Written evidence submitted by Sheffield City Council [SRF 020]

  1. 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. 

1.1     The need to provide properly for Local Government funding in the Spending Review

 

1.2     The sections below provided further evidence to support the following key asks of the forthcoming Spending Review. We ask that the review:-

 

1.2.1.        Funds Local Government as a whole with sufficient money to deal with the ongoing challenges faced by the sector.

1.2.2.        In conjunction with the Fair Funding Review, addresses the growing disparity in funding faced by Local Authorities and ensures the main driver of funding allocations is based around need, with particular focus on communities with high levels of deprivation.

1.2.3.        This Spending Review needs to find a solution where Central and Local Government work together to fund and mitigate the potential impact of COVID on finances over the medium term. SCC calls upon the Government to consider options including:-

 

 

1.3     Resolves the fundamental weaknesses in Social Care funding that have left the sector on its knees even before COVID swept through. There must be a sustainable long-term solution for Social Care.

 

1.4     The disproportionate level of Central Government funding reductions suffered by Local Government since 2010

 

1.5     Local government has been cut earliest, by the greatest percentage and at the fastest pace compared to the rest of government.  Over the past decade, Local Authorities have been forced to adjust to an increasingly difficult financial reality. The coalition, Cameron, and May governments cut grants to local authorities by almost half (49.1%), between 2010/11 and 2017/18. 

 

1.6     By 2020, local authorities had faced a reduction to core funding from the Government of nearly £16 billion over the preceding decade. That means that councils will have lost 60p out of every £1 the Government had provided to spend on local services in the last eight years. Next year, 168 councils will receive no revenue support grant at all.

 

1.7     Local authorities also face a range of new demand and cost pressures, while their statutory obligations have not been reduced. Non-social-care budgets have been reduced substantially despite increases in council tax in many councils. Authorities now have less room for manoeuvre in finding further savings. In spite of all the best efforts of local government, the reality of these funding reductions and increasing inflation has had a negative impact, and residents are  seeing the consequences of these cuts.

 

1.8     By way of comparison, funding for the NHS increased year-on-year between 2015 and 2020, whilst funding for public health, which transferred to Local Government in 2013, will have reduced by 14 per cent, or around £531 million, the consequences of which have become painfully apparent.

 

1.9     The pattern of growing overspends on services and dwindling reserves exhibited by an increasing number of authorities is not sustainable over the medium term. The financial future for many authorities was extremely bleak prior to COVID-19, the pandemic has pushed many perilously close to the financial cliff edge.

 

Local services were facing a £7.8 billion funding gap by 2025, even before COVID-19.  This gap corresponded to keeping local authority services ‘standing still’ and only having to meet additional demand and inflation costs. It did not include any extra funding needed to improve services or to reverse any cuts made to date.

 

1.10 The uneven spread of these cuts between different parts of Local Government

 

1.11 The incidence of cuts since 2010 has also been unfairly distributed. Local Authorities, especially Unitaries (Including Metropolitans), have had to bear a disproportionate share of the overall cuts.

 

1.12 There has been a shift from Central Government funding to locally raised taxation. This increased need for locally raised taxation has led to inequitable changes in the core spending power of authorities; those Local Authorities with high levels of deprivation, and lower local tax bases have had to bear a disproportionate share of the cuts within the sector. The expansion of the Business Rates Retention Scheme in the near future has the potential to put further pressure on local authorities.

 

1.13 Since 2009/10 funding from Central Government has been reduced, leading to local authorities cutting spending by 23% per person or nearly £300 per person nationally. This however hides a wide range of spending cuts masking the hardest hit authorities.  The most deprived 10% of council areas have averaged a 31% cut in funding (£432 per person) compared to a 16% (£134 per person) cut for the least deprived 10%. 

 

1.14 These inequitable Local Authority cuts have placed a further burden on the poorest areas of society, placing increased pressure on austerity hit Councils.

