Written evidence submitted by SIGOMA [SRF 025]

 

  1.      About SIGOMA

1.1.  We welcome the opportunity to submit our evidence.  The Committee has had sight of our submission to the Spending Review and heard the oral evidence of our Chair, Sir Stephen Houghton. We ask the committee to consider our response along with the other evidence in order that this response can be kept succinct.

 

1.2.  We also comment on some aspects of the Review which is now known.

 

1.3.  SIGOMA is a special interest group (within the LGA) representing 47 local authorities covering key urban areas in the North West , East and West Midlands, the North East, Yorkshire & Humberside and the South-coast ; consisting of 33 metropolitan districts and 14 major unitary authorities.

 

1.4.  43 of our member councils are in the higher (worst ranked) half the Index of Multiple Deprivation with 15 or councils in the list of the 20 most deprived, including the 4 most deprived [1]

 

1.5.  Collectively we represent 25% of the English population, yet 36% of the nations looked after children are in SIGOMA authorities and 31% of all pensioners on pension credits.

 

1.6.  This contrasts with local income raising capacity where our councils earned 19% of total business rate income and only 20% of national Council Tax take.

 

1.7.  The committee will appreciate that funding mechanisms which tend towards increasing dependency on local financing and at the same time has less recognition of deprivation in formula funding offer little hope of an even chance for citizens within our councils, as we will explain.

 

What approach should the Government  take to local government funding as part of the 2020 Spending Review and what should be the key features of that settlement.

 

  1.      The committee has already heard from the LGA, CIPFA and our Chair that the councils fear only a partial recompense of the funding gap caused by covid in 2020-21, inadequate overall quantum of funding in 2021-22 and crippling uncertainty in the years beyond.

 

2.1.  Government needed to reassure councils that the funding necessary to deliver the exceptional services required this year will be sustained.

 

2.2.  Government also needed to reassure councils now, that it has heard and recognises the quantum of “stand-still” funding of £4 billion quoted by the LGA for 2021-22 in their submission to the review and that this still may not be enough as the longer term financial consequences of covid emerge.

 

 

2.3.  This will involve a dialogue that needs to begin now about what level of services councils can be expected to provide in 2021-22 and beyond, especially in care services which were already facing a funding crisis. The overwhelming majority of our members have highlighted the need for some level of certainty in the medium term

 

2.4.  A key element of this will be to ensure that the available funding is directed to where it is needed. We have strongly recommended that this should see a curtailment of incentive based funding in favour of a funding system that has needs at its heart. This was illustrated succinctly by Councillor Jameson in his oral evidence when he said that funding for adult care should be based on the needs of the elderly population. Not the amount of tax you could raise locally. Sadly this has not been addressed in the Review.

 

2.5.  The importance of this approach has also been illustrated by the sensible approach given to emergency covid funding, which suggests needs should continue to be the over-riding priority in the Spending Review.

 

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

 

  1.                The situation can only be descried as uncertain. Our members acknowledge the unprecedented level of funding supplied to date by Treasury but in their most recent (October) submissions our members emphasise that they have not taken account of the latest lockdown on their calculations and that the current level of funding is likely to prove inadequate.

 

3.1.  In addition to the high profile S114 notices issued by Croydon council, some of our members are predicting a trajectory of funding that may lead them to a similar position. Additionally as our chair highlighted, many more councils are already introducing severe spending restrictions that replicate the effects of a s114 notice.

 

3.2.  Councils typically cite massive overspend pressures in the area of children’s and adults social care, homeless costs, loss of income and the pressures of service delivery partners as the main threats to service delivery.

 

3.3.  Councils also raise the issue of pressures on collection fund balances (council tax and business rates). This is being dealt with by MHCLG as a problem of 2021-22 and beyond. This is technically true in the sense that, in revenue accounting terms, the shortfall does not impact until the following year. However council governance requires councils to take action when they become aware of significant variation to forecast collection. Councils cannot ignore this problem. Government has gone a long way towards providing assurance in the Spending Review.

 

3.4.  Councils have reported difficulty in arranging long term supplier care contracts in adult services. Whilst current bespoke funding has sustained what would otherwise be an unviable care sector, this cannot continue without the assurance of further funding.

 

3.5.  It is fair to say that the full year pressures anticipated from children’s services varies between our members but this may be partly a consequence of different approaches to reporting referred to during the oral evidence sessions. This is commonly reported as an area where members fear a greater impact as we emerge from lockdown and where the consequences may be longer term.

 

3.6.  Members also raise the issue of the consequences of being unable to deliver planned efficiencies due to dealing with the consequences of covid. Hence some costs not directly related to covid may be higher than budget (or income lower) as councils were unable to deliver the planned efficiencies.

 

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

 

  1.                Maintaining a sustainable service in the face of uncertain costs, uncertain local income and with month to month central funding top ups is stretching the financial planning functions of councils to their limit.

 

4.1.  To date, councils have relied on assurances from Ministers that pressures will be supported by Government but are concerned that, of late, these assurances seem to be more guarded.

 

4.2.  The most recent announcements of business grants to tier 3 areas on emerging from national lockdown leaves councils concerned that they will suffer the local impact of business failures unfairly; the whole of the nations councils having been allocated grants of £20 per head from BEIS for national lockdown, which for some will ease from 2 December but for others will be more onerous.

 

4.3.  The difficulty in assessing the impact of covid is illustrated in our members re-casting of the full year impact of covid. Each successive month shows a worsening prediction of the financial impact.

 

Covid Pressures SIGOMA Excluding Business Rates and Council Tax

 

4.4.  Government must fully understand and respond to the fact that shortfalls in budgeted funding in this year must be balanced with a service cut which many of our members are badly placed to do.

 

4.5.  It is very welcome that the Spending Review has allocated a significant amount of funding to partly compensate lost revenue from Council Tax and Business Rates which would have been borne in later years. However the now revealed funding plan for 2020-21 relies predominantly on council tax increases which many councils may have difficulty in applying, leaving councils to fund 2020-21 shortfalls out of a stand still budget.

 

 

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

 

  1.                Our members along with most of the local government community understand the difficulty in which the Government now finds itself and the necessity for dealing with the immediate problems presented by the virus.

 

5.1.  It does not detract however from the need for medium term financial certainty and the risk to key services for so long as uncertainty continues. The care services particularly are underpinned by partnerships with the private sector which have been largely sustained by emergency grant funding during the pandemic.

 

5.2.  The care sector is unsustainable on the current funding and delivery model and in the very near future there needs to be a plan that addresses this beyond the next few months. This must incorporate investment in preventative expenditure to reduce downstream costs, which may occur in other Departments.

 

5.3.  It is disappointing that such a plan is not foremost in policy priorities for government, as it must be a key part of future multi-year settlements.

 

5.4.  Councils will not of course be helped in delivering services by a targeted wage freeze which will apply to many of the staff that have helped maintain society during the pandemic at personal risk and who are every bit as deserving as front line staff in hospitals.

 

5.5.  The latest Spending Review has been most disappointing to our members in terms of a missed opportunity to at least move some way towards levelling up. There is a clear and widening gap that exists, between councils with relatively low demand for services and high income tax bases compared to councils with high service demand and relatively low council tax and business rates.

 

5.6.  The review has done this by allocating day to day funding mostly according to Council Tax base and by locking out of formula for another year £1.8 billion+ of business rates growth that should have been distributed on a needs basis at re-set, as we were assured would be done at 2020.

 

5.7.  For many of our members 2021-22 will be another year of, at best, surviving whilst some around them thrive.

 

 

November 2020


[1] The IMD 2019 as prepared by MHCL ranks every council on a deprivation score