Written evidence submitted by Southwark Council [SRF 009]

 

 

About Southwark Council

The London Borough of Southwark is a densely populated, diverse and vibrant area situated on the south bank of the River Thames. Home to over 314,000 people, Southwark is a patchwork of communities: from leafy Dulwich, to bustling Peckham and Camberwell, and the rapidly changing Rotherhithe peninsula. Over 120 languages are spoken across the borough, with 11% of households having no members who speak English as a first language.

 

Southwark has the 9th highest population density in England and Wales at 9,988 residents per square kilometre. At Southwark Council, we are pursuing a bold and ambitious agenda that will deliver thousands of new social rent and affordable homes, end rough sleeping in the borough, and promote a green and fair economic renewal from COVID-19 to drive growth, create jobs and help us to achieve carbon neutrality by 2030.

 

 

Executive Summary

Southwark Council welcomes the opportunity to respond to this inquiry. In our response below, we make a number of recommendations for Government to ensure that councils can continue to operate to protect residents and support the future success of the UK.

 

We would ask that Government:

 

The approach the Government should take to local government funding and our response to the Spending Review 2020
 

  1. The 2020 Spending Review represented a critical opportunity to stabilise local government finance following the immense social and economic upheavals unleashed by the COVID-19 pandemic and the broader consequences of a decade of central government reductions to funding. Since 2010, local councils have lost nearly 60p in every pound the government had previously provided for local services.

 

  1. Whilst it is deeply regrettable that this Spending Review will not provide the certainty of a multi-year settlement that local government so desperately needs, the Government must acknowledge the critical role councils have played in stepping up to respond to this crisis – and the enormous costs they have incurred as a result. The situation across local government is precarious and unsustainable. We welcome the announcement of further funding for local councils to support provision of ongoing services that have been under pressure as a result of COVID-19 and would urge the Government to further compensate councils for all costs and losses. This will help create the conditions for a rapid and robust economic recovery in our local communities that will enable this country to emerge from this crisis with renewed strength and resilience.

 

  1. Crucially, the 2020 Spending Review must be the final time that a one-year settlement for local government is pursued and set the stage for a full, multi-year funding settlement for the remainder of the Parliament.

 

  1. Even prior to the pandemic, councils were facing an estimated £6.5 billion funding gap by 2024/25[1]. After years of central government funding reductions, there is no capacity within local services to absorb any further cuts or support amongst the public for a sustained period of further austerity.             
     
  2. We echo the Local Government Association’s (LGA) bipartisan submission to the CSR consultation in September[2], which set out the need for sustainable and certain long-term funding for councils, bringing power and resources closer to our communities and driving cross-party collaboration to provide a long-term solution for adult social care services.

 

  1. We note the announcement in the Spending Review that will see councils’ core budget increase by an estimated 4.5% (in cash terms). This is welcome, but should have gone further. According to the Institute for Fiscal Studies, the March 2020 Budget proposed a 4.4% increase in public service spending for 2021/22, but lower than expected inflation means that this would represent a 6.5% increase in real terms.[3]This should have been the Government’s starting point for the Spending Review. 

 

  1. We are disappointed that Government did not commit to a review of the finance system to enable councils to broaden their range of revenue-raising powers, which is long overdue. The Chancellor should also have publicly announced when its reviews of adult social care and business rates retention will conclude.

 

  1. We strongly supported the cross-party submission from London Councils to the Spending Review[4], which included recommendations for the Government to boost local authorities’ ability to deliver new affordable and socially rented housing alongside targeted extension of business support schemes.

 

  1. The Prime Minister declared this summer that the UK needs a ‘New Deal’ to secure our economic renewal - that means investing in infrastructure and public services to drive growth and protect jobs. In the context of local government, building new council homes and supporting the construction sector are strong examples of counter-cyclical investment. Research from Shelter illustrates that for every £1 spent on construction, the UK economy benefits by £2.84.[5] Adopting a public investment approach in the Spending Review would both tackle long-standing issues such as the housing crisis and promote a strong economic recovery from the pandemic, retaining and creating tens of thousands of jobs.

