Written evidence submitted by Gateshead Council [SRF 019]



Gateshead Council welcomes the opportunity to contribute to the Committee’s inquiry into the Spending Review and Local Government Finance, and hopes that the Council’s comments will be of use.


The COVID-19 pandemic has laid bare the precarious state and volatility of local authority funding. Local authorities have been on the front line, responding to the needs of their residents and businesses. The Council has repeatedly lobbied for the entrenched unfairness of local authority funding to be addressed and the CSR needs to deliver upon the governments promise of levelling up every part of the country so that regional differences in need and deprivation can be addressed.


Even before the implications of pandemic, the Council is facing a significant funding gap of £18.6m in 2021/22 and £58.4m over the 5-year medium term financial strategy, on top of the £170m of cuts to the Council’s budget over the last decade. The Council has always been fiercely ambitious for the people of Gateshead, but to be successful this needs to be built on a stable foundation of funding certainty and adequate quantum. Despite the welcome additional funding for 2020/21 as well as the emergency COVID-19 funding, the Council’s core services continue to be under significant pressure, in particular Adults social care and children’s services. It’s essential that the full financial impacts of COVID-19 are funded not only in the short-term during the response stage, but also in the longer-term during the recovery phase. Regardless of the additional emergency funding received, there still remains a significant gap due to the estimated additional cost and lost income as a consequence of the pandemic. Even after the four tranches of emergency funding and the first tranche of fees and charges compensation received to date is taken into account, the Council is still projecting a shortfall of £30.4m in relation to the General Fund, Housing Revenue Account, and Collection Fund. The Government needs to deliver on its promise to ”stand ready to do whatever is necessary to support councils in their response to coronavirus” and meet the cost of the pandemic in full. Furthermore, some of the implications of the pandemic will be permanent and some of the emergency funding will need to be baselined to enable the Council to continue to respond beyond the initial response stage.


The Council welcomes the increase in cash uplift in Core funding and the additional flexibility in social care funding that was delivered for 2020/21 to help support increasing cost pressures the Council has been facing for a number of years.  However, the Council believes this increase to be both inadequate and inappropriately targeted. The Council continues to be concerned that the settlement is fundamentally unfair due to its failure to acknowledge need appropriately, with the greatest funding reductions continuing to fall on the most deprived areas of the country. Within Gateshead there are changes in demography with an increasing population and a growing number of our most vulnerable residents requiring complex health and social care support. Within the borough there remains areas of high deprivation with issues of health inequalities and child poverty. Gateshead is ranked 47th most deprived out of 317 local authorities in England and within Gateshead there are 21 areas which fall within the 10% most deprived areas in England. This has worsened from 73rd out of 326 since 2015. Yet, as funding for the Council’s services has fallen significantly over the last decade, reliance of residents on vital local services has increased due to austerity. There is a well documented link between deprivation and the demand for, and cost of delivering services. 


Following a decade of severe cuts in Government funding, the CSR needs to address the impact of the funding cuts the Council has had to suffer over the last ten years at the same time as increasing demand. There remain some significant issues relating to improving the fairness of the distribution of funding to reflect the higher pressures in the most deprived areas of the country. The Chancellor’s “plan for correcting the public finances” needs to include adequate and fair funding for local authorities, including “unmet” need and the damage that has been done due to the severity of funding cuts over the last decade. Some of the most important work that local authorities do is preventative in nature e.g. early intervention in children and families, and support to elderly adults to avoid costly hospitalisation. This needs to be adequately funded and the wider benefits to the public sector recognised. The focus of funding allocations needs to move away from incentivising growth and towards funding service needs. This needs to include a long-term financial solution for the funding of Adult Social Care. There is no correlation between the ability to fund council services from business rates and the underlying needs of residents. This is further exacerbated by the delays to the Business Rates reset.


The Government should urgently address the additional demands and cost pressures of Children’s social care being faced by the Council which continues to experience increases in the number of Looked After Children coupled with increasing costs due to the complexity of needs. The Council is supportive of the Association of North East Council’s response to previous CSR consultations which provided new evidence that additional funding for Children’s social care is urgently needed for distribution to councils, where growing needs in recent years have not been recognised by the current formula. Further delay in the review of Fair Funding is exacerbating the problems faced by the Council.


Notwithstanding the uncertain implications of Brexit on the local economy, regulatory changes, workforce, and potential increased demand for Council services, it’s critical that the Government provide certainty in relation to the UK Shared Prosperity Fund including bridging funds for existing schemes, alongside the form, function and value of the fund going forward.


Short-term settlements run counter to sound financial management, effective decision making and governance. A longer-term perspective is essential if local authorities are to demonstrate financial sustainability, a fundamental principle of CIPFA’s Financial Management Code. The Government must set out at the earliest opportunity a long-term financial plan for Local Government that includes a quantum of funding that is both sufficient and fairly distributed to ensure the financial sustainability of the sector.


The Council would also welcome multi-year settlements and earlier final settlement announcements to aid financial planning. Significant grants announced by other government departments such as better care fund and public health grant need to be published alongside the settlement to complete the funding picture. Often grants are announced in February after most council tax requirements and budget setting has already taken place.


The ongoing and longer-term impacts of the pandemic, the uncertain implications of Brexit, the implications of economic recovery from the recession, and the uncertain and precarious nature of local government funding have created a perfect storm for the Council.  In these uncertain times, now more than ever, our residents will be looking towards the Council to do what we do best, providing essential local services and particularly care and support to some of the most vulnerable members of our society. We can deliver, but we need the government to play their part and deliver a quantum of funding that is adequate, fairly distributed according to need, and longer-term in its nature to enable longer term planning and sustainability.



November 2020