Written evidence submitted by the Local Government Association [FSF 023]
1. About the Local Government Association (LGA)
- The LGA is the National Voice of local government. We’re on the side of councils: promoting their work, supporting them to improve and helping them make a difference to people, places and the planet.
- We aim to be the best membership organisation we can be. As the national membership body for local authorities, we provide the bridge between central and local government and we help councils deliver the best services to their local communities.
2. Key messages
- Council finances in England are under pressure like never before. Reductions in grant funding, increases in the scale and complexity of service demand, and the recent spike in inflation and wage costs have created the perfect storm for town halls. These challenges have been exacerbated by a local government funding system which has not been subject to significant reform since the introduction of 50 per cent business rates retention in 2013/14.
- A fundamental challenge facing the sector is that cost and demand pressures are rising faster than funding. While inflation has fallen steadily since its peak in 2022/23, significant cost and demand pressures remain in the system in services such as homelessness, children’s social care, adult social care, and home to school transport, particularly for children with special educational needs and disabilities. LGA analysis before the Autumn Budget showed that by 2026/27 these pressures will have increased the cost of delivering services by 12.5 per cent since 2024/25, leaving councils facing a funding gap of £6.2 billion across 2025/26 and 2026/27 just to sustain services at 2024/25 levels.
- Extra funding for councils next year, announced in the 2024 Autumn Budget and 2025/26 Provisional Local Government Finance Settlement in December 2024, will help councils meet some – but not all – of the pressures they face in adult and children’s social care, homelessness prevention and support for children and young people with special educational needs and disabilities. Councils of all types will continue to struggle to balance the books next year with many having to increase council tax bills to bring in desperately needed funding but still being forced to make further cuts to services.
- Whilst it is good that the Government has provided details of how it will compensate councils for the costs they will face through increases in employer national insurance contributions (NICs), this falls short of the £637 million we have estimated it will cost councils next year for direct staffing. We have also warned that indirect NICs cost increases, through commissioned providers, will cost councils up to an extra £1.13 billion next year.
- The whole finance system is now structurally unfit for purpose for day-to-day spending. The system has been creaking at the seams, but the pressure exerted on it in recent years means it is now comprehensively failing to provide councils with the security of funding they need to reliably and effectively deliver for all of their communities. The result is weakened public services, hampered growth, and poorer outcomes for many, in particular the most vulnerable. Current proposals for Local Government Reorganisation add further uncertainty and potentially additional costs into the system.
- We believe there is a need for a cross-party review of, and debate on, options to improve the local government finance system. This has to include a review of council tax alongside other council funding sources, and whether business rates retention represents a viable future funding model. We should look to build a sector-wide consensus on the nature of any proposed reform. However, we think there are a range of interventions the Government could take now to simplify and create certainty within the funding system, realign funding with assessed need and add certain flexibilities to current funding sources.
- Given the current challenging state of council finances changes focused on individual elements of the local government finance system may be necessary in the short-term. But care needs to be taken to understand the distributional impacts these changes might have over the longer-term. And ultimately, longer-term reform needs to understand and incorporate the interaction of all funding streams and their relative importance to different local areas and regions.
3. Is the local government finance system fit for purpose? If not, what needs to change?
- Councils need a significant and sustained increase in overall funding to stem the emerging risk of system-wide financial failure and to ensure that councils can meet growing demand for the vital services needed by their communities. But additional funding alone will not address the multiple issues with the funding system. There is growing evidence that the wider local government revenue funding system itself desperately needs reform.
- The local government funding system has not been subject to significant reform since the introduction of 50 per cent business rates retention in 2013/14. It is opaque, overly complex and out of date. Councils have been operating in a dated, patched-up system where financial planning is hindered by a drip feed of one-year finance settlements, and financial sustainability is increasingly secured by one-off grants or Exceptional Financial Support from Government. These arrangements act as barriers to councils making innovative and meaningful decisions, limit their ability to focus on long-term strategic and economic planning, and undermine their financial sustainability.