 

1.15 Similarly there have been differing levels of funding cuts between County Councils compared to Unitary/Metropolitan Councils. The most deprived areas have suffered the largest cuts during the main austerity period of 2010 to 2016, and have seen the lowest increases in the small rises in core spending power that have occurred since 2017.

 

1.16 For example Surrey County Council (population 1.16m) raises over £7m for each 1% increase in CT, whereas Sheffield City Council (population 580,000) raises just over £2m. Consequently, moving funding away from Revenue Support Grant and towards Council Tax shifts resources from poorer to wealthier authorities, as wealthier authorities can raise proportionately more income through Council Tax. New Homes Bonus adds to this disparity by favouring authorities that are growing compared to those that are struggling.

 

1.17 At the same time poorer authorities have populations with shorter Healthy Life Expectancies, and a higher proportion of vulnerable children, whilst their residents have less ability to make contributions to their own care.

 

1.18 Sheffield City Council is the third largest Metropolitan District Council in terms of population and has had to cope with huge cuts to its Revenue Support Grant of over £150m since 2010. As aforementioned, the result of these significant funding reductions has equated to Sheffield having to deal with a cut of £36% in spending power in the period 2010/11 to 2017/18, far above the national average.

 

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

2.1   As highlighted above SCC has seen significant reductions in its Central Government funding at a time when demand for Adults and Childrens Social Care has been increasing. Efficiencies have been found over the last decade within social care, but these have not been sufficient to fund the increased cost base and demand for services. Ultimately, SCC along with many other LA’s, have had to priorities these services and deliver savings across other areas of the Council.

 

2.2   This situation only worsens over the medium term, with forecasts showing demand for social care services continuing to grow. In addition, there are very limited opportunities to make additional efficiencies following ten years of austerity. This reduced ability to deal with cost pressures will results in yet further cuts to other vital council services.

 

2.3   The graph below highlights that without additional funding from Government, £82m worth of savings will have to be found from non-social care budgets. This is the equivalent of Sheffield no longer providing any cultural, environmental, regulatory or planning services. This would mean no libraries, museums, leisure and sports facilities, parks, waste collection or recycling services. This would clearly not be acceptable to the Council taxpayer and would effectively mean that for every £ of local taxation over 75p will be spent on Social Care services in 4 years’ time.

 

 

2.4   The weaknesses in the funding for (adult) social care revealed by the pandemic

 

2.5   While the world has been convulsed by COVID for the past six months, none of the urgent problems that Councils faced in February 2020 have gone away. Some have been made more acute. The social care crisis has been building for decades, but the unacceptable way we treat old frail people was starkly exposed with 1 in 20 of care home residents in the UK killed by the virus.

 

2.6   The pandemic has taken a grim toll on social care services in England. As at 19th June 2020, there had been more than 30,500 excess deaths among care home residents in England, and social care staff had been around twice as likely to die from COVID-19 as other adults.

 

2.7   This is maybe not surprising when you consider spending on the social care system in England is £600 million lower today than it was a decade ago, now 8% below 2010 levels in 112 of the 150 responsible local authorities, according to trade union analysis. By allowing additional flexibility within Council Tax Referendum limits, social care costs are also being increasingly funded by Local Authorities themselves rather than Central Government. This approach increases inequity, as the largest driver for Social Care costs is poverty and deprivation, and authorities from poor and deprived areas tend to have lower tax bases.

 

2.8   Social care deserves parity of esteem with the NHS. This parity needs to be backed up by a genuine, long-term and sustainable funding settlement for adult social care, which has been called for long before the current crisis. Councils are doing all they can to protect their social care services, but are finding it increasingly difficult to maintain the level and quality of care that people deserve.

 

2.9   Half of councils no longer provide meals on wheels services.  Analysis by the Daily Telegraph shows 77/147 councils across the UK do not provide a meals on wheels service, with 400,000 fewer meals now being distributed annually as opposed to five years ago, when nearly three million meals were delivered by councils.

