Written evidence submitted by West Sussex County Council [SRF 008]
- West Sussex County Council welcomes the opportunity to submit a representation into the Spending Review and Local Government Finance Inquiry.
- West Sussex is a county that is predominately rural in nature, and includes the South Downs National Park. The latest population estimates from the Office for National Statistics (ONS) show that West Sussex is now home to over 836,000 people. There are 187,000 people around or above retirement age accounting for 22% of the total population, a percentage which grows year on year. While West Sussex is one of the least deprived areas in the country, this masks the health inequalities within the county, with some areas ranking amongst the 10% poorest neighbourhoods in England.
- West Sussex County Council faces a particularly challenging set of circumstances this year, not least the financial impact arising from the pandemic, both in 2020/21 and any on-going impact in future years, but also in terms of the scale of the pressures for growth in the budget and the continued uncertainty about the outcomes of the Comprehensive Spending Review, the Fair Funding Review, the Review of Business Rates and the future funding of Adult Social Care. Despite saving just under £240m since 2010/11, West Sussex County Council faces a gross budget gap currently estimated at £105 million over the next three financial years. In the absence of significant additional funding, the County Council will be forced to make serious reductions to services in order to remain financially resilient and maintain a balanced budget in line with our statutory duties.
- Furthermore, the current system does not allow local authorities to plan effectively for the medium and long term, which makes it significantly more difficult to plan effectively for future service provision and to invest in preventative services. A sustained and holistic approach is needed that will enable councils to meet the soaring demands for care and its associated costs. Local government receives financial support from a range of sources (including transport, education and climate change) and all need to be sustainable if local government to fulfil its remit of providing adequate local services.
The approach the Government should take to local government funding as part of the 2020 Spending Review and what the key features of that settlement should be.
- The 2020 Spending Review presents an opportunity to help put local government on a sustainable financial footing. Local authorities will be key to enabling, supporting and facilitating the growth of jobs and skills, maximising productivity, supporting the NHS, cutting crime and providing an excellent education for all, reaching net zero carbon emissions and delivering projects on time and within budget.
- Over the past decade, local government has suffered the most severe funding cuts of all government departments. Despite this, local authorities have managed to innovate and evolve to continue to serve their local populations and provide vital public services to their residents. However, the cracks are finally beginning to show, and many local authorities are now on the very edge of financial sustainability.
- The County Council’s view is that the total funding available to local authorities, including government grants and local revenues, needs to ensure they have a fair, adequate and sustainable funding base. The National Audit Office recognises that local government is the most efficient of all government sectors, yet the severe cumulative effects of Government funding cuts since 2010 have brought local authorities’ financial sustainability into question. Therefore, providing adequate financial support so that local authorities again become, and then remain, sustainable and resilient will be essential to ensuring spend is efficient and effective.
The current financial situation of councils, how this has affected their ability to deliver services and the demand for services, including Adult Social Care.
- West Sussex County Council faces a particularly challenging set of circumstances this year, not least the financial impact arising from the pandemic, both in 2020/21 and any on-going impact in future years, but also in terms of the scale of the pressures for growth in the budget and the continued uncertainty about the outcomes of the Comprehensive Spending Review, the Fair Funding Review, the Review of Business Rates and the future funding of adult social care.
- While we have seen central government funding cuts of nearly 50% since 2010, demand for services, nationally and locally, continues to rise. Children’s social care and Special Educational Needs and Disabilities (SEND) have seen some of the biggest growth in demand. In West Sussex over the past ten years we have seen a 66% increase in children starting on child protection plans, an 11% increase in Children Looked After (CLA) over the past four years, and since 2015, a 114% increase in unaccompanied asylum-seeking children. Services for children with SEND are also facing significant challenges due to considerable pressure on the High Needs Block and increasing demand. The additional cost associated with increased demand is estimated to be £12.5m for 2021/22, a significant element of this due to the increase in the number of CLA in the current financial year which has continued to rise and has been higher than forecast in the 2020/21 budget planning. Funding for schools is also not sustainable in the medium-term, which is of particular concern to West Sussex, where the funding is low in comparison to our statistical neighbours. West Sussex has many rural areas with small schools at the heart of the local community. The funding formula disproportionately benefits larger schools but it is crucial that these smaller schools in West Sussex are not left behind.
- The adult population of West Sussex is projected to increase by 18% over the next 20 years. The majority of this increase is forecast to be in older people; the 65+ population is expected to grow by 53% over 20 years. These demographic changes coupled with the impact of the National Living Wage means the County Council faces increased care costs throughout the county.
- We are estimating pressures of £47m on our budget for 2021. This takes into account pay and price inflations, children’s social care (including a rise in the number needing care from the local authority), a rise in demand for adult social care and a predicted decrease in the amount the Council will receive in business rates and council tax as a result of the pandemic. Assuming we receive the same government funding as 2020/21 in 2021/22 from all government departments, will mean we have a further £44m of savings to achieve to balance the budget. Over the following two years we are anticipating gaps of £44m and £17m, creating a total gap of £105m over the three-year period. Funding demand-led services means budgets for discretionary services such as roads, neighbourhood or waste services are often crowded out. These are important universal services and there is no sign that demand for these services has fallen as local authorities have cut spending. Funding of local government services needs to fully reflect the broad roles that it fulfils, recognising the impact it has upon the overall place and wellbeing of local residents. The funding gaps are unsustainable and if additional government funding is not found it is likely that significant reductions in these services will need to be made in order to balance the Council’s budget over the period 2021-25.