- The Secretary of State for Housing, Communities and Local Government (and Deputy Prime Minister) acknowledged at the LGA Councillors’ Forum in July 2024 that there is a need to reform the funding system and address its inefficiencies. They have committed to multi-year settlements and the Government is currently consulting on changes to the system that underpins the local government finance settlement.
- We believe there is a need for a cross-party review of, and debate on, options to improve the wider local government finance system. This has to include a review of council tax alongside other council funding sources, and whether business rates retention represents a viable future funding model. We should look to build a sector-wide consensus on the nature of any proposed reform.
- However, the pressing nature of the sector’s financial problems means there is not the time simply to wait for wholesale reform to be designed and delivered. Change is also needed in the short-term to ensure service and financial sustainability of the sector. In parallel with the conversation on long-term reform, a series of short-term changes to the current funding system need to be introduced now. This includes: certainty and timeliness; the simplification of funding streams: realigning funding with need and resources; and adding flexibility to current funding streams. Further information on how to improve the wider system of local government revenue funding can be found in our report Reforming the local government funding system in England.
- Councils need to be given greater freedom to respond to financial and service challenges. Creating a more sustainable funding system for local government has the potential to strengthen the value for money of local spending and, most importantly, improve outcomes for the people and places councils serve. A financially robust local government sector also has the potential to reduce costs falling on other public services and to support the more efficient delivery of key Government agendas such as economic growth, crime reduction, supporting early years and education provision, delivering net zero and supporting the NHS. Ensuring local government is financially stable is fundamental to any Government being able to deliver its wider policy objectives.
3.1. Does the local government finance system match funding to the relative needs of local authorities?
- While there is a broad acceptance that ‘need’ must sit at the heart of any funding system for allocating local government funding, there is less agreement on how this critical concept should be defined. But this should not prevent us from recognising that the current arrangements have become so dated that they do not even align with the definition of need hard-wired into the system’s own funding formulae.
- In 2023, the IFS published the results of analyses on the impact of updating data in distribution formulae for the NHS, local government, schools, public health and the police, compared to the revenue resources available to each area. The authors concluded that local government funding is much less well-targeted towards estimated needs, with only 39 areas out of 150 receiving a share of funding that is within 5 per cent of their share of estimated spending needs.
- In November 2024, the Government announced that from 2026/27 it will move gradually towards an updated allocation system for council funding. This will build on the proposals set out in the previous Government’s Review of Relative Needs and Resources (the ‘Fair Funding Review’). In our view, it is important that any new approach should include a comprehensive review of the formulae. The IFS, for instance, has argued that changes to the activities that public service providers spend their money on, and changes in the technology and processes by which they carry out their work, mean that the relationship between local characteristics and spending needs will have changed (IFS, 2023).
- Consideration should also be given to the base year used in any assessment of need. Relative need within the formulae is often measured by patterns of historic spending across councils. However, the funding reductions since 2010/11, have fallen disproportionately on deprived areas (IFS, 2019). Using spending data that includes the impact of these funding reductions will have an impact on which indicators would appear in any formula and the weight given to each indicator.
- Consideration will also need to be given to transition when we move to a new system to ensure that local authority services that residents rely on are not put at risk. The LGA believes that there should be transitional mechanisms attached to the outcome of the Fair Funding Review, or its equivalent, to provide sufficient funding to ensure that no council experiences a loss of income.
3.2. Does the funding system allow and incentivise local authorities to make sensible long-term choices about their finances and budgets, to better serve their residents?
- Councils’ ability to deliver the high quality, value for money services needed by their residents is dependent on both the sufficiency and certainty of their funding. But at the current time council funding is neither sufficient nor certain. Rather councils’ ability to mitigate the funding and demand pressures they face has been hampered by one-year funding settlements and continued uncertainty over funding reforms.
- These act as obstacles to councils making innovative and meaningful decisions, limit their ability to focus on long term strategic and economic planning, and undermine their financial sustainability. The potential to deliver maximum value for money is held back by uncertainty and a limited ability to plan for the future. For instance, councils may end up planning on the assumption that they will have less funding available to them than is the case, needlessly scaling back non-statutory services and making redundancies. Further uncertainty and cost is now being introduced into the system by the prospect for Local Government Reorganisation.