 

  1. Councils are best placed to understand the needs of their communities and where the greatest opportunities for regeneration and renewal lie. Consequently, any increase in capital resources must also come with the flexibility for councils to spend according to their own capital investment programmes. This must be in the form of cash, not further loans through the Public Works Loan Board, which carry high rates of interest and penalties for repayment. It must also be new money, not old funding that has simply been repackaged, as we have seen in past announcements.

 

  1. Southwark Council strongly supports the proposed extension of the Bakerloo line to Lewisham via Old Kent Road. This shovel-ready infrastructure project is absolutely vital to the wider regeneration of the Old Kent Road Opportunity Area, which promises to bring 20,000 new homes and 10,000 new jobs to this part of London. We will continue to make the case for the necessary funding from central government.             
     
  2. The Government must ensure that its ‘levelling up’ agenda in certain areas of the country does not mean ‘levelling down’ in more deprived and under-developed parts of London. One key element in this is the Area Cost Adjustment that is used in determining funding allocations, which must remain at the same level or above. Area costs are an enormously significant factor in Southwark, influencing everything from the cost of accommodating the homeless, to pressures on the workforce in our statutory services.

 

  1. The tremendous progress that has been achieved in tackling homelessness and rough sleeping in recent months must not be squandered and we welcome the further financial support from the Government as announced in the Spending Review. Under the ‘Everyone In’ scheme, Southwark Council housed 799 rough sleepers, with 700 placed into ‘move on’ accommodation. However, homelessness applications continue to rise amidst a deteriorating economy and the still-raging pandemic. Government needs to commit to a long-term solution to supporting those who find themselves homeless, rather than just allocating ad hoc sums of money to local authorities to provide support.

 

  1. The low rate of Local Housing Allowance is a key driver of soaring and unaffordable temporary accommodation costs. The Government should have used the Spending Review to immediately raise LHA rates to cover the full cost of rent, and over the longer-term provide funding for a Housing First model for homelessness prevention. Instead, the Government is proposing to maintain LHA rates in cash terms after April 2021, in effect imposing a real terms cut.

 

  1. The Government must also go further in its funding approach to tackling the climate emergency and be clearer about the role that councils have to play. Southwark Council has declared its intention to become a net zero borough by 2030, and we are undertaking several ambitious programmes to help achieve this. This includes a commitment to replacing the heating in our housing estates, at a cost of £350 million. The climate emergency is the defining issue of our times, and strong financial backing from central government is essential if we are to achieve the changes that are necessary.    

 

 

 

The current financial situation of councils, how this has affected their ability to deliver services and the demand for services, including Adult Social Care

 

  1. The scale of the financial challenge facing our country is unprecedented in modern times. Councils have been hit with huge funding gaps this year, and face even greater funding shortfalls in the next financial year. The Local Government Association (LGA) estimated in July 2020 that the full financial challenge councils face as a result of COVID-19 totals almost £11 billion.[6] The Institute for Fiscal Studies has projected that spending pressures within local government could outstrip Government funding by as much as £3.1 billion in 2020/21.[7]              
     
  2. This reality is set against a backdrop of year-on-year central government cuts since 2010 – with total funding across England falling in real terms by 56.3% over the last decade. Moreover, there is still significant uncertainty about the full impact of funding pressures related to the pandemic, and with England now in the midst of a second national lockdown at the time of writing, the outlook for local government finance is likely to prove even bleaker.
     
  3. Our own forecasts are being regularly revised through our budget monitoring process in response to the changing circumstances, as the pandemic continues to have significant impacts across all our service areas. We are facing an approximate £12 million shortfall this financial year, overwhelmingly as a result of spending on COVID-related pressures. Without additional government support the council will almost certainly overspend on its agreed 2020/21 budget by many millions of pounds. The consequence of this will be that we are forced to draw down on our reserves, compromising our financial resilience and greatly impacting our ability to invest in the borough and pursue the ambitious and transformative programme set out in our Borough Plan.             
     
  4. Even before COVID-19, Southwark was facing significant budget challenges in a number of key areas. The Dedicated Schools Grant (DSG) has experienced structural pressures on the High Needs block for some time, with a cumulative deficit on the DSG of £21.7m at year-end. The costs associated with providing temporary accommodation and tackling rough sleeping have also been a significant pressure on the council’s budget which has only been compounded by the pandemic.