Financial challenges facing councils as a result of the COVID-19 pandemic, including lost income and local tax losses
- COVID-19 has imposed very intense service and financial pressures on local authorities. West Sussex County Council expects to incur £103.8m (£94.2m additional costs, together with income losses of £9.6m) over this year alone in order to meet the increased demand for our services from the most vulnerable residents, in particular to support the provision of care to adults and children. We expect many of these impacts to continue into 2021/22 and beyond (these are currently not in gap projections). Nationally, the Local Government Association estimates that, after taking account of the £3.bn COVID-19 emergency funding, local authorities still have a funding gap of £7.4bn.
- There has been a significant adverse impact upon businesses and employment within West Sussex as a consequence of the pandemic. Between March and April there was a 96% increase in the claimant count across the county and a further 40% increase from April to September. Within West Sussex, the Gatwick Airport reliant local economy both directly and indirectly accounts for an economic footprint of 85,000 jobs and £5.3 billion towards GDP. Crawley is the most exposed locality to the economic impact of the pandemic, with high levels of business failure and unemployment likely. Along with the Gatwick Diamond area it is among the places in UK most severely affected, both economically and socially by COVID-19. Gatwick airport has warned it expects it to take up to four years for demand for flights to fully recover with major airlines including BA and Virgin warning they may not resume flights from Gatwick.
- The substantial increase in unemployment rates throughout the county has also led to an increase in residents applying for a council tax reduction. This has a serious impact on our council tax collection levels with a current estimate of a £20 million deficit (£6.7m spread across three years). Furthermore, in February 2020, when the Medium Term Financial Strategy (MTFS) was updated as part of setting the budget for 2020/21, the assumption was that increases in council tax would add to the level of funding available across the period 2021/22 to 2023/24, however current estimates show a reduction in this increase of £12.6 million. This reduction reflects the loss of growth in the tax base and the potential increase in the number of people applying for council tax relief because they are now experiencing financial hardship.
- The economic downturn has also put pressure on business rates, particularly with regard to Gatwick Diamond but also in relation to the hospitality economy along the coastal region of the county. The funding available for 2021/22 from business rates is estimated to be £5.9m reduction relative to the MTFS forecasting levels at the time the 2020/21 budget was set in February 2020.
- Combined, the reduction in funding arising from the impact of Covid-19 in 2021/22 is estimated to be £25.2 million (council tax £12.6 million, business rates £5.9 million and collection fund £6.7 million). Despite the safety net, this is currently estimated to cost West Sussex County Council £9.6m in lost revenue in 2021/22 which would be in addition to any loss incurred on the Collection Fund. Lower collection levels of both Council Tax and Business Rates directly impact upon the financial resilience of West Sussex County Council.
- We expect the impact of the pandemic will continue into 2021/22 and beyond, both in terms of service pressures and a predicted decrease in the amount the Council will receive from council tax and business rates. Furthermore, in-year savings plans have been impacted by the pandemic as resources have been stretched and this will have an ongoing impact into subsequent years with additional funding required to sustain services. There is significant uncertainty and ongoing consequences even if we have a workable new normal by 2021/22 so clarity around ongoing commitment to funding will be essential.
- We urge that the Government and its Aviation Task Force recognise the challenges for places with major airports like Gatwick and their need for bespoke support to rebuild, regrow and take advantage of emerging international business opportunities as they arise. We also urge the Government to ensure the continuation of committed Local Growth Funding allocated to projects that are important to helping to stimulate economic recovery. To help strengthen the UK’s place in the world and support our future as an international destination it is important that Government recognises the importance of the visitor economy in the face of COVID-19’s impact on our coastal communities. In doing so, the Government should look to support local destination partnerships as strategic leaders to support recovery in places, while continuing to work closely with Visit Britain and Visit England on supporting the sector to recover.
- Furthermore, support will be needed to fund economic recovery in order to revive high streets, improve digital connectivity and improve skills for employment. For some services, the new normal will be different and could work better or more sustainably by continuing to deliver day-to-day services in more diverse ways. For instance, libraries continuing e-lending services, more remote teaching and learning opportunities, and fewer carparks and office spaces. Government could help facilitate these through one-off transformation and capital grants that could promote the technologies to enable these.
What the impact is of another one-year spending review and a further delay to a multi-year settlement and the Fair Funding Review
- The current system does not allow local authorities to plan effectively for the medium and long term, which makes it significantly more difficult to plan effectively for future service provision. A sustained and holistic approach is needed that will enable councils to meet the soaring demands for care and its associated costs.
- The continuing uncertainty about the funding of local government makes the task of reviewing the MTFS more challenging and means that the announcement of the Local Government Finance Settlement is a critical element in developing a balanced budget for 2021/22 and updating the MTFS for the following three financial years. In addition, there is continued uncertainty about the future funding of adult social care, pending the publication of a national policy and plan to address this issue for the longer-term. The demand and cost of children’s social care services continues to rise with local authorities consistently overspending on these services, and the spending increase has not kept pace with demand. Currently, there are significant funding streams that are not currently guaranteed to be available in 2021/22.
- Local Government needs investment to support the increased demands for complex and intensive services, e.g. social care and to effectively modernise in response to changing circumstances e.g. COVID-19 and Brexit. The current funding arrangements for local government have been under review for a number of years now, which prevents effective forward planning and resilience. Local Government needs to be given clarity around future funding arrangements, for instance on adult social care, Business Rates Review and the Fair Funding so that it can plan with confidence and knowledge. While the impact of prevention is hard to prove, secured longevity of funding would allow local authorities to focus on and incentivise the prevention agenda, enabling them to make significant cost-savings downstream. It is essential that that we are able to continue to invest in improving services and meet new challenges but the budget pressures and uncertainty put continued improvement at risk.