Quarter of council heads predict not enough resource for spending needs by 2022

A quarter of council chief executives predict they will have to issue a  statutory notice saying that they do not have resources to match spending needs by the end of the 2021-22 financial year, a survey has found.

However, council leaders have warned that the situation will be made worse by the government’s decision this week to drop plans for a three-year spending review for 2021-24, in favour of one covering just 2021-22.

The survey by Solace – which represents leaders in local government and the wider public sector  – in conjunction with BBC Newsnight, found 26% of chief executives of councils with responsibility for adult social care and children’s services predicted they would have to issue a section 114 notice by the end of 2021-22, with a further 17% saying they would need to by 2022-23.

Under section 114 of the Local Government Act 1988, a council’s chief financial officer must issue a report if it appears expenditure will outstrip income during a financial year, meaning no new expenditure is permitted apart from specified items including urgent expenditure to safeguard vulnerable people and that required to statutory services at a minimum level.

The survey revealed that the financial pressures councils had been facing before Covid-19 had significantly worsened as a result of the pandemic, with the average gap for councils with social services responsibility more than trebling from £7m at the start of the year to £25.6m.

And chief executives warned that social care would be in the firing line for cuts, with 85% saying that adults’ services would be most likely to suffer in terms of quality and level of provision in 2021-22 and 69% saying this would be true of children’s social care.

A committee of MPs said yesterday that adult social care needed an extra £7bn a year by 2023-24 as a “starting point”, to cover demographic pressures, rises in minimum wages and to prevent “catastrophic costs” for self-funding service users.

Solace local government finance spokesperson Martin Reeves, the chief executive of Coventry council, said: “there has never been a more urgent need for the government to provide councils with a truly sustainable financial settlement”.

One-year spending review ‘hugely disappointing’

However, following the release of the survey findings,  Chancellor Rishi Sunak announced  that its t long-awaited spending review would be confined to one year, 2021-22, rather than three, to “prioritise responses to Covid-19”.

In response James Jamieson, chair of the Local Government Association (LGA), said “It is hugely disappointing that councils will only get a one-year funding settlement for the third year in a row. This makes it incredibly difficult for them to plan how to provide the local services our communities rely on and which have proved so vital during the pandemic, including public health, adult social care, children’s services, homelessness support, and help for those in financial hardship.”

Reflecting the results of the Solace survey, Jamieson said that many councils were already in a difficult financial position before the pandemic “after a decade of central government funding reductions”.

He added: “They will continue to face demand pressures on day-to-day services – some pre-existing and others made more significant by the impact of Covid-19 – amid substantial income losses, such as from local taxation, fees and charges.”

Association of Directors of Children’s Services (ADCS) president Jenny Coles echoed Jamieson’s sentiments,  saying that “the government must provide children’s services with a sustainable, equitable and long-term financial settlement that enables children to thrive, not just survive in the wake of the pandemic… [A one-year spending review] makes it incredibly difficult for councils to strategically plan and deliver services that vulnerable children and families rely on.”

Councils ‘bracing themselves’ for demand surge

Coles highlighted that councils were already seeing a rise in referrals, following a drop during the first months of the pandemic, and anticipated a further increase in demand:

“Referrals to children’s services are already rising significantly and local authorities are bracing themselves for an unprecedented level of demand for children’s social care and early help, in the autumn and well into next year.

“Only with sustainable and certain long-term funding can councils protect and improve services and play a leading role in addressing the stark inequalities the pandemic has exposed, developing a green recovery, tackling skills gaps and rebuilding the economy so that it benefits everyone.”

Jamieson urged the government to publish the spending review as soon as possible as the current target of the end of November was “incredibly late for councils to find out how much money they will have to provide services next year”.

“Councils will face a £4bn funding gap next year just to keep services running at today’s levels and need urgent certainty about how to set budgets and to plan any measures they may be forced to take to cut spending.”