by around 18%. Without a significant increase in funding, a further £700 million will be required in 2024-25 and 2025-26.

In total, the forecast funding gap is £2.4 billion over the next four years – which is almost £1 billion higher than London boroughs were planning for a year ago. This is the most challenging outlook boroughs have faced since 2010. Any further cuts to council funding will make the situation even tougher.

Difficult decisions for London boroughs

There is no painless way for London boroughs to make savings on the scale required. Any low hanging fruit and basic efficiencies are long gone. Staff numbers have been reduced by a third (80,000) since 2010. Many boroughs have delivered significant transformational programmes, which can only be done once.

London boroughs have worked hard to protect their budgets, but many now face the prospect of having to make severe cutbacks to vital services including bin collections and filling potholes, social care for adults and children, support for low-income households and preventing homelessness.

To deal with this challenge, boroughs are now starting to discuss some incredibly tough choices which they haven’t had to do before. These include:

• Cutting back adults and children’s social care packages to the statutory minimum 
• Cutting back community safety and domestic violence to the statutory minimum 
• Cutting back homelessness services to the statutory minimum 
• Cutting voluntary sector funding 
• Cutting back youth services 
• Withdrawal from the delivery of adult social care day services  
• Withdrawal from the delivery of leisure services  
• Reductions in Home to School transport 
• Turning off street lighting 
• Less frequent waste collection
• Less frequent street cleansing
• Reducing public health support on obesity, and smoking cessation
• Increasing parking charges
• Significant asset rationalisation

How the government can help to protect local services

Cuts to council services will damage our communities. However, they will also undermine the government’s ambitions to boost economic growth, level up the country, and help residents through the cost-of-living crisis.

The pandemic showed what London boroughs could do when adequately funded and given the powers to deliver more for our residents. We need the same partnership approach between central and local government for tackling cost-of-living pressures.

We’re therefore asking for local government to be protected from further cuts by increasing business rates and grant funding in line with inflation next year. The government must stick to the funding plans set out in the Spending Review at the very least, rather than make any further reductions to council budgets.

Boroughs desperately need more certainty over longer-term funding to ensure public money is spent well. Despite the three-year Spending Review, local government only had a one-year settlement (effectively for the fourth year in succession), and there continues to be no clarity about plans for wider reforms to local government funding.

We’re asking for the government to confirm a two-year local government finance settlement and publish it as soon as possible.

Amy Leppänen, Parliamentary Officer

amy.leppanen@londoncouncils.gov.uk

SHOCKING: Brent schools' share of £4.5bn budget cuts made since 2015

The School Cuts coalition analysis LINK  of the latest Government school funding figures shows a shortfall in funding £5.4 billion over the past 3 years with 91% number of schools in England affected.

This is the most comprehensive examination of school funding figures, bringing together:

·      Schools Block allocations (which for 2018/19 also includes the new Teacher Pay Grant)

·      the Pupil Premium

·      sixth form funding

See the table below to see how Brent schools are affected.

Lesley Gouldbourne, Brent NEU Secretary, said:

This is an intolerable situation. Children and young people are being short changed by a Government that believes their education can be run on a shoe string budget.

As a result of Governments absolute refusal to accept the fact that a school funding crisis exists school class sizes are increasing, teachers and support staff are being reduced, building repairs are being left undone, subjects are being dropped from the curriculum and teachers are having to pay out of their own pocket for items such as text books and glues sticks.

This situation cannot go on. There needs to be a reversal of cuts to school budgets since 2010, and for the funding of schools and Special Educational Needs and Disabilities (SEND) provision to be of a level that ensures all children and young people get the education they deserve, regardless of where they live.

Click bottom right for full page. Editor's note: some schools will be carrying forward a surplus from the previous year but most, given the cuts, are likely to carry forward a deficit.

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Fair Funding for All Schools - Get Your Voice Heard

Labour stifles the anti-cuts movement

A year ago I published a piece on Wembley Matters which asked what Jeremy Corbyn, then the new Labour leader, would do about local council cuts.  I drew attention to the contradiction that under him Labour claimed to be an anti-austerity party while local Labour councils were implementing the Tory austerity agenda by making cuts to services. LINK

In December last year Corbyn and McDonnell, responding to pressure from local council leaders who in turn were under pressure from anticuts campaigns, threw the towel in and wrote to Labour councillors telling them to set 'legal' budgets:

Failing to do so can lead to complaints against councillors under the Code of Conduct, judicial review of the council and, most significantly, government intervention by the Secretary of State.

It would mean either council officers or, worse still, Tory ministers deciding council spending priorities. Their priorities would certainly not meet the needs of the communities which elected us.

In effect this meant implenting cuts.

In March this year, just as Councils were formally approving budgets, the People's Assembly Against Austerity LINK  asked councillors to sign the following letter:

As Councillors we believe this Tory Government's ideological opposition to public services lies behind the deliberate underfunding of Local Authorities.

