England & Wales Finance

State of Local Government Finance Survey 2018


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The annual State of Local Government Finance Survey gives a snapshot of the pressures facing councils. We ask the most senior figures in each council to tell us their plans for the coming year in the run-up to setting their annual budget. This year 132 council leaders, chief executives, cabinet members for finance and finance directors took part, representing a third of all English councils.

The results help us to assess the impact of policies and highlight areas that are of current or future concern. As an independent, cross-party membership body we hope to bring together the voice of the sector and contribute to strength of our local democracy.

What’s happening in local government?

Local government is responsible for a dizzying array of essential community services, visible and invisible, universal and targeted – from care homes to business support, potholes to social services, education to leisure centres. But if you ask the average person on the street what their council does, they’ll likely reply, ‘Collecting my bin.’

If you were feeling particularly cruel, you could ask the poor soul how their council is funded, to which they would probably hesitantly reply, ‘Council tax?’ And who could blame them for this assumption? Most of those working in the sector struggle to wrap their own heads around the complexities and vagaries of the various grants, tariffs, top-ups, funding formulas and local business rate shares.

But this (somewhat glib) example strikes right to the core of the challenge that councils face in articulating their current financial situation with the urgency it requires.

When people see their council tax go up and the quality of their services deteriorate, they rightly ask questions. But in reality council tax only accounts for 15% of local authority income: over half comes in the form of grants from central government*.

However, local authority grant income has plummeted by £16bn since 2011, first because of wider public sector budget cuts after the financial crisis, and then as part of government’s plan for councils to transition from grant funding to relying on local business rate income by 2020 – the implementation of which has been severely delayed.

As it stands, councils are facing the 2020 cliff-edge without a clear idea of how they will be funded afterwards or how much money they will have.

Why this work matters

The real world impact of delaying these seemingly technical decisions is that, across the country, libraries and parks are closing down, the elderly and disabled can’t access basic care, vulnerable children aren’t be supported and the streets are dirtier and more dangerous.

With limited borrowing powers and restrictions on types of investment, council tax and charging are two of the only mechanisms left over which councils have some control, which is why we are seeing over 90% of councils increase both this year. This is not a sustainable solution.

Each council has approached these challenges in different ways according to the needs and wishes of their residents, so it can be difficult to see the overall impact of central cuts to council income. This survey helps us to shine a light on the cross-sectoral challenges in order to move the conversation back to the national scale.

It would be easy for this to remain a technocratic debate among those in the sector, but the consequences of slow or ineffective decisions is potentially disastrous and deserves greater urgency and a wider audience.

This survey is the first output from LGiU’s Local Finance Taskforce 2018, a local authority-led project to raise the profile of council funding issues and to move the agenda forward.