Written evidence submitted by Bristol City Council [SRF 026]
1. About Bristol City Council
Bristol City Council (BCC) is a unitary authority with a directly-elected Mayor Marvin Rees. The city is one of the country’s ‘core cities’ with an estimated population of over 463,000, projected to reach nearly half a million by the end of the decade. It is the 10th largest city in Great Britain and is England’s regional capital for the South West.
Before the Covid-19 pandemic, Bristol had a thriving economy, contributing £14.7bn to the UK economy. But it is also a city of contrasts, where some of the most some of the most deprived areas border the most affluent. Deprivation data shows that Bristol has 41 areas in the most deprived 10% in England, including three in the most deprived 1%. The pandemic has seen many more people needing the council’s support, which has impacted the organisations finances.
It has been confirmed that the Government has instructed Tier 3 – very high alert - restrictions be put in place for Bristol, which come with strict measures to reduce the spread of Covid-19. We have forecast that Tier 3 will cost the council £2.8m per month due to a shortfall in Government funding to support businesses and vulnerable people during this period.
Support for this period as well as long term funding certainty and flexibility is vital. The Spending Review has now brought more certainty for next year. However, this was a one year spending round only and provision of multi-year funding in a single pot would have brought the council vital long term certainty and allow us to better plan services, our capital programme and maximise our attractiveness to investors.
As part of this inquiry, we recommend the select committee urge Government to work with councils to consider the overall quantum of funding needed to sustain effective public services and local resilience in the years ahead, given public finances will continue to be under significant strain. Furthermore, unlocking further investment in areas like prevention and early intervention will help reduce the pressures on the rest of the public sector and ensure Bristol and other city authorities continue to add value to our unique local partnerships that will be integral to supporting the UK’s recovery.
1.1. In the report commissioned by Core Cities, the OECD concluded public investment needs to be viewed more holistically, particularly in city regions. This means looking at the totality of public investment into a place and asking, what are the outcomes that the place needs, and how can resources best be deployed to maximise the benefit of investment. With increasing demand for services, city authorities like Bristol are dedicating more spending to these vital services, leaving little room to pursue other activity in support of their wider economy.
1.2. During this period of crisis, we urge the Government to consider local public service spending as an investment and to recognise that cities also have greater needs, and subsequently, greater costs in some areas. Fundamentally any budget envelope or funding made available to cities like Bristol should reflect this.
1.3. The Spending Review included £762m earmarked to compensate local authorities for 75% of the irrecoverable losses in our council tax and business rates revenue this year. We know ambitious investment and public service reform must be built on a stable financial foundation. The overall compensation is welcome but will need to be kept under review and potentially extended further. Government should provide sufficient funding and certainty for councils in the long term, and ensure that Covid-related losses are fully reimbursed.
1.4. Recognising the key cost drivers of deprivation and relative need is also critical. During our Covid-19 local response, the majority of anticipated costs were not simply aligned to population - cities have been hit hardest not because of density, but deprivation and inequality. Local authorities like Bristol have a key role to play in prevention, protecting the NHS and the economy, yet are facing an unparalleled financial crisis that unless addressed will undermine population health, recovery and future resilience.
1.5. We recommend a simplified system that ensures a funding methodology that follows need and deprivation and addresses the overall quantum of funding. Councils also require greater autonomy and flexibility so, as locally accountable bodies, we are best placed to determine and prioritise how that money can best meet local demands and deliver national priorities.
1.6. The Government’s support and funding for local regeneration projects is welcome. However, there is a risk that the new Levelling Up Fund will require local areas to bid against each other for funding support that – with a set limit of £20m – risks not delivering the significant transformative investment our cities and communities require in their Covid-recovery.
1.7. Bristol joins Core Cities and others in also calling for greater use of capitalisation. We urge Government to review this current programme and revise the guidance due to end in 2021-22, to expand the option of capitalisation beyond the current scenarios. As noted by Core Cities, this should apply to additional costs, for example for redundancies, transformation programmes, or some of the Covid-19 related costs not covered – or likely to be covered - by grants. At a minimum, any sustainable local government finance model should include increased headroom for capitalisation to meet revenue pressures.
1.8. The Spending Review confirmed proposals to reduce access to the Public Works Loan Board (PWLB) borrowing for local authorities that wish to invest in commercial assets primarily for yield. We feel this is not proportionate given the minor number of instances when investment with a sole commercial motive occurs. The proposals will have unintended consequences for cross subsidised, multifaceted, regeneration projects and other projects of strategic importance to the city such as energy initiatives aligned to Zero Carbon targets.
1.9. Bristol also echo calls for councils to retain Right to Buy receipts for five years instead of the current three year period. Keeping the revenue of receipts would allow us to invest straight back into developing new homes, refurbishing our housing stock, maintaining and improving homes and ensuring we upgrade homes to meet our net-zero targets.
