Headlines: November 19th, 2014

Over a quarter of the larger councils had to make unplanned reductions in service spend to deliver their 2013-14 budgets and there is concern about their capacity to make the further savings that are required.

The NAO has examine the way councils have responded to budget cuts and concluded that further cuts could lead to problems for many councils. It is concerned that the Department for Communities and Local Government has a limited understanding of authorities’ financial sustainability and the impacts of funding cuts on services.

The Government will reduce its funding to local authorities by an estimated 28% in real terms between 2010-11 and 2014-15. Further planned cuts will bring the total reduction to 37% by 2015-16.

Although there have been no financial failures in local authorities in this period, a survey of local auditors shows that authorities are showing signs of financial pressure. Over a quarter of single tier and county councils (those authorities responsible for social care and education). Auditors are increasingly concerned about local authorities’ capacity to make further savings, with 52% of single tier and county councils not being well-placed to deliver their medium-term financial plans.

Local authorities have tried to protect spending on social care services. Other service areas such as housing services (-34%) and culture and leisure services (-29%) have seen larger reductions.

While local authorities have tried to make savings through efficiencies rather than by reducing services, there is some evidence of reduction in service levels. Since 2010-11, for example, fewer days of residential care and homecare for adults are being provided.

According to the NAO, however, the Department does not monitor in a coordinated way the impact of funding reductions on services, and relies on other departments and inspectorates to alert it to individual service failures. In consequence, the Department risks becoming aware of serious problems with the financial sustainability of local authorities only after they have occurred.
The Department’s processes for assessing the capacity of authorities to absorb further funding reductions are also not sufficiently robust.