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A number of social services departments across the country face shortages of millions of pounds in their budgets as a result of the new local government finance settlement announced last week, writes Derren Hayes.

Despite the new funding formula guaranteeing social services departments an annual above inflation increase of at least 3.5 per cent for the next three years, some authorities feel the settlement will not be enough to meet their existing spending levels.

Overall, the social services and education budget is to increase by 6.2 per cent next year, in line with figures announced in April’s budget.

However, this will not be evenly distributed. Calculations made according to the new local government formula mean 27 councils will have their budget increases pegged to the 3.5 per cent ‘floor’ level, while 38 councils will receive the 8 per cent maximum increase.

Early indications are that this will result in a moderate shift of resources from the southeast to the north and midlands: London boroughs and the southeast will receive a 5.4 per cent and 4.5 per cent average increase in funding respectively, while those in the Midlands and northwest will receive 7.1 and 6.6 per cent.

Councils are to spend the next month analysing the settlement before reporting back to the government, but it seems likely some will be forced to look for savings through service cuts.

Julie Jones, director of social services at Westminster Council, said the increase of 3.5 per cent would leave her department with a budget deficit of £3m.

“I think London boroughs are going to have to look at both service cuts and potential council tax rises,” she said. “I already spend well above SSA [Standard Spending Assessment] and the council now faces a difficult choice whether to take money from other places to continue funding social services.”

David Munro, executive member for social services at Surrey Council, which is also set to receive the minimum 3.5 per cent increase, described a substantial shortfall between what the council spent and its allocation that would force rises in council taxes and threatened a number of new schemes.

Although David Behan, chairperson of the Association of Directors of Social Services, felt the new formula appeared to help social services in general, he acknowledged that those at the floor were going to experience “immense budgetary pressures which could lead to service cuts”.

However, he welcomed the new ring-fenced grants to tackle systems capacity, workforce training and recruitment and retention issues.

From April, SSA is to be replaced by Formula Spending Shares. The new formulae used to calculate each authority’s FSS will give greater emphasis to ethnicity, deprivation indicators, levels of domiciliary and residential care, and the cost of foster care.