3.3. How will this be affected by the introduction of multi-year funding settlements?
- Providing certainty over funding and finance reform would be a step forward. Councils would be able to prepare for the impact of the reforms, establish multi-year transformation programmes and enter into longer-term contracts with suppliers and providers. These benefits can be secured by the Government providing:
- Multi-year and timely finance settlements to allow councils to plan ahead and make meaningful financial decisions that improve value for money and financial sustainability.
- Certainty over financial reforms including the business rates reset, the Fair Funding Review, and reforms to other grants such as the New Homes Bonus, and consulting on any potential changes in a timely manner.
- However, certainty alone will not address the multiple issues with the way local services are funded and councils stand ready to work with the Government on creating an improved and a more sustainable future funding system that works for all of local government.
4. Where are the most significant funding pressure in local government, and how does the finance system address them?
- Costs are rising faster than funding. Before the Autumn Budget we calculated that councils faced a £6.2 billion funding gap across 2 years to maintain services at their current levels. This comprises £2.3 billion in 2025/26 and £3.9 billion in 2026/27.
- Spend on children's social care increased by 25.7 per cent in real terms from 2019/20 to 2024/25 due to increasing complexity of need and rising placement costs.
- Increasing costs and demand in adult social care have seen a £3.7 billion (18.1 per cent) increase in spend since 2019/20,
- Spend on homelessness services has surged by £604 million (77.4 per cent) since 2019/20, due to growing demand for temporary accommodation driven by asylum and resettlement issues, alongside housing shortages.
- Increased demand for services for children with special educational needs and disabilities, resulting in an expected ‘deficit’ of £5 billion by 2025/26 for these services.
- Growing numbers of children with Education, Care and Health Plans mean spend on home-to-school transport for children with special education needs rose by 62.7 per cent from 2018/19 to 2023/24.
- Pressures on Housing Revenue Accounts due to rent caps and inflation.
- The need to direct funding away from other services in order to meet these statutory pressures means that ultimately spending is increasingly concentrated on fewer people, so councils are less able to support local and national agendas on key issues such as housing, economic growth, and climate change. Councils have to take tough decisions to reduce non statutory services (see section 7.2. below) and this also holds them back from investing in preventative services and in areas that would deliver productivity gains, like technology.
5. Does the current statutory regime for identifying and responding to financial distress in local authorities support local authorities to get out of financial distress?
- Although the current statutory regime for local authorities in financial distress, including the Exceptional Financial Support (EFS) programme, has provided some short-term support to local authorities to help them avoid issuing a S114 notice, it has not resolved the underlying issues of insufficient funding over the medium to long term, and adds to the cost burden overall through the cost of additional borrowing. Ultimately these costs are still borne by the local authority and its taxpayers over a longer period. Without a solution that fundamentally addresses the national funding regime to ensure there is adequate resource available to meet council’s statutory duties over the longer term there is likely to be an ongoing increasing demand for support to get out of financial distress, which is unsustainable for the sector as a whole.
5.1. Have Government interventions in response to local authorities being in financial distress helped those local authorities to stabilise their finances and avoid further financial distress?
- Per the response above, while Government intervention has provided some immediate relief to local authorities in financial distress, and in some cases does act as a catalyst to enable a more sustainable medium term financial plan to be agreed, it is not a panacea and does not address the more fundamental issues of lack of funding to meet core statutory duties such as social care, SEND and housing provision. This is evidenced by the increasing number of local authorities seeking Government support in recent years, and a number of local authorities relying on EFS over more than one financial year.
- Based on research undertaken as part of a report on SEND, commissioned by the LGA and the County Councils network, and published in July 2024, a quarter of councils with DSG deficits would cease to be solvent within a year if the DSG override ended now, and we have estimated that a further quarter would cease to be solvent within three years. We do not believe that the proposals set out in the Government’s SEND and Alternative Provision improvement plan will result in the increase in EHCPs either slowing down or stopping. Nor do we believe that the ‘Safety Valve’ programme (which has now been paused), or the Delivering Better Value in SEND programme, will result in council high needs deficits being eliminated in the absence of reform prior to March 2026. We are, therefore, calling for the Government to write off all high needs deficits as a matter of urgency to ensure that councils are not faced with having to cut other services to balance budgets through no fault of their own or their residents.