2.1. The demands on local authorities are increasing and long-term solutions are required for complex services, in particular funding for adult social care, and SEND. Adult social care services in Bristol have faced significant funding pressures, due to the combination of a growing and ageing population, increasingly complex care needs, reductions in Government funding to local authorities and increases in care costs. Social care (both for adults and children) is taking up an increasing share of Bristol Council’s financial resources.
2.2. The combination of budget reductions and the increase in demand means that if councils are to continue to play a role as custodians of their places, then a change in the amount and structure of funding we receive will need to be addressed. The Spending Review provided new funding for adult social care and further flexibility of up to 3% for the adult social care precept . Subject to consultation agreement, this could equate to approx £6.3m for Bristol Council. Whilst this additional funding is welcome, the precept will not be sufficient to address the long-term pressures faced by the council, particularly in social care, and does not recognise the level of need. Further funding and reforms will be required if our forecast adult social care needs are to be fully met.
2.3. We know high quality social care and support help people live the life they want to live. It helps bind our communities, sustains our NHS and provides essential economic value to our country. The delayed Social Care Green Paper must address the pressures on publicly funded adult social care services and the Government’s recent SEND review and a sustainable long-term funding settlement must also follow hand in hand. Beyond the welcome announcements in the Spending Review, significant additional investment will still be needed to stabilise the council’s wider children’s social care services.
2.4. Other areas of core service provision are also seeing increasing demand in particular homelessness services. In addition, the extra burdens and duties placed on us as a direct result of Covid-19, including the prevention and management of local outbreaks, have placed even greater financial pressure. Next year (2021/22) the council will be facing additional budget pressures including but not limited to:
- population growth and a rise in demand for many of our services; particularly social care;
- additional spending in our response to the pandemic and the loss of income which will continue into next year and beyond;
- increase in staff pay and the price of our contracts; including payments to social care providers for the costs of paying the increases in the National Living Wage.
3.1. In the Spending Review and previous announcements, the Government has provided some welcome support and recognised some of the challenges being faced by councils across England. But significant gaps remain and it is important that the Government address in full the financial challenges facing councils as a result of Covid-19. This should include all lost income and local tax losses, as well as further investment so councils can protect and improve local services.
3.2. The full impact of Covid-19 on the council’s spending and income, including Council Tax and Business Rates which together account for about 35% of the council’s income, is not yet fully known but the impact has seen a marked reduction in council tax and business rate receipts.
3.3. Bristol is one of a few dozen areas who are part of the business rates retention scheme (BRRS) pilots and currently retains 100% of any real-terms changes in business rates revenues. However, we are only able to claw back up to 97% of lost business rate revenue. This represents a significant challenge in the council’s deficit and is not aligned to the situation for local authorities which retain less of the business rate. This is a relatively unique problem and could be quickly resolved through raising this to reimbursement to the full 100%.
3.4. Our overall budget shortfall in 2020/21 is currently estimated to be £77m. The reasons for this include the additional amount we’ve spent so far in our response to the pandemic; loss of income that came from the temporary closure of services like museums and libraries and the significant reductions in our commercial rental and parking income. Before the Spending Review, we were expecting to receive approximately £68m of additional funding from Government leaving a remaining shortfall of approximately £9m this year, in addition to the £2.8m monthly cost from Tier 3 restrictions imposed as of December 2 2020. The funding announced will help mitigate this shortfall but will not be sufficient to meet the overall critical challenge to our finances.
4.1. There is much uncertainty as to what will happen in the future and the associated long term impact of Covid-19 on public finances. The LGA estimate that over 95 per cent of councils’ 2020/21 core spending power is subject to one source of uncertainty or another ahead of next year.
4.2. A one-year Spending Review has meant that Bristol will again receive a one-year funding settlement only for the third year in a row. This makes it incredibly difficult for us and other councils to plan how to provide the local services our communities rely on, many of which have proved so vital during the pandemic. The council’s plans and priorities need to marry up with our budget.
4.3. In line with our medium term financial planning, we need multi-year rolling settlements, which cover more than one calendar year or a Spending Review period, reducing the level of uncertainty and removing the risk of cliff edges which have been experienced in many service areas. Setting short term, one year only budgets prohibit councils from making meaningful long-term decisions that guarantee the best value for public money.
4.4. One example is the lack of multi-year funding for enabling infrastructure within city regions, that could unlock housing and wider regeneration. Temple Quarter in Bristol is one of the largest housing and redevelopment schemes in the country but the lack of new funding now risks this shovel ready project, which could result in delays of several years which the city and region can ill-afford.
4.5. As of November 2020, we estimate in our Medium Term Financial Plan 2021/22 – 2025/26 [link] a funding gap of £28.3m next year alone. This includes non-Covid-19 and Covid-19-specific pressures and with such a significant challenge, our council budgets will not be able to be balanced without additional funding, making greater efficiencies and/or transformation projects.
 Enhancing Productivity in UK Core Cities, March 2020