English councils face £6.2bn funding ‘chasm’, sector warns

English local authorities face a £6.2bn funding gap over the next two years, the sector’s lobby group has warned, with further cuts expected by whichever party wins the upcoming general election.

The Local Government Association said on Thursday that councils faced a “chasm” between the needs of communities and the capability of authorities, because central funding has failed to keep pace with demand over a sustained period.

Children’s and homelessness services had been particularly hit, it added.

Separately, new research by the Institute for Fiscal Studies found that each resident in England had lost the equivalent of 18 per cent in core council funding since 2010, with the burden of those cuts resting on the poorest communities. 

“Councils are still very much feeling the financial effects of the late 2000s global financial crisis — 15 years later,” said Kate Ogden, author of the IFS research. 

So far the issue of local funding had been “conspicuously absent” from the general election debate, said the think-tank. “The spending plans pencilled in for after the election imply another round of cuts to government funding for councils could be on its way,” the IFS added.

Local councils were one of the hardest-hit parts of the public sector under the coalition government’s austerity programme from 2010 onwards, which aimed to reduce central spending in order to control the government’s debt interest payments.

As central grants were reduced, authorities cut services and came to rely far more on locally raised council tax revenues.

The IFS found that while there had then been a real-terms increase in central grant funding under the latest parliament, which ran from 2019 to this year, the rise had failed to offset the previous cuts. 

Local authorities were now spending two-thirds of their funding on social care, it said, compared with half in 2010. In the meantime council spending on housing has fallen by a third, on planning by 40 per cent and on youth services by 70 per cent. 

The core funding available to England’s 10 per cent most deprived authorities is 26 per cent less than in 2010, while in the most affluent the reduction was 11 per cent. 

“This reflects cuts during the 2010s that hit poorer areas harder than richer areas — by design,” added the IFS.

Local government’s long-standing financial crisis has been exacerbated in recent years by the rocketing cost of placing vulnerable children in residential care, as well as demand for temporary accommodation to house a sharply rising number of homeless families. 

Six councils including Birmingham City declared effective bankruptcy under the last parliament after being unable to balance their books, while 29 were given emergency flexibility to use investment funding for day-to-day services. 

In a new “white paper” calling for action, the LGA urged all political parties to commit to “a significant and sustained increase in funding for councils” in the next spending review, which is expected later this year.

Councillor Kevin Bentley, the LGA’s senior vice-chair and the Conservative leader of Essex county council, warned that a projected £6.2bn funding gap over the next two years “means a chasm will continue to grow between what people and their communities need and want from their councils and what councils can deliver”.

Councils are mainly funded by a mixture of central government grants and locally raised council tax, a charge based on property valuations carried out in the early 1990s. 

Neither Labour nor the Conservatives have committed to increase council funding, although chancellor Jeremy Hunt said on Thursday that the party would not revalue properties or introduce any additional bands for more valuable homes.