How Can Evidence Help to Defend Public Services From the Growing Council Budget Crisis?

Icons depicting different kinds of public services

Sarah Chaytor

More than 10 years’ of cumulative reductions in funding to councils, exacerbated by long-term impacts from the Covid-19 pandemic and coupled with rising demand for services, have brought budgets to a tipping point. But what can be done? 

The recent report published by the Levelling Up, Housing & Communities Select Committee set out in stark terms the current crisis in funding for local government funding, and the severe impact this is having on citizens around the country – particularly some of the most vulnerable groups. 

Pointing to a ‘systemic underfunding of local councils in England’, with local councils ‘issuing section 114 notices at an alarming rate’, the Committee’s inquiry has highlighted the considerable service pressures on councils’ statutory responsibilities, including acute impacts on adults’ and children’s social care.  

While the situation is now acute, it has not come out of the blue. The Institute for Government has examined how the impacts of ‘austerity measures’ to reduce local authority services have created ‘rising unmet need’ for social care alongside other services. A National Audit Office report in 2020 found that local councils, ‘scarred by the pandemic’, were facing nearly £10 billion of cost pressures and income losses. With three-quarters of councils reporting a ‘funding gap’, the report warned that some authorities were ‘at risk of financial failure’. In October 2023, the Local Government Association estimated local councils were facing a funding gap of £4 billion over the next two years.  

As the UK’s cost-of-living crisis continues, and living standards further decline, the impacts on citizens around the UK are likely to be severe and worsening. Cuts to libraries, leisure centres, bus services, road maintenance, waste services, and local theatres around the country are now a familiar prospect.  

The continuing crisis is likely to bite more deeply into statutory services; the Local Government Information Unit warned last year that many councils were reporting a need to take ‘desperate measures’, with a fifth anticipating cuts to services result in ‘visible’ impacts for citizens. A 2022 report from the County Councils Network noted any further funding cuts for local councils would mean services reduced to ‘a “core offer” of bare minimum statutory service levels, removing most, if not all, preventative services’. Local councils are now facing difficult choices on reductions to social care provision or support for families; for example, changes to childcare provision or home-to-school transport

So What Is There Left for Councils to Do?

All this begs the question: What scope remains for councils to deploy measures to mitigate cost and demand pressures, especially with reserves eroded? In theory, there may be a range of options to reform service delivery, including ‘trading’ services with other councils or selling services to other parts of the public sector; or generating income through service fees, selling commodities or assets. However, in practice, most councils have been exploring these for well over a decade, in response to the austerity measures of the 2010s. Similarly, efficiency savings, whether through merging management between councils, introducing new organisational models to improve service delivery, or reforming waste services, have in many cases already been implemented. While many councils have been seeking to boost income generation through commercial property investment (via low-cost loans from the Public Works Loan Board), this is not without risk and requires sufficient management capacity at a time when staffing is being reduced in response to financial pressures. And recent reports that councils may be encouraged to sell public assets to meet budget shortfalls have met with concern from experts.   

With many councils introducing innovations in delivery of public services, this may appear to offer considerable potential – for example, creating social enterprises, greater collaboration or partnership working, or tapping into community and volunteering resources. There is also an increasing focus on ‘unleashing the power of local data’ to give more agency to local government – through, for example new delivery models to improve social care services; measures to tackle net zero; or using data to tackle rough sleeping in London. (A new IPPO project with five local and combined authorities will be developing data projects to address local challenges, as well as exploring the potential for enhancing comparative local data across the UK.) 

Innovation, data and digitalisation may undoubtedly be part of the solution, but we don’t know enough yet about their impact both in terms of reducing costs or improving services to be sure that they are enough to address what is now a system national crisis. Increasing calls, including by the Select Committee, for reforms to local authority funding, taxation and service delivery, are also important. But none of this addresses the immediate question of what actions should councils take now?

How Can Evidence Help to Defend Our Public Services?

This question matters right across the country. The current crisis is compounding both regional and socio-economic inequalities. Local authorities in the most deprived areas of the country are facing the biggest pressures while shouldering the largest cuts, according to the Institute for Fiscal Studies. Some of the most vulnerable groups in our communities are the most dependent on council services and the most affected by lack of preventative measures.   

IPPO will be kicking off a new project looking to explore with local councils how best to respond to the increasing challenge of fiscal constraints on local services. We are seeking to answer questions such as: What do we know about what are likely to be ‘least-harm’ cuts? What is the evidence that will support councils to balance their statutory service responsibilities with the need to tackle major societal challenges such as the climate crisis or social cohesion? How can short-term needs be weighed against the need for investment in prevention measures? Have sustained financial pressures led to radical realignments of policy and approach?

As part of our project, IPPO will be convening a series of exploratory roundtables to explore general attitudes towards fiscal constraint among local authorities across the UK, and how we can better understand the common threads that underpin responses to budget cuts. 

We’d love to hear from you if you’re interested in exploring some of these challenges with us and if you think there are ways we can help.