5.2. What should a broader support system for local authorities in financial distress look like?
- The current model of statutory intervention for authorities, which the Government assesses as failing their best value duty, is very expensive and commissioners/ envoys do not provide the additional capacity councils need to deal with their challenges.
- While some authorities’ financial distress will be as a result of underlying systemic resource issues, in some instances there is also the potential for improvement support to enable councils to embed good practice and reduce the risks of financial failure. The earlier this support is provided, the greater the potential for authorities to avoid financial distress.
- Sector-led improvement support is highly valued by the sector and cost-efficient. The LGA’s core grant for sector-led improvement for 2024/25 is £19.2 million; this has not kept pace with inflation and is lower than in previous years. The LGA is seeking to work with the Government and the sector to co-create a new sector-led approach to prevention, recovery and reform, enabling authorities to improve at an accelerated rate and a lower cost to the public. This additional support is not currently funded: nor is support to councils for devolution or local government reorganisation, which we are keen to support.
6. How much control do local authorities have over the levels of funding they receive, including from local taxation, business rates, central Government grants, and returns on commercial investments?
Simplification of grant funding streams
- Alongside the introduction of greater funding certainty there should also be a move away from piecemeal pots of funding allocated through wasteful competitive bidding processes. Research published by the LGA in 2020 found that there were nearly 250 different grants provided to local government, around a third of which were awarded on a competitive basis. LGA research estimated that the average cost to councils in pursuing each competitive grant was in the region of £30,000 costing each local authority roughly £2.25 million a year chasing down various pots of money across Whitehall.
- Regardless of whether grants are allocated based on need or through competitive bidding Government should look to reduce the use of formal ring-fences and grant conditions. The steady return of grant conditions undoes much of the progress made in the early 2010s when the Government removed ring-fences and combined individual grants into larger ones to reduce reporting burdens and provide flexibility to councils in how they used funding (National Audit Office, 2014).
- The Ministry of Housing, Communities and Local Government (MHCLG) recognised this as an issue and introduced a funding simplification doctrine in 2023. The current Government has committed to consolidate funding streams into the settlement, reduce the overall number of grants to local authorities and to work to end competitive bidding processes and cut burdensome reporting requirements. This is welcome and needs to be implemented with urgency.
Adding flexibility to current funding streams
- Over 70 per cent of council revenue income currently comes from three sources; council tax, retained business rates and sales, fees and charges income.
- The efficacy of all funding sources and possible options for their reform must sit at the heart of the debate on long-term reform of council funding. But while this discussion takes place there are options for smaller scale reforms to these core funding sources that will be of value to councils.
Council tax
- There are key areas where Government could act to add greater flexibility within the current council tax system:
- Council discretion over rate setting: The rate is set by councils, but they have limited discretion due to centrally-set referendum limits that restrict annual increases in the rate.
- Discounts and exemptions: The local revenue raising potential of council tax is significantly diminished by discounts and exemptions, most of which are fixed nationally. The mandatory single person discount, for instance, covers almost a third of dwellings. This discount is not means tested and, according to the IFS, encourages the inefficient use of property (IFS 2020). The Government should therefore give councils the powers and flexibility to vary all council tax discounts.
- Unbuilt properties: Council tax is only payable on properties classed by the Valuation Office Agency as dwellings. For example, there is no council tax payable on properties not on the list because they are undergoing reconstruction or are being rebuilt. This can result in delays in councils receiving income from new or reconstructed dwellings after planning permission is granted.
Business rates and business rates retention
- In October 2024 the Government published a discussion document which sets out the Government's priority areas for reform of the business rates system. The LGA will be responding to this call for views.
