England’s Largest Social Care Authorities Facing Deep Cuts In Government Grants Over The Next Three Years.

New analysis has revealed that almost all the increase in funding for council services in county and rural areas over the next three years will be reliant on residents paying maximum council tax rises for the foreseeable future, under plans to reform the local government finance system, with some of England’s largest social care authorities facing “deep cuts” as they struggle to provide life critical services.

The County Councils Network (CCN), which represents the largest authorities in England, says the government fair funding reforms are ‘better than feared’ for councils in county and large rural areas. However, they are warning council taxpayers in these areas are ‘shouldering the burden’ of redistributing hundreds of millions of pounds to urban areas, with some councils facing ‘deep cuts’ to services.

In June, the government revealed its detailed plans for redistributing council funding over the next three years through its ‘Fair Funding Review 2.0’ consultation. This included a set of new formulae to determine different councils’ funding needs and how much councils can raise in council tax.  These permanent funding changes will be phased over three years, with ministers also expecting councils to raise council tax by 5% in each of the next three years to fund services through their ‘Core Spending Power’ (CSP) and support the transition of funding allocations.

Download CCN’s consultation response, which contains new analysis, here.

As a result of the proposed changes and the funding announced at the Spending Review, councils in county and rural areas could be overwhelmingly expected to meet yearly increases in the demand and costs of services through local taxation.

• Some 22 county and rural unitary authorities will see grant funding increases totalling £845m. The analysis shows that even amongst those county authorities gaining from the reforms, they will be dependent on council tax rises to fund services. On average, these authorities will still derive 70% of their increase in CSP from council tax rises, with some as high as 99%.
• However, some 16 authorities – including some in the midlands and the north – will see cuts in government funding totalling £470m. These authorities will see no increase in direct government funding, with all their increase in CSP derived from council tax rises. One third of council tax income raised in these areas over the three-year period is needed to offset cuts to funding and prevent them falling below a proposed 0% funding floor.
• In total across the 38 county and unitary councils their grant funding will rise by just £374m, with 90% of the total increase in CSP for these councils coming through maximum 5% council tax rises. In contrast, almost 50% of metropolitan authorities’ new resources will come from additional grant funding, some £1.2bn over the next three years.
• Overall, without council tax rises of 5% over the next three years, the analysis shows that 33 of the 38 county and rural unitary authorities would see a real-terms reduction in funding. Estimated new government grant will fund just 9% of the £4.4bn increase in costs of providing services in county and rural areas over the next three years, while the boost in government funding for metropolitan authorities will fund half of the total £2.4bn increase in estimated costs of providing services in these areas.

CCN says it welcomes the proposals for a new ‘remoteness’ indictor and for a new formula for distributing funding for adult social care and home to school transport, which they say better recognise the needs of county and rural areas. The 38 rural and county authorities see their share ‘assessed needs’ – the estimated costs of providing services – increase from 34.9% in 2013/14 to 37.9% in 2026/27.

However, despite some of the proposals being ‘better than feared’, CCN argues that the proposals place a disproportionate burden on council taxpayers in county and rural areas to fund local services and redistribute funding to urban areas.

The analysis shows that £1.6bn in council tax income in county areas will effectively be redistributed across the country. This is because of a government decision to fully take account (“equalise”) of how much councils can raise in local tax to fund local services. The decision by ministers to move from the previous approach of equalising 85% to 100% of council tax receipts means 32 of the 38 county and rural authorities lose an additional £400m, overwhelming benefiting urban metropolitan boroughs.

The network is calling for the government to revisit these proposals for full council tax equalisation, which the network says unfairly transfers previously raised local council tax to urban areas, while ‘weakening’ incentives for councils to build homes.

CCN also argues that insufficient resources were made available at the Spending Review to implement changes of this scale and nature, with those worse impacted facing cuts in government funding which will result in reductions to services and could even threaten their financial sustainability. Those seeing modest funding increases will still face an extremely challenging funding outlook, they argue, with rising costs outstripping new funding.

CCN says it is ‘simply unrealistic’ to expect some of England’s largest social care authorities to provide life critical services while receiving deep cuts in government grant over the next three years. To prevent this while ensuring those county authorities than gain from the reforms do not lose out, the network is calling on the government to provide significantly more government funding to ensure county and rural authorities do not witness unsustainable cuts to services and reduce the reliance on council tax to prop up these reforms.

Cllr Tim Oliver, Chairman of the County Councils Network, said:
“Reforms to the way council funding is distributed are long overdue, and we welcome the government’s proposals for new formulae for distributing funding for adult social care and home to school transport. Alongside an adjustment for the costs of delivering services in rural areas, this means the funding reforms are better than many of our councils feared, with some seeing a welcome uplift in funding.”

“However, some 16 county and rural councils across the length and breadth of the country will see reductions in grant funding, while the governments proposals place a disproportionate burden on council taxpayers in county areas to fund local services and redistribute funding to urban areas. Those facing cuts in government funding will inevitably have to reduce vital frontline services, while the reliance on council tax rises leaves even those with modest funding increases facing an extremely challenging funding outlook.”

“There is still time for government to rethink this and reduce the pressure on county taxpayers. It is simply unrealistic to expect some of England’s largest social care authorities to provide life critical services while receiving deep cuts in government grant over the next three years. It is therefore vital the government makes more money available to further mitigate the impact of these reforms.”

“Importantly, the government should also revisit its proposals for full council tax equalisation. While we recognise the need to take account of how much councils raise in local taxation, the government’s proposals to fully equalise unfairly redistribute hundreds of millions of local council tax to other areas, while weakening the incentive to build homes.”