 

  1. Adult’s and children’s services represent approximately two thirds of the council’s budget, and years of underfunding by central government have led inescapably to immense strain falling on these departments.

 

  1. A range of factors over many years have led to a shortage in the supply of social workers, which has resulted in an undesirable level of agency staffing in many boroughs. This trend appears to be worsening and is putting increasing pressure on the children’s services budget. The council is supporting more unaccompanied asylum-seeking children than ever before, as well as providing ongoing care and support to a number of children with complex needs and high associated costs. This is set against a funding environment that remains wholly inadequate.

 

  1. Children’s charities estimate that available funding for children’s services fell by £2.2 billion - or 23% - between 2010 and 2019[8], whilst demand for services has only increased further. Without adequate funding, services are unable to put the necessary resources into early intervention, which only leads to greater costs later down the line.

 

  1. Pre-COVID, the immediate pressures on adult social care were less acute than those within children’s services due to the internal transformation of services and budgets - despite the lingering influence of austerity and the Government’s disjointed approach to health and social care. Ongoing pressures instead reflected the longer-term structural challenges of an aging population and the longstanding lack of political progress towards achieving a proper funding solution for adult social care. With the emergence of COVID-19, the urgency of these challenges have not only intensified but been accompanied by large and unanticipated new costs, many of which are likely to persist for the foreseeable future (see para. 28). The Government could provide some relief by rolling-over or making permanent the Infection Control Fund.

 

  1. We note with interest the Government’s announcement to allow councils to increase revenues through a 3% adult social care precept, and whilst this will help us to deliver much-needed services to our residents, we would urge Government to urgently bring forward proposals for a long-term, sustainable funding solution.


What the financial challenges facing councils are as a result of the COVID-19 pandemic, including lost income and local tax losses.

 

  1. At the onset of the COVID-19 pandemic and the national lockdown in March 2020, it was local government that stepped up to meet many of its most pressing challenges by providing critical services to support our communities - especially those from vulnerable groups. The Secretary of State for Housing, Communities and Local Government told council leaders on the 16 March that “this government stands with local councils at this difficult time...Everyone needs to play their part to help the most vulnerable in society and support their local economy, and the government will do whatever is necessary to support these efforts”.              In Southwark, we embraced these words wholeheartedly, and were already taking immediate steps to support the Government’s efforts against the virus and help protect our residents from its effects. This included the commitment of millions of pounds in emergency hardship support to residents, communities and businesses.

 

  1. Since late March, the Southwark Emergency Support Scheme has received nearly 8,000 applications for financial help due to the pandemic, and we have supported 5,000 families and individuals to cover the cost of food, fuel and other basic essentials. To date, we have spent £1.3 million supporting families facing financial crisis as a result of COVID-19 through this scheme. In addition, we have spent almost £1 million resourcing the Southwark Community Hub - a partnership between Southwark Council, the local NHS and GP surgeries, charities and community and volunteer groups to provide residents with one-stop access to the right support during this difficult time. We currently expect to spend around £3.2 million supporting our residents through the Southwark Emergency Support Scheme and Community Hub in 2020/21.

 

  1. All core council services including housing, adult and children’s social care, public health and leisure - have incurred significant unbudgeted costs as we responded to the crisis. By way of one example, during the first wave of the pandemic we took action to secure housing for virtually every rough sleeper in the borough. As a result, our spending on temporary accommodation soared. We are anticipating additional costs of around £8.9 million, even after taking account of the announced MHCLG grants.             

 

  1. After housing, adult social care is our highest COVID-related cost pressure. This includes the additional costs of meeting increased demand for social care, workforce pressures and significant expenditure on personal protective equipment and infection control measures. Despite starting the year in strong shape, a multi-million pound deficit in adult services is now inevitable, wholly attributable to the additional costs, lost income and delayed savings stemming from the pandemic.             
     
  2. At the same time, we have experienced a drastic reduction in income from fees and charges, whilst the ongoing disruption to businesses and jobs has had a substantial impact on the collection of business rates and council tax. We anticipate losses of £10 million in lost business rates and £9 million in lost council tax revenue this year, which will need to be recovered through the budget-setting process for 2021/22 and 2022/23. The Government has rightly taken action to support businesses through this period through the provision of various cash grants, but it has so-far failed to support councils over lost business rate income.              
     
