Written evidence submitted by Derbyshire County Council [FSS 006]

Background

Derbyshire County Council is an upper-tier local authority for the county of Derbyshire, comprising 64 councillors, which is controlled by the Conservative Party having gained control in the 2017 local elections.   

Derbyshire is a largely rural county with many sparsely populated areas alongside larger built-up urban conurbations.  The population of the county is expected to increase by 13% by 2043.  Population growth varies across the county ranging from just 5.2% in Derbyshire Dales to 30.1% in South Derbyshire

There are 28 market towns which play a significant role in the local economy.

Derbyshire is home to over 29,000 businesses that employ around 295,600 people. Together they contribute £15.4 billion in economic output to the UK’s economy. The county has a strong resilient business base, demonstrated by the area’s good business survival rates, where almost a half of all businesses that start up survive at least 5 years. The county also has higher than average levels of employment.  In September 2019 the Derbyshire employment rate stood at 78% higher than the England rate of 76%.

The rising cost of living including food and fuel means that some communities in Derbyshire experience higher than average levels of deprivation and poverty. The Index of Multiple Deprivation (IMD) is the most commonly used measure of deprivation and the 2019 index shows there are 22 out of 491 small areas in Derbyshire that fall within the most 10% deprived areas across England. Most of these areas are located in the North East of the county in the former coalfields areas.

Social Care

At the start of the current calendar year, Local Government Association research highlighted that the number of children in care had risen by 28% in the past decade.  The national picture is being reflected in Derbyshire, with substantial strain placed on the children’s social care budget.  There were overspends in the children’s social care budgets in each of the four years from 2016-17 and it is currently forecast to overspend in 2020-21, despite local investment in the service. Increased demand for services in Derbyshire is highlighted below:

The Comprehensive Spending Review 2015 announced that £1.5bn would be added to the ring-fenced Better Care Fund progressively from 2017-18.  This was later increased to £2bn in the Spring Budget 2017 allocated over a three-year period.  For 2020-21, funding has been maintained at 2019-20 levels incorporating £240m which was allocated as Winter Pressures Grant in 2019-20.  An additional £410m Social Care Support Grant was also made available in 2019-20 to support both adult and children’s social care. 

It is helpful that this level of funding will continue in 2021/22 with a further £300m allocation announced alongside the Local Government Finance Settlement. However, it is imperative that this level of funding for social care continues over the medium to support the financial sustainability of social care services.  Without this level of funding, services will be at breaking point.  The Council has adopted innovative solutions to the delivery of adult social care services across the county which will realise significant savings over the medium-term.  However, the advent of Covid-19 has resulted in delays to the programme.  Even with the planned level of savings being achieved, there is still rising demand for services and the cost of increased independent sector care fees alone is estimated to cost the Council between £10m - £13m per annum over the medium term, in addition to annual costs of £4m per annum for estimated rising demand costs.

The option of implementing the Adult Social Care Precept has provided local authorities with much needed additional Council Tax income to support the funding of associated services.  The Council is committed to keeping low Council Tax increases and whilst we recognise that increases in Council Tax bills for many during rising unemployment will be difficult, it is helpful that the option to implement the precept has been afforded to local authorities in 2021/22, with the choice to defer some of the increase until 2022/23.     

Covid-19 Costs

The Council, like all local authorities, has incurred additional costs as a result of the pandemic.  The grant income received to date from Government to meet the costs of Covid-19 to date is welcome, as well as the sales, fees and charges income compensation scheme.  However, the Council’s estimates for the current financial year project that costs, loss of income and slippage of savings schemes will far outweigh the grant income received to date.  Whilst the Council has robust plans for a second wave of the pandemic, it is likely to give rise to additional costs, over and above those currently estimated. 

It is vital that local authorities are given the appropriate funding to ensure that they continue to support communities, the local economy and the care and health sector throughout the duration of the pandemic.  The Council coordinated a colossal community response across the county to make sure vulnerable residents were supported throughout the outbreak.  Our Community Response Unit was quickly established working with volunteer groups and local communities. 

The announcement of additional funding for Covid-19 related costs in 2021/22 is welcome as the Council is seeking assurance that the Government will fund all costs to local authorities which have been incurred to date and throughout the course of the pandemic to guarantee that we continue to support communities and the local economy during this difficult time.  Without the funding support, the Council will be forced to take draconian measures such as significant cuts to services or the issue of a Section 114 Notice.  Local government has been an exemplar in responding to austerity measures imposed upon it but finding new ways of working and being innovative in the services it delivers.  The Council has realised savings of £300m since 2010 and continues to ensure that value for money is at the heart of all its services.  However, we are concerned that insufficient funding and the prospect of cuts to funding in future years to mitigate the costs of Covid-19 will have a detrimental effect on service delivery. 

Financial Sustainability

Multi-Year Settlements

Local government will need funding to support current and future costs as new challenges emerge.  The Council is clearly focused on what is required to ensure that it recovers as a county from the pandemic, balanced with rising demand for our services, particular in respect of social care. 

The one-year spending review announced in November 2020, hinders medium-term financial planning and does not provide the funding certainty needed to ensure that local authorities can continue to set a balanced budget.  Without a multi-year settlement, local authorities may have to make decisions which require reductions in spending and cessation of discretionary services.  A multi-year settlement provides for meaningful decisions to be made to support financial sustainability.

Having a multi-year settlement is justified as recovery is now a vital phase in responding to the pandemic.  Local authorities along with its partners will be the key drivers of local economic growth.  We need to plan and shape our economic strategies which is difficult when presented with a one-year settlement. 