Councils have faced unprecedented cuts; Local Authority grants in England have been slashed, with £12.5 billion of cuts and half a million Council workers losing their jobs since 2010. Osborne has forced through 40% cuts to Council budgets meaning that local authorities face the reality of cutting frontline services including Adult Social Care and Children's Services, leaving those that rely on them at risk.

We believe that austerity is a political choice. We oppose all cuts from Westminster and believe Osborne’s plans for Local Government will only make a bad situation worse.

We call on the government to reverse cuts to council funding so we are able to provide essential services our communities rely on. Furthermore we call for an end to austerity that is seeing living standards for the majority fall.

Given the Labour leadership's instruction this meant paper opposition only, although councils tried to find alternatives by rising charges and rents and finally raising council tax. This still meant of course that the poor were paying for austerity - but by a different route.

The situation is now worse as a result of cuts in real terms to local authority education grants. LA education budgets have not been increased to take account of increased pension and national insurance contributions or the increasing number of pupils in schools.

The anti-cuts movement had argued for councils to refuse to set budgets, set illegal budgets or devise a needs based budget, as an alternative to making cuts. This to be accompanied by a mass campaign involving councillors, trade unions, voluntary organisations and the public. 

In practical terms combining the two approaches didn't work because no group of councillors took the former approach although some individual councillors voted against budgets losing the whip as a consequence.  It was then difficult for local Labour parties to mobilise the public against cuts when they themselves had implemented them.

This year, by agreeing to the freezing of the Revenue Support Grant and the associated four year action plans, councils have accepted the government cuts and boxed gthemselves in for 4 years.

The Labour National Executive Committee has now strengthened control over Labour councillors with the following  rule change:

Members of the Labour group in administration must comply with the provisions of the Local Government Finance Act 1988 and subsequent revisions and shall not vote against or abstain on a vote in full council to set a legal budget proposed by the administration.

Members of the Labour group shall not support any proposal to set an illegal budget. Any councillor who votes against or abstains on a Labour group policy decision in this matter may face disciplinary action.

My interpretation of this is that when in opposition Labour groups can decide to vote against cuts budgets but where Labour is in power individual Labour councillors cannot vote against cuts budget.  These are not just any cuts, these are Labour cuts - and therefore preferable?

I searched in vain for any reference to challenging cuts and mobilising mass campaings in Jeremy Corbyn's Conference speech.  I publish the section on local councils in full. He praises local councils for what they have done despite the cuts and describes (rather than advocates) some councils' decisions to take services back in-house. In doing so he says that this is cheaper and preserves working conditions. However this presents difficulties as year after year Labour administrations have argued that out-sourcing to private providers has saved council tax payers money whilst not acknowledging that lowert costs have been achieved by lower wages, worse working conditions, poor pensions etc.  

Even worse some councils have argued that the private and voluntary sector is more able to respond to local need in araes such as youth provision and social care.

Already, across the country, Labour councils are putting Labour values into action, in a way that makes a real difference to millions of people, despite cynical government funding cuts that have hit Labour councils five times as hard as Tory-run areas.

Like Nottingham City Council setting up the not-for-profit Robin Hood Energy company to provide affordable energy;

Or Cardiff Bus Company taking 100,000 passengers every day, publicly owned with a passenger panel to hold its directors to account;

Or Preston Council working to favour local procurement, and keep money in the town;

Or Newcastle Council providing free wi-fi in 69 public buildings across the city;

Or Croydon Council which has set up a company to build 1,000 new homes, as Cllr Alison Butler said: “We can no longer afford to sit back and let the market take its course”.

Or Glasgow that has established high quality and flexible workspaces for start-up, high growth companies in dynamic new sectors.

Or here in Liverpool, set to be at the global forefront of a new wave of technology and home to Sensor City, a £15million business hub that aims to create 300 start-up businesses and 1,000 jobs over the next decade.

It is a proud Labour record each and every Labour councillor deserves our heartfelt thanks for the work they do.

But I want to go further because we want local government to go further and put public enterprise back into the heart of our economy and services to meet the needs of local communities, municipal socialism for the 21st century, as an engine of local growth and development.

So today I’m announcing that Labour will remove the artificial local borrowing cap and allow councils to borrow against their housing stock.

That single measure alone would allow them to build an extra 12,000 council homes a year.

Labour councils increasingly have a policy of in-house as the preferred provider and many councils have brought bin collections, cleaners, and IT services back in-house, insourcing privatized contracts to save money for council tax payers and to ensure good terms and conditions for staff.

Corbyn's election campaign inspired many independent activists (and not a few Green Party members) to join the Labour Party and gave the left inside the Labour Party fresh energy. 

The problem now is that on the ground, and impacting on the poor, they face 4 more years of local government cuts, 'efficiencies' where fewer workers do the same or increased amounts of work, council tax rises, increased service charges, dodgy regeneration projects to increase the council tax base and privatisation.

Maintaining the morale of new recruits in such circumstances will present a real challenge.

Celebrate Teaching Assistants on Friday