- The Government is introducing new multipliers for retail hospitality and leisure, paid for by a higher multiplier for premises with rateable values above £500,000, to apply from 2026/27. This is provided for in the Non-Domestic Rating (Multipliers and Private Schools) Bill currently before Parliament. However, the Government has no plans to extend the powers to set lower or higher multipliers to councils. The LGA would like to see powers to vary the multiplier, and mandatory reliefs, given to councils.
- We would also like to see more powers and flexibility to tackle business rates avoidance given to councils. The LGA estimated in 2019 that this costs £250 million per year. The Government has promised to consult on a General Anti Avoidance Rule – we would like to see this published and implemented as soon as possible.
- As part of the Local Government Funding reform consultation published in December the Government has announced its intention to ‘reset’ the business rates retention system from 2026/27. Further details are expected in a forthcoming technical consultation that is expected to cover the delivery of a reset and the methodology of updating business rates baselines. This will be the first reset since the business rates retention system was introduced in 2013 and could have a significant financial impact on some local authorities. A business rates reset will not in itself add flexibility but councils need certainty on the reset of the business rate retention system.
- It is important that the Government introduce a transitional mechanism as part of any business rate reset to ensure that local authority services that residents rely on are not put at risk. One further option would be to consider whether to introduce a partial or phased reset either in 2026/27 or the next time the business rates retention system is reset.
Sales, fees and charges income
- In 2022/23 sales, fees and charges generated over £12 billion in income for councils, roughly similar to the amount generated through the retained business rates system. But despite the significance of this funding stream, councils do not have the ability to set fees for many crucial areas of their activity such as planning.
- Sales, fees and charges need to be fully localised, including road user charges and workplace parking levies. Councils also need the flexibility to set planning fees at a local level so that can they cover their full costs relating to planning. This would help to future-proof the sector and ensure planning departments can continue to support the delivery of much-needed new homes, including the affordable homes and infrastructure that the country needs.
6.1. What are the impacts of statutory restrictions preventing the use of capital returns (e.g. from asset sales) as revenue funding, and are those restrictions beneficial for local authorities?
- The current flexible use of capital receipts scheme, which has run since 2016/17 and has now been extended until March 2030, has been welcomed by councils. According to Revenue Outturn statistics, in the seven years from 2016/17 to 2022/23, 108 individual local authorities (of which more than 100 are councils) have used the scheme and applied a total of £918 million of capital receipts. The amount applied in individual years has varied from a minimum of £88 million in 2021/22 to a maximum of £200 million in 2019/20.
- In the same period (2016/17 to 2022/23) local authorities generated a total of £24.3 billion capital receipts and £18.2 billion of capital receipts were applied to finance new capital scheme (receipts do not need to be used in the same year that they are received). This means that only about four per cent of capital receipts received in this period have been applied to the flexible use scheme. It is clearly a useful option for local authorities and has been important to a minority but it is not central to the operations of the majority nor the main use of receipts.
- While additional flexibilities would be welcomed by some councils, additional flexibilities should not be seen as a substitute for the requirement for a long-term plan to sufficiently fund local services through multi-year settlements.
- The availability of saleable assets will not be universal across all councils; that less than a third of all councils have used the current scheme is an indicator that there will be many councils that will be unable to benefit from additional flexibilities on use of receipts.
- Capital receipts (and borrowing even more so) are not ‘free money’, and they can only be spent once. They cannot be used to fund long term ongoing revenue pressures. Using them extensively to finance revenue costs is also likely to have a negative impact on capital investment by local authorities. To an extent, without an adequate funding settlement for some councils additional ‘freedoms’ would just mean ‘freedom to choose between a wider range of difficult options’. The ability to use capital resources to fund revenue costs must not be seen as a way out of the Government addressing other problems facing local government.
7. How much control do local authorities have over their costs, including on mandatory services (which they are required to deliver by statute) and demand-led services (for which the level of cost is determined by the needs of residents)?
