Written evidence submitted by SIGOMA [FSS 007]

 

1. About SIGOMA

1.1 We welcome the opportunity to submit our evidence.

 

1.2 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.

 

1.3 43 of our member councils are in the higher (worst ranked) half the Index of Multiple

Deprivation with 15 of our or councils in the list of the 20 most deprived, including the 4 most

Deprived.

 

1.4 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.

 

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

 

1.6 The committee will appreciate that funding mechanisms which increase

reliance on local financing and at the same time has less recognition of deprivation in

formula funding offers little hope of an even chance for citizens within our council areas.

 

1.7 Our members have suffered amongst the greatest cuts to core spending power in the last decade, 29.9% which is 6.1% worse than the national average. Worse, there is a substantial value of un-ringfenced funding that does not appear in core spending power. We estimate on a prudent basis that around £1.8 billion of funding was earned in business rates growth in 2020-21 alone, which appears nowhere in core spending power, to the advantage of more prosperous authorities.

 

1.8 Inevitably this leaves our councils more exposed to financial or service failure either due to inadequate medium-term funding or additional pressures from the corona virus.

 

  1. Issues Impacting on Financial Sustainability

 

2.1.       Matters that are impacting on local authorities generally are:

 

      Successive cuts in government funding over the last decade

Even with additional one-off funds for adult social care in recent years, core spending power of authorities has fallen in real terms by 23.8% between 2010-11 and 2020-21. During this time, council tax has grown in real terms by 23%

 

      Lack of long-term funding horizon due to one-year settlements

This may not be problematic when there is confidence that funding will be sustained or grow, but in an environment of decreasing funding, uncertainty can lead to poor decisions, or avoiding decisions that need making. This can result in build-up of financial pressures and increase the risk of financial or service failure.

 

      Increased demand for care services

Even before covid, the demand for adult care services had been increasing, as reported by the Kings Fund in 2019[1]:

 

Whilst the ADCS reported a 76% increase in Children subject of child protection plans and a 167% increase in section 47 enquiries started, in the year between 2008 and 2020[2].

 

      More complex service demand in ageing populations

As illustrated in this chart of health spending per person published by Public Health England using OBR data

 

      Additional pressures from covid

It is welcome that government are recognising and funding the additional pressures reported by Councils in 2020-21and using a funding allocation measure related to care costs. But many members feel that covid has served to expose the chronic underfunding issues in both adult and children’s social care. The residual impact of covid may last for many years and has opened an expectation amongst care providers of the levels of funding which will be needed, beyond covid.

 

      Possibility of requiring reserve use to fund covid deficit

Government continue to collect reserve data from councils in covid pressure returns, creating a fear that councils will be expected to fund aspects of covid pressures from their reserves. Uncertainty about the availability of future reserves and their availability to fund year-on-year pressures from other sources will inevitably leave some councils in a frame of mind where they may go down a section 114 route when they otherwise would not.

 

  1. Our Members face additional adversity due to the following factors

 

3.1.       Unequal reductions in settlement funding

By the same measure we used for the national real term cut in CSP of 23.8%, SIGOMA councils have seen a cut of 29.9%, including a 27% real term rise in Council Tax.

 

3.2.       Increased use by Government of local Council Tax to fund local government.

In 2010-11 council tax made up 39% of core spending power of that year. By 2020-21 council tax made up just under 60% of core spending power.

 

3.3               A Council Tax increase does not increase core spending power equally across authorities and does not match the increased funding to the increase in funding need, as has been pointed out by the LGA Chair in his evidence to the previous inquiry on the 2021-22 Settlement.

 

3.4              For our members Council Tax made up just 28% of core spending power in 2010-11 and rises to 50% of 2020-21 CSP. Hence whilst a 1% rise in Council Tax for the country raises core spending power by 0.6%, for our members a 1% rise in Council Tax raises their core spending power by 0.5%

 

3.5      Failure to re set business rates in 2020 and in 2021

 

3.6         Business rates growth retention was introduced in 2013 at which time, it was explained, there would be a reset in 2020.

