SIGOMA backs joint letter to the Chancellor
Posted on October 10, 2024
Dear Chancellor,
We are proud to lead organisations representing the interests of local government in England and the people and communities they serve. We are sure you will agree, local government is at the heart of democracy in action, creating thriving communities and places, while supporting the most vulnerable people in society. We are equally proud of how our members have strived to carry out their important responsibilities and services in the face of ever-reducing budgets, higher and more complex demands, and higher costs.
Therefore, in our first joint correspondence with you on behalf of our members, it is our duty to lay out the key challenges that face them. This is why, ahead of the Budget and Local Government Finance Settlement, we are seeking immediate action to stabilise council finances and protect vital services, in particular additional funding to meet growing pressures in children’s and adult social care, special education needs and disabilities (SEND), home-to-school transport and temporary accommodation.
It is clear to us that without this action the ability of councils to deliver crucial services, including supporting some of the most vulnerable in society and driving inclusive local growth, is under threat. Councils’ capacity to continue to provide these key services needs to be seen in the context of the huge budget reductions they have already made. The Local Government Association (LGA) estimates that service spending in 2022/23 was 42 per cent lower than it would have been had service spend moved in line with cost and demand pressures since 2010/11. This means councils have made £24.5 billion of savings and efficiencies in their services in this period.
Councils have faced a perfect financial storm: a 22.2 per cent real terms cut in core spending power since 2010/11, spiking inflation in recent years, unfunded increases in the National Living Wage, and growing demand for services. Consequently, councils’ costs are increasing more rapidly than funding, with LGA analysis showing English councils facing a £2.3 billion funding gap in 2025/26, rising to £3.9 billion in 2026/27: £6.2 billion over two years.
Key financial pressures on councils include:
• Increasing complexity of need and rising placement costs in children’s social care leading to a 25.7 per cent in real terms increase in spend since 2019/20.
• A 64.3 per cent real terms rise in spend on home-to-school transport for children with special education needs and disabilities (SEND) from 2018/19 to 2023/24.
• Increasing costs and demand in adult social care leading to a £3.7 billion (18.1 per cent) real terms increase in spend since 2019/20.
• Spend on homelessness has surged by 77.4 per cent since 2019/20 in real terms, due to growing demand for, and costs of, temporary accommodation (TA). The number of households in TA is at its highest since records began in 1998.
• Increased demand for SEND services, resulting in an expected ‘deficit’ of £5 billion by 2025/26 for these services.
• Pressures on Housing Revenue Accounts due to rent caps and inflation.
Councils have also faced uncertainty on key financial issues such as the temporary ‘statutory override’ for Dedicated Schools Grants high needs deficits and the future of the Household Support Fund.
In February, 18 councils were given Exceptional Financial Support (EFS) from Government to secure their financial sustainability for 2024/25. This is unprecedented and underlines the risk of financial failure becoming systemic without further financial support.
Councils are also increasingly reliant on the use of their financial reserves to balance budgets. Their unringfenced reserves fell by £1.7 billion in 2022/23 and £1.1 billion in 2023/24. While using reserves may provide some short-term resilience, they can only be spent once. This situation is simply not sustainable.
Whilst we understand the fiscal constraints you have set out ahead of the Budget, funding reductions for councils would be disastrous given the acuteness of their financial pressures: a stark reality we have consistently raised over many years and with different administrations.
This is why, ahead of the Autumn Budget and Local Government Finance Settlement, we are calling for measures to support and stabilise the sector’s finances in 2025/26, including the following areas:
• A significant and sustained increase in overall funding that reflects current and future costs and demands for services, in particular for adult social care, children’s social care, SEND services, home to school transport, temporary accommodation, and funding to accommodate any increase in the National Living Wage.
• Provide certainty on the future of the statutory override for Dedicated Schools Grant deficits.
• Uprate temporary accommodation subsidy rates to 90 per cent of 2024 Local Housing Allowance rates.
• Work with local government on a planned succession to the Household Support Fund that enables local welfare schemes to be maintained.
In the medium term, we are calling on the government to set out how it intends to support councils in 2026/27 and beyond, including:
• The introduction of multi-year settlements and measures to simplify the number of funding pots and end competitive bidding for grant funding.
• Providing certainty on finance reforms including the business rates reset, the Fair Funding Review, and reforms to other grants such as the New Homes Bonus, including a commitment to transitional funding.
• Reform of the SEND system, as set out in LGA/CCN-commissioned research, to improve outcomes and make it financially sustainable for councils.
• Strengthening Housing Revenue Accounts via a long-term rent settlement of at least 10 years alongside restoration of revenue lost to rent caps and cuts.
• Additional freedoms and flexibilities relating to council tax, business rates and sales, fees and charges.
Where the sector has identified measures that could be introduced for 2025/26 then these should be implemented immediately.
Looking ahead, we want to work with the Government on reforming the local government funding system and forming a long-term plan for greater financial sustainability for councils that also strengthens the link between resources and need.
We do not underestimate the difficult decisions you will have to take in your first Budget, but stabilising the local government sector financially will not only protect key services, it will also provide a return on investment to the tax-payer, while improving outcomes for the people and places councils serve.
From giving young people a good start in life and pursuing preventative strategies, to unlocking and enabling talents, skills, spaces and places, a robust and sustainable local government sector will be critical to the realisation of the Government’s growth, housing, planning and infrastructural ambitions for our country.
Yours sincerely,
Cllr Louise Gittins, Chair, Local Government Association
Cllr Tim Oliver, Chairman, County Councils Network
Cllr Sam Chapman-Allen, Chairman, District Councils Network
Cllr Claire Holland, Chair, London Councils
Cllr Sir Stephen Houghton CBE, Chair, Special Interest Group of Municipal Authorities
Cllr James Lewis, Chair, Core Cities
Cllr John Merry, Chair, Key Cities
Read about more about the letter from the LGA.