7.1. Has the level of demand for local authorities’ services changed recently? If so, in which specific areas and why?
- Rising costs in children’s social care – Councils face growing complexity of need and increases in placement costs. LGA research has shown that in 2022/23, councils paid for over 1,500 placements costing £10,000 or more per week – more than 10 times greater than the 120 placements purchased by councils at this price in 2018/19. This has created huge pressure on councils’ budgets with budgeted real terms spend on children’s social care increasing by £2.8 billion (25.7 per cent) from 2019/20 to 2024/25. There appears to be no real sign of this budget pressure reducing. Of the additional £2.8 billion in budgeted spend since 2019/20, £1.3 billion of this increase was from 2023/24 to 2024/25.
- Escalating costs of home to school transport for children with special educational needs and disabilities (SEND) – The number of children and young people with an Education, Care and Health Plan increased by 62.7 per cent from 2018/19 to 2023/24. This in turn has driven a real-terms increase in budgeted spend by councils on home to school transport for children with SEND of £544 million (64.3 per cent). Overall, councils budgeted £1.4 billion in 2023/24 for SEND home to school transport.
- Increasing costs and demand in adult social care means budgeted net spend on adult social care increased by £3.7 billion (18.1 per cent) in real terms from 2019/20 to 2024/25. As with children’s social care, despite the rate of inflation falling from its peak there is little sign of these cost pressures tailing off. Of the additional £3.7 billion in budgeted spend since 2019/20, £1.9 billion of this increase was from 2023/24 to 2024/25. A Spring 2024 survey of Directors of Adult Social Services concluded that the financial situation facing the service “is as bad as it has been in recent history”. Budget overspends in 2023/24 were the highest for a decade, savings required in 2024/25 are at their highest for eight years and there is an “increasing reliance on one-off reserves to prop up budgets”.
- Increasing costs of homelessness services with multiple contributory cost and demand drivers, including asylum and resettlement issues and an insufficient supply of affordable housing – Government data shows that more than 117,000 households, including 151,630 children, were in temporary accommodation at the end of March 2024, the highest figures since records began in 1998. Councils’ budgeted net spend on homelessness services increased by £604 million (77.4 per cent) in real terms from 2019/20 to 2024/25. Again, there is no sign of these cost pressures abating with £336 million of this increase taking place from 2023/24 to 2024/25.
- There is no sign of pressures subsiding in these service areas. Based on a continuation in these pressures our modelling in 2024, showed the significant cost pressures they will generate for the sector over 2025/26 and 2026/27 (Table 1).
Table 1: Modelled cost pressures by service compared to 2024/25
| Additional spend - 2025/26 compared to 2024/25 (£bn) | Additional spend - 2026/27 compared to 2024/25 (£bn) | Additional spend - 2026/27 compared to 2024/25 (%) |
Children's social care | 1.6 | 3.5 | 22.2% |
Other education (incl. home to school trans.) | 0.4 | 0.8 | 15.7% |
Housing and homelessness | 0.2 | 0.4 | 14.8% |
Adult social care | 1.8 | 2.8 | 11.3% |
Central and other services | 0.2 | 0.4 | 8.4% |
Public health | 0.2 | 0.3 | 8.2% |
Planning and development | 0.1 | 0.1 | 6.2% |
Fire services | 0.0 | 0.0 | 6.0% |
Highways and transport | 0.1 | 0.1 | 5.6% |
Culture and leisure | 0.1 | 0.2 | 5.6% |
Environmental and regulatory services | 0.1 | 0.3 | 4.6% |
Total | 4.7 | 8.9 | 12.5% |
(Source: LGA analysis of multiple public data sources)
7.2. Where local authorities cut costs by reducing the services they pay for or provide, what services are most affected and what is the impact on residents?
- Councils have made huge savings in their service spending since 2010/11. Our analysis shows that in 2010/11 councils had a cash terms net revenue spend of £45.3 billion on services. This fell in the first half of the 2010s but then grew, partly due to the addition of public health responsibilities, to £58.3 billion by 2022/23.