The multi-year settlement offered by Government in 2015 for the period 2016-17 to 2019-20 provided greater funding certainty across the spending period and was accepted by 97% of local authorities. 

Fair Funding Review

The Fair Funding Review commenced in December 2016 with a commitment from Government to review the needs assessment formula in the light of the change to funding local authorities through local resources rather than central government grant.  Despite a number of consultation documents issued by Government since that time, the Review has continued to be delayed.  The financial year 2021/22 was meant to see the move to 75% business rates retention.  This has now been postponed with no clear direction or revised timeframes from Government. 

It is clear that those local authorities in the deprived regions of England are most reliant on central government funding meaning that they have suffered from the funding cuts seen in the last decade.  Recent research by the Institute of Fiscal Studies highlights that children’s social care spending has risen whilst spending on adult social care has been cut by much less than the average.  Almost two thirds of local authority spending (excluding schools) now goes towards the provision of social care.

The move to the business rates retention scheme in 2013 was intended to provide local authorities with the incentive to promote economic growth with the business rates growth being retained by the local authority.  However, there is no correlation between growth in business rates and the demand for local government services, particularly social care. 

The move to 75% business rates retention, or even 100%, will not be sufficient funding to meet rising demand social care costs as the population ages and the number of children in care continues on an upward trajectory.

The announcements made at the Provisional Local Government Finance Settlement show a reliance on Council Tax for overall core funding, this being 61% in 2021-22 compared to 49% in 2015-16.  Local authorities have long argued the distributional impacts.  Those authorities in the more affluent areas of the country can raise substantially more through in Council Tax income compared to authorities in those deprived areas in the North and the Midlands. 

It should be noted that there is evidence of rising demand for social care services, but the impact of Covid-19 will also be felt in future years as there are likely to be impacts of long-term ill-health and safeguarding.  If this transpires, there will be a further funding gap for local authorities unless additional funding is received, otherwise local authorities will have no alternative but to impose large Council Tax increases to support rising demand.

The Fair Funding Review must address the requirement for a funding system that recognises both the needs and revenue raising capacity of a local authority.  The Fair Funding Review has dragged on now for a number of years and we are no further forward in understanding what the funding landscape will look like.  Local authorities need a firm commitment from the Government to deliver on the Review with a detailed timetable to support its delivery.

 

 

Recovery

Recovery is now a vital phase in responding to the Covid-19 pandemic.  This Council, along with other local authorities requires cohesive working with partners at the local level and local authorities are best placed to do this. 

A commitment to the “levelling up” agenda is needed from Government.  Therefore, the Council expect to see significant financial funding to the region in support of these statements.  The Council would welcome additional funding from Government to stimulate the economy.  Local authorities need a range of levers to support economic recovery. 

Last year the Government stated it was the intention to “level up across Britain” and the Spending Review launched in July 2020 committed to “levelling up economic opportunity across all nations and regions of the country”.  Therefore, the Council expect to see significant financial commitment to the region in support of these statements. 

The Council agrees with recent comments made by the LGA in that the Government must place inclusiveness at the core of its recovery strategy.  Local authorities should be given the powers and resources to shape more inclusive local economies. 

Further Uncertainties

The Covid-19 pandemic has resulted in a significant economic shock, from which it will take some time to recover.  Higher unemployment increases demand on local authority services, whilst at the same time there will be a loss of income for discretionary services.

The expected Devolution White Paper has been further delayed and there are no firm dates as to when the Government will publish it.  Again, local authorities need to understand the Government’s plans to ensure that it has sufficient resource to support to support reorganisation.

Whilst a deal has been agreed regarding the EU Exit, there remains uncertainty as to how the agreement will work in practice.

The publishing of the Adult Social Care Green Paper has been delayed several times.  It is expected that the Paper will look to examine the funding required to support social care demand.  The recently announced review of children’s social care is welcome, but must also address the disparity of rising demand and under-funding of the service. 

Section 114 Notice

During the early days of the Covid-19 pandemic, a number of local authorities expressed their concerns in maintaining a balanced budget and as a result many contemplated the issue of a Section 114 notice.

In response to this the Chartered Institute of Public Finance and Accountancy made two modifications to support Chief Financial Officers which were designed to create space to consider other avenues for financial support.  The changes were:

The following changes have been agreed:

These temporary changes are intended to encourage greater dialogue between local and central government, as well as encouraging early discussion with the external auditor. 

In encouraging ongoing and transparent relationships between local and central government it is hoped that these temporary arrangements will be embedded as part of the Section 114 process.

Summary

The Fair Funding Review needs to address the disparities that are prevalent in the current local government funding mechanism.  There is a reliance on central government funding for those authorities in the deprived areas of the country.  This needs to be addressed with any future funding models recognising the needs of local authorities.  The business rates retention scheme has no correlation with demand for services, so it is important that a new funding model seeks to ensure that rising demand for services, particularly social care, is addressed.

A renewed commitment and timeframe for implementation of the Fair Funding Review is needed to ensure that the historic resource equalisation flaws in the current funding methodology are addressed.    

The Council would welcome a multi-year financial settlement to aid medium-term financial planning.  Local authorities will then be in a position to prioritise its services and support the recovery of the economy over the medium-term.

The issue of Section 114 notices is a key mechanism in ensuring that the chief financial officer of local authorities has the option to instigate appropriate measures to support a balanced budget.  In doing so, the temporary measures introduced last year should be adopted as practical steps in the process.   

 

January 2021