When Rachel Reeves delivers her long-awaited spending review on Wednesday, there will be one group of people holding their breath more than others – council leaders.
The Chancellor is widely anticipated to deliver real terms cuts to local government budgets this week, as she looks to focus increases in spending on health and defence.
Should the axe fall disproportionately on local government accounts, those working within the sector believe the prospect of more councils filing for bankruptcy will become all the greater.
Communities Secretary and Deputy Prime Minister Angela Rayner has been locked in negotiations with Reeves and the Treasury for weeks over the spending review, as she tries to carve out a greater slice of a diminishing spending pie.
“The talks seem to be going right down to the wire, which is quite worrying,” a local government source told The i Paper before adding: “Because the Treasury usually wins.”
According to the Local Government Association, councils will face a funding gap that rises to £8.4 billion by 2028/29 under current spending plans, with 29 local authorities already in receipt of Exceptional Financial Support (EFS) as their budgets are stretched to breaking point.
The LGA says that the shortfall in funding expected by 2029 already takes into account council taxes rising by the maximum amount every year.
It raises the prospect of households paying ever more in council tax bills only to witness more years of potholes going unfilled, bins not being collected and their local areas slowly deteriorating.
Voters, not unreasonably, will want to know why they will be paying more in their taxes for services that are worsening.
The overarching reason is social care and special educational needs disability (SEND) provision. For most councils, just over two-thirds of their entire budgets – 67 per cent – go on meeting their statutory obligations, namely adults’ and children’s social care and SEND. And in recent years the cost of both has rocketed.
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Read More“The majority of what councils spend on now are social care services for adults and children that are targeted towards a relatively small group of the population,” Kate Ogden, senior research economist at the Institute for Fiscal Studies, said.
“So most of the services that people think about when it comes to their local authority – street lighting, bins and potholes – are actually quite a small bit of what councils do.
“Individual councils will be making a choice about how to prioritise but they do have statutory duties to deliver some things.”
Ogden said that there is still not enough data to definitively state what is driving these costs, but an increase in demand in areas such as children’s social care and a lack of supply has seen costs soar.
Research by the LGA showed that in 2022/23 councils paid for 1,500 placements for children – for example at a foster home, a children’s home or in supported accommodation – at a cost of £10,000 or more a week, 10 times the cost they were paying for the 120 placements councils purchased in 2018/19. Services such as home to school transport for SEND children has soared to £1.4bn for councils. Adult social care has risen by £3.7bn or 18 per cent. Spending on homelessness has rocketed by 77 per cent.Local councils were forced to make swinging cuts under the Conservatives, with budgets being slashed by nearly 50 per cent at one stage. It has led to warnings from council leaders that further cuts to overall funding will mean there is no more fat to trim off the bone.
Cllr Louise Gittins, Chair of the Local Government Association, said last week that “without adequate investment now we risk not being able to deliver crucial services that so many depend upon”.
But Labour MPs were willing to put it in far starker terms as they fear the ramifications of another round of cutbacks to frontline council services.
“Bankrupt councils, failing services for the most vulnerable children and adults, potholes unfilled, littered streets, closures of community venues and so much more summed up the last 14 years of the Tories, it would be a disaster for the Labour Government to repeat that mistake,” one Labour backbencher warned.
“Angela Rayner knows this too, and she has MPs from all wings of the party batting for her on this – Rachel and Keir would burn so much political goodwill from Labour MPs if they don’t protect local communities and councils.”
Social housing
Another backbencher said they were “nervous” as to what the spending review would mean for spending on social housing, which is understood to be one of the key demands from Rayner.
“In my area they’ve built a lot of houses, the size of a small town in terms of volume of housing, but waiting lists have still gone up,” the MP said. “We could have provided a house for everyone if they were social houses. I think we should be asking what should the Labour Government’s priorities be?”
The danger for Downing Street is that the services that local government provides is often the primary interaction that voters have with the Government, regardless of which party is running the council.
If the public feel that their local area is getting worse, then that risks biting them at the ballot box in 2029.
Chris Hopkins, political research director at Savanta, said that while cuts to local government may not make the situation worse for Labour, it will do little to improve their prospects.
“The public need to feel improvements, including in local services if the overall perception of the government is to improve,” Hopkins told The i Paper. “If Labour’s making that more difficult by slashing local council budgets, then I think any idea of a bounce back or a recovery in their polling numbers is just going to be more difficult to achieve.”
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