  3. The Government has so far provided £4.6 billion to local authorities across four separate tranches to meet their increased costs from COVID-19. Southwark’s total share of this has been £33.6m, but we expect our increased costs as a result of the pandemic to reach £52.8 million pounds this financial year across all our services, including housing and adult’s and children’s social care. Consequently, the Government has yet to reimburse us for millions of pounds in costs that we have incurred as a result of the pandemic, and the council is facing a budget shortfall of approximately £12 million in 2020/21.

 

  1. Whilst Government funding received or pledged so far has been welcome, the scale of the challenge means that this will not fully cover our costs. The Government’s compensation scheme for lost income from sales, fees and charges will also fall significantly below the actual losses incurred. Moreover, this scheme does nothing to address lost income from other sources, such as rents, commercial property, council tax and business rates. Any funding settlement must acknowledge and reflect that income losses from areas such as parking and leisure, which form an important part of our budget requirement, may never fully recover.  

 

What the impact is of another one-year spending review and a further delay to a multi-year settlement and the Fair Funding Review.

 

  1. The Local Government Association (LGA) estimated that even prior to COVID-19 councils were already facing a funding gap of £6.5 billion by 2024/25.[9] After repeated delays to the Comprehensive Spending Review, this will be the third year in a row where councils only receive a one-year funding settlement. This lack of certainty and security makes it extremely difficult for Southwark Council to plan for service delivery over the medium-term. Moreover, it threatens to undermine our ambitious plans for long-term capital investment in the borough’s infrastructure – including the delivery of much-needed social and affordable housing.                
     
  2. Whilst the Government’s decision to have a one-year Spending Review is understandable in the context of COVID-19, it is extremely disappointing that local government will not be extended the same multi-year funding guarantees that the NHS and schools will receive. The Government’s decision to provide a £16.5 billion multi-year settlement for defence is particularly perplexing; local councils have been absolutely pivotal to the fight against the virus, but appear to be viewed as a lower priority than other areas of the public sector despite their central importance to any recovery. Additionally, there is no clarity on when or if a Fair Funding Review will take place.             
     
  3. The Government must begin planning for an urgent multi-year Spending Review immediately and undertake it as soon as the pandemic allows – councils cannot wait another year.              
     

 

November 2020


[1] Local Government Association, Re-thinking local, Available at: https://local.gov.uk/sites/default/files/documents/3.70%20Rethinking%20local_%23councilscan_landscape_FINAL.pdf

[2] Local Government Association, Comprehensive Spending Review 2020: LGA submission, Available at: https://www.local.gov.uk/publications/re-thinking-public-finances

[3] Institute for Fiscal Studies, The IFS Green Budget: October 2020, Available at: https://www.ifs.org.uk/uploads/CH6-IFS-Green-Budget-2020-Spending-Review-2020.pdf

[4] London Councils, Comprehensive Spending Review 2020 London Councils’ Representation to Government, Available at: https://www.londoncouncils.gov.uk/node/37686

[5] Capital Economics, Increasing Investment in Social Housing, Available at: https://england.shelter.org.uk/__data/assets/pdf_file/0020/1637012/Capital_Economics_Confidential_-_Final_report_-_25_October_2018.pdf

[6] Local Government Association, Re-thinking local, Available at: https://local.gov.uk/sites/default/files/documents/3.70%20Rethinking%20local_%23councilscan_landscape_FINAL.pdf

[7] Institute for Fiscal Studies, COVID-19 and English council funding: what is the medium-term outlook?, Available at: https://www.ifs.org.uk/publications/15041

[8] Action for Children, Barnardo’s, The Children’s Society, National Children’s Bureau & NSPCC, Children’s and young people’s services: Funding and Spending 2010/11 to 2018/19, Available at: https://www.barnardos.org.uk/sites/default/files/2020-05/Analysis%20funding%20and%20spending%20on%20children%20and%20young%20people%27s%20services%20-%20May%202020.pdf

[9] Local Government Association, Re-thinking local, Available at: https://local.gov.uk/sites/default/files/documents/3.70%20Rethinking%20local_%23councilscan_landscape_FINAL.pdf