 

3.7         The reset is important. In 2013, local rates retention was balanced by annual adjustment[3] so that the net of rates retained, and the annual adjustment would be a needs formula share of rates at 2013. From 2013 onwards councils could keep 50% of any rates growth up to a planned re-set at 2020. At 2020 a new needs-distribution of 50% of rates would create a new adjustment to set growth to nil and thus lead to higher needs shares for all.

 

3.8         For the second year this re-set has been deferred. The impact is that in 2020-21 alone around £1.8 billion of growth remains with councils. This is detrimental to the large majority of our members who were extremely likely to benefit from a needs-based re distribution of that growth.

 

3.9         The growth is not recorded in core spending power and thus distorts the CSP information presented by MHCLG. The chart below illustrates the impact of growth as a percentage of 2020-21 core spending power

 

Business Rates Growth in 2020-21 as a Percentage of 2020-21 CSP[4]

 

3.10          We estimate the loss to our members from this decision to be around £225 million in 2020-21/.[5] Our members % share is highlighted in the chart.

 

3.11          Clearly councils who lose from this decision are placed in a more precarious situation, and again the funding fails to match needs.

 

3.12.        Relatively Worse Key Demographics

 

3.13. Our members are extremely concerned that at the same time that they are suffering the highest burden of cuts, and losing out on growth-based distributions, the key demographics that drive demand are also relatively worse for us.

 

3.14. 43 of our 47 authorities are in the lower half of MHCLG’s latest Deprivation Ranking[6] with 12 in the most deprived decile (15 authorities). SIGOMA members make up 75 % of the 2 most deprived deciles. Most SIGOMA authorities have become relatively more deprived since the last IMD measure of 2015, as shown in the chart below.

 

3.15. Whilst this worsening in deprivation ranking is due in part to higher IMD scores of SIGOMA councils, it is also partly due to the lower (improved) IMD scores in other English councils, adding to the “left behind” impact on our members.

 

 

 

SIGOMA Councils Deprivation Ranking 2019 and 2015 (where 1 is most deprived)

 

3.16.   In every instance in the chart where the red bar falls below the purple line, this signifies that the authority’s deprivation ranking has worsened between 2015 and 2019.

 

3.17.   Health inequalities that accompany deprivation are well documented. Research from the Health Foundation[7] found a direct link between lower income and bad health.

 

3.18.   Those in the poorest income decile were 5 times more likely to self-report their health as bad or very bad than the top income decile as the chart below shows.

 

Life Expectancy and Deprivation

 

 

3.19.   Perhaps one of the most disturbing analyses was presented by the Kings fund showing the geographic spread of preventable deaths, shown on the next page:

 

   From “What are health inequalities?” : Willams,Buck and Babalola for the Kings fund.

 

3.20.   Our own chart below plots the range and concentration of life expectancy at birth for SIGOMA authorities compared to the whole of England. It shows that the very highest prediction for a SIGOMA council barely exceeds the average for the whole of England[8].

 

Life Expectancy at Birth 2016-2018 (years)

 

3.21     Similarly, there is a strong correlation between deprivation and lower educational achievement, with all the connotations for lower skill, lower paid jobs, affecting the ability of regions to earn their way out of their poverty trap and become less reliant on council services.

 

3.22          To quote from a recently updated ONS report[9]

 

Child poverty in the UK is a growing issue and affects more than 4 million children. Growing up in poverty can have negative consequences for children's well-being and future life prospects, such as employment and earning opportunities (HM Government, 2014)

There is a clear pathway from childhood poverty to reduced employment opportunities, with earnings estimated to be reduced by between 15% and 28%, and the probability of being in employment at age 34 years reduced by between 4% and 7%.

 

3.23          Given the Deprivation status of our councils reported in section 1 it will be no surprise to hear that 41 out of 47 of our member authorities were in the bottom half of the IDACI ranking[10] of the IMD, or that 9 out of the worst scoring 15 local authorities were SIGOMA members.