- Digital technology is seen in local government as a key enabler of transformation and efficiencies at a time when local government is under continued and ever-pressing resource constraints. However, according figures obtained from Oxygen Finance Insights on behalf of the LGA, local government spends significantly less on ICT & Business Process Outsourcing (BPO) (£3.23 billion in 2023/24) than central government (£10.91 billion in 2023/24) and other parts of the public sector (the NHS excluding emergency services spent £4.13 billion in 2023/24). This means that councils are less able to avail of the productivity gains and efficiency savings. The new Blueprint for Digital Government promises to use technology to make up to £45 billion in annual productivity savings across the public sector. With the financial constraints and challenges facing councils, it’s critical that local government can equally avail of the opportunities digital technology provides.
- The IFS also revealed, in a June 2024 report, that during the 2010s, councils’ overall core funding per person fell by 26 per cent in real terms, on average, with higher council tax revenues only partially offsetting a 46 per cent fall in funding from central government. Councils responded by prioritising statutory services: while spending per person on children’s social care rose by 11 per cent in real terms, per-person spending on culture and leisure, housing, planning and development, and transport fell by over 40 per cent. Councils also offset some of these pressures by raising more from sales, fees and charges on service users.
- This continued pressure on local government budgets falls disproportionately on non-statutory services including economic development. Failure to address this could undermine the ambitions of local leaders across all parts of the country to achieve inclusive growth. Further, in recent years councils have become more dependent on external grants (such as UK Shared Prosperity Fund) for much of their spending in these areas. This reliance creates long term uncertainty. Added to this, any shorter-term, competitive, national bidding rounds adds pressure on economic development services to commit scarce resources into writing competitive bids.
- We estimate that if council net service spending in 2010/11 had grown in line with inflation, wage growth and demographic and demand drivers it would have been £82.8 billion by 2022/23 – 42 per cent higher than actual service spend in that year. This means that councils have made £24.5 billion worth of cuts or efficiencies to their net service spending from 2010/11 to 2022/23.
- Table 2 shows the scale of these cuts and savings by service area. In some service areas such as culture and leisure, and highways and transport net spend in 2022/23 was effectively half of what it would have been had it kept pace with inflation, wage growth and demographic and demand pressure since 2010/11.
- Even in service areas with significant statutory responsibilities and demand pressure, service spend is still significantly lower than it would have been had it moved in line with cost and demand pressures. For instance, we estimate that councils have made £6.6 billion in cuts and efficiencies in adult social care net spending from 2010/11 to 2022/23.[1] Spend on this service area was effectively a third smaller in 2022/23 than if it had moved in line with cost and demand pressures since 2010/11.
Table 2: Modelled cuts and efficiencies by service – 2010/11 to 2022/23
| Outturn net spend – 2010/11 (£bn) | Outturn net spend – 2022/23 (£bn) | Modelled cost pressures – 2022/23 (£bn) | Modelled cuts and efficiencies –2010/11 to 2022/23 (£bn) |
Housing services | 2.5 | 2.2 | 4.6 | 2.4 |
Culture and leisure | 3.1 | 2.5 | 5.0 | 2.5 |
Highways and transport | 3.8 | 2.8 | 5.4 | 2.6 |
Planning and dev. services | 2.0 | 1.6 | 3.1 | 1.5 |
Environ. and regulatory | 5.2 | 5.9 | 8.7 | 2.8 |
Fire services | 0.4 | 0.4 | 0.5 | 0.1 |
Central and other services | 3.1 | 4.0 | 5.2 | 1.3 |
Adult social care | 15.7 | 20.5 | 27.1 | 6.6 |
Home to school transport | 1.0 | 1.9 | 2.4 | 0.5 |
Children’s social care | 8.4 | 12.8 | 16.3 | 3.5 |
Public Health (since 2016/17) | - | 3.8 | 4.4 | 0.6 |
Total | 45.3 | 58.3 | 82.8 | 24.5 |
(Source: LGA analysis of multiple public data sets. Methodology available on request)
(Notes: 1. Totals may not sum due to rounding. 2. Data shown is for London Borough Councils, Metropolitan Borough councils, Shire Counties, Shire Districts and Shire Unitaries. The Greater London Authority, standalone fire authorities, Combined Authorities, National Park Authorities and Waste Authorities are excluded. 3. Children’s social care is adjusted to include on Sure Start and services for young people from 2010/11 and throughout the time series)
January 2025