 


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

3.1   The further financial hit from COVID

 

3.2   COVID-19 came at a time when the Conservative Government had finally declared austerity to be over, only for the pandemic and lockdown to then impact Local Government finances when they were at their most vulnerable.

 

3.3   The public health and economic effects of the COVID-19 crisis have created a perfect storm for councils’ finances, simultaneously increasing spending and reducing incomes.

 

 

 

3.4   For Sheffield City Council (SCC) forecast spending pressure relating to COVID in 2020/21 totals £65.8m, this is alongside £16.6m in lost income (not including local tax collections). This means in-year pressures are forecast to be £82.4m.

 

3.5   SCC has received £67.1m of Government Grants to date towards this expenditure, including £51.8m in the four tranches of un ring-fenced funds (some of which was actually provided for March 2020 rather than this financial year), leaving us with a £15.3m shortfall. The Sales, Fees and Charges income compensation scheme may reduce this slightly but an in-year shortfall in funding of around £10m is clearly a huge problem.

 

3.6   This is exacerbated by the current proposed treatment of leisure services. The decision not to reimburse costs relating to Third Party Leisure Services could cost SCC in excess of £10m, whilst other Councils would get the majority of their gap in leisure funding back because theirs services are in-house. This is a huge disparity, and seems particularly unfair given the Governments normal preference for letting the market manage public services.

 

3.7   The numbers for 2020/21 described above are only part of the problem. Total Collection Fund losses accrued in 2020/21 are forecast by the IFS to be £3.7bn nationally, made up of Council tax (£1.9 billion) and Business Rates (£1.8 billion). Shorter term this could result in cash flow problems for some authorities, but the longer-term impacts could be more profound.

 

3.8   Sheffield City Council forecasts £27m of Collection Fund losses in 2020/21 that will go forward in to 2021/22, for Core Cities the figure is £315m. These numbers are only likely to increase in future years as authorities’ battle to recover from the pandemic and its consequences. SCC estimates a hit of £70m over the course of this spending review, equally split between Council Tax and Business Rates.

 

3.9   Further to Collection Fund losses that roll forward, authorities will continue to face other financial pressures as a result of COVID-19 which will extend far beyond 2020/21. Examples include increased costs in relation to social care and homelessness due to higher numbers of people requiring long term care and support, new burdens linked to SEND and Home to School transport, income streams they may never fully recover such as parking fees (if there is a permanent switch to home working) and delayed savings from transformational changes. These costs will be significant, and some could be on-going for a number of years.

 

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

4.1   SCC implores MHCLG to provide a multi-year settlement to deliver a degree of certainty for Councils in extremely uncertain times. Without this certainty, LA’s will not be able to plan effectively, which is likely to result in short-term inefficient decision making and reactive cuts to vital services. Continuation of this uncertainty is also likely to result in more S151 officers issuing section 114 notices due to the perilous funding position and inability to plan strategically to deal with the financial challenges ahead.

 

4.2   Over recent years there has been a huge amount of uncertainty for LG funding resulting from one-year spending reviews and one-off temporary funding awards. To some degree the 2019 spending review provided more certainty via the confirmation that a number of ‘one-off’ grants had indeed been rolled into base funding.

 

4.3   However, the 2019 spending review did not resolve all uncertainty due to it being yet another one-year funding award. Added to this was a delay to implementing the Business Rates Retention and the Fair Funding Review – both of which will change how much money individual local authorities will have. There is still no certainty when either of these will happen.

 

4.4   The Government needs to make a commitment to timescales for these reviews. They also need to be done fairly, ensuring the redistribution of LG funding based on needs as per the recent Covid funding allocations. These allocations have acknowledged relative needs and elements such as deprivation as key factors in the funding formula.  The future Fair Funding model should reflect these needs and reverse the previously proposed, overly simplistic, flattening of the formula based more on population statistics.

 

November 2020