 

3.24          Our Members have high expectations of the levelling up agenda and feel this is essential to the recovery of the country post-covid and post Brexit. They believe there should be a focus on Skills and Employment, suggested areas include:

 

      increased flexibility on the apprenticeship levy,

      funding to locally coordinate youth schemes,

      reskilling for adults,

      and that future funding should be geared towards local economic recovery with a skills and employment framework.

 

  1. Care Services

 

4.1.            Councils have emphasised to us how precarious is the state of funding for care services.

 

4.2.       This has been highlighted by covid, but the issues extend beyond that, and one member was keen to point out the increased demand for visible services in adult and children social care such as street scene.

 

4.3.       Members are looking for a sustainable long-term solution to the two major care services of adults and children’s care.

 

  1. Sustainability measures and S114

 

5.1.       During consultations on CIPFA financial sustainability measure our members opinions were divided as to their usefulness.

 

5.2.       The common points of consensus were:

 

      The measures in themselves could only form part of the picture of sustainability which needed to include strength of governance, communications and planning.

 

      The measures were not forward looking enough and at best could serve to explain why an authority had failed rather than serve as a prediction of likely failure.

 

      There were common concerns about the suitability of publicising these to the press and public

 

      League tables should be avoided.

 

5.3.       It is a view commonly expressed amongst our membership that a s114 decision is only an outward and public manifestation of issues that many of our members have faced over the last decade. It could be argued that cutting services has been the “day job” of many of our members whilst others have been able to put off these decisions.             

 

5.4.       That said, all councils are facing crisis decisions in their service provision and it can be no surprise that councils are increasingly unable to square the circle of increased service demand and costs and underfunding.

 

5.5.       Of the five interventions by the secretary of state since 2010 only two have involved a formal s114 notice. Though other interventions did involve financial issues, there was a strong emphasis on failing to provide services.

 

5.6.       For our Members, the issue that should be focussed on therefore is not so much the avoidance of a S114 notice but the avoidance of failure off essential services due to inadequate funding. It is increasingly possible that a S114 declaration may be a public declaration by a council that the financial constraints imposed are not adequate to provide the statutory and other services required of it.

 

5.7.       What is true to say is that no council Member or officer takes this decision lightly and it is significant that something that had until recently only happened once in the last 20 years is now a subject of regular discussion amongst our membership

 

5.8.       We feel that a missing element in this process is a duty on government to demonstrate that the funding it has provided (or “made available”) to the council is adequate in both absolute and relative terms, for the services it is expected to deliver.

 

5.9.       Government may put in place separate step stages to a s114, but it will not prevent some decisions either by the council or an administrator that could have the impact of a service failure unless funding is adequate.

 

 

January 2021


[1] https://www.kingsfund.org.uk/publications/social-care-360/access

[2] Association of Directors of Childresn Services https://adcs.org.uk/assets/documentation/ADCS_Safeguarding_Pressures_P7_Interim_Report_FINAL.pdf

[3] If rates share was less than needs share a “top up”; if rates share exceeded needs share, a tariff

[4] Uses same basis to measure growth as was used by MHCLG in 2018-19. All retention at 50%, excludes non-comparable councils and city of London outlier for presentation purposes. Ignores pools other than for levy rate. Excludes smaller s31 grants and is, to that extent, under stated.

[5] Local growth retained compared to an allocation of total growth based on 2020-21 SFA shares

[6] 2019 Index of Multiple Deprivation produced by MHCLG, measured in Chart 1 at county level

[7] Health Foundation, 2020 “Living in poverty was bad for your health before COVID-19”, p.5. Adam Tinson available at: link

[8] Prepared by SIGOMA using ONS life expectancy at birth 2016-2018 from ONS “Life expectancy at birth..…UK 2001-2018.  Average taken of male and female life expectancy data.

[9]Child PovertyandEducationalOutcomesbyEthnicity_ONS Feb 2020 Link

[10] Income Deprivation Affecting Children Index