Councils warn of potential failure to meet legal duties unless local government funding resolved

Councils may be unable to meet their legal duties unless the Government resolves their funding and gives them assurance on their financial future in the next spending review.

That warning has come from the Local Government Association (LGA) following a report by MPs on the Housing, Communities and Local Government Committee on Local Government Finance and the 2019 Spending Review.

LGA chair James Jamieson, the Conservative leader of Central Bedfordshire Council, said: “Vital local services provided by councils face a funding gap of more than £5bn next year.

“A third of councils fear they will run out of funding to provide their statutory services – such as adult social care, protecting children and preventing homelessness, within three years.”

Cllr Jamieson welcomed the committee’s call for the forthcoming spending round to confirm the continuation of key funding streams such as the Better Care Fund, and guarantee councils sufficient to meet the growing demand pressures.

“Only with the right funding and powers can councils meet their legal duties and protect the wide range of other valued local services which also make such a positive difference to communities and people’s lives,” he said.

The committee criticised ministers for allowing the current four-year settlement to run close to its end without councils knowing their future position.

Its report said: “Without clarity about funding in 2020 some local authorities will need to prepare for the worst, making decisions which may unnecessarily reduce spending and represent poor value for money in the longer term.”

It said local government should receive a multi-year settlement running one year beyond the spending review period and rapid assurance on the 2020–21 funding position.

Clive Betts, the Labour MP who chairs the committee, said: “The Government has a duty to establish a funding settlement that enables local authorities to provide services to meet the needs of their local communities. Over the last decade we have seen a regular chipping away at funding, while adding further statutory obligations for them to meet.

“This constant stress on local government is now compounded by a failure to even set out how much money they will be allocated in the next financial year. The time has come for the Government to get real with local government funding. They must make clear exactly what services they expect to be provided and dedicate sufficient funding for this to be achieved.”

County Councils Network chair Paul Carter, Conservative leader of Kent County Council, said: “The County Councils Network has been making a clear case for funding certainty and emergency resource for all local authorities in 2020-21. [The committee’s report]] adds further weight to those calls.”

He said counties faced a £2.1bn funding gap and “filling this gap will result in further cuts to highly-valued and frontline services, unless extra resource is provided by the government.

“It is paramount that the new government provides short-term resource, targeted at those areas most in need, in next month’s one-year spending review, ahead of a more long term settlement and reforms to adult social care in early 2020.” 

The committee’s report also criticised the business rate retention system as too complex and unlikely to work well given changes in retail patterns.

It urged a return to revenue support grant as the main funding mechanism for councils, and a property revaluation for council tax, which the report said now bore little relation to actual values since it had been left unchanged since the tax began in 1991.

A Ministry of Housing, Communities and Local Government spokesperson said: “We’re providing local authorities with access to £46.4bn this year – a real terms increase.

“Ultimately councils are responsible for managing their own resources and we are working with local government to develop a funding system for the future.”