Local authorities on the brink: councils forced to cut preventive services to meet rising crisis costs

New research published today shows councils are struggling to provide services for rising numbers of people facing disadvantage, with the most deprived areas hit hardest. Faced with increasing demands for help, cash-strapped councils are having to cut funding on the preventive measures that stop problems such as homelessness or having to take children into care in the first place.

A Quiet Crisis: Local Government Spending on Disadvantage, by the New Policy Institute (NPI) for Lloyds Bank Foundation for England and Wales looks at official data on local government spending in England on a range of services for disadvantaged adults and children facing disadvantage. The research shows that 97% of total cuts in spending on disadvantage have fallen on the fifth most deprived councils despite them also having higher numbers of people in need. Due to reduced central government funding these deprived councils (typically northern metropolitan authorities) have had to cut spending by 5% or £278m since 2011/12, whereas the least deprived areas (mostly southern county councils) have been able to maintain or even increase spending on services for people facing disadvantage in the last five years.

The research highlights that to meet immediate crisis costs local authorities are having to shift spending away from preventative services, thus generating future higher costs down the line. NPI found that in housing, preventive funding to help people stay in their homes has fallen 46% since 2011/12, while crisis spending, primarily on the costs of temporary accommodation for those who have become homeless, has risen 58%. Similarly, to meet the costs of rising numbers of children going into care, councils are having to cut spending on the very services which could keep children out of care in the first place. Without such preventive services councils – and charities and other public services - are facing even greater demands for crisis support in the years ahead.

Councils across the country have had to make large cuts in their spending since 2010, primarily because of significant reductions in the funding they receive from central government, forcing them to make difficult spending decisions. Despite these pressures, A Quiet Crisis shows councils have tried to manage and prioritise spending on services for disadvantaged groups so that it has fallen overall by 2% since 2011/12 relative to 8% for local government spending overall.[1] During the same period local authorities have faced significant increases in the number of people needing their help, with a 60% increase in the numbers requiring temporary accommodation due to homelessness, an 11% increase in the number of children being taken into the care system and a 4% increase in the number of people with a learning disability requiring assistance. To help meet these demands other areas have been hit particularly hard with spending on substance misuse cut by 59% and on youth justice by 14% over the three years to 2016/17.

The research comes as councils around the country are reporting that they can no longer balance the books and provide the services that their communities, and particularly those facing disadvantage, require. Reductions in government grant, coupled with the reduced capacity of poorer areas to raise their own taxes, will further undermine the link between an area’s need and its funding. This will increase the postcode lottery in the services people facing disadvantage receive. The research concludes that, without a change in the direction of central government funding and policy, local authorities risk a downward spiral as needs and the costs of meeting them escalate to unaffordable levels, yet resources shrink further, particularly for any form of prevention.

Paul Streets, Chief Executive, Lloyds Bank Foundation, said: “Local government finances are increasingly hitting the headlines. But behind the particular troubles of Northamptonshire, Sussex or Somerset this research uncovers the quiet crisis that even well-run local authorities are facing up and down the country in trying to fund services for disadvantaged adults and children, a crisis for which the worst may be yet to come.

“Councils have been trying to do more with less for some years, but the tipping point is increasingly close with deprived areas hit hardest. It cannot be right that the services you get if you are homeless or have a learning difficulty are dependent on the post-code lottery of the ability of your council to raise local taxes. And it’s a false economy that in trying to cope councils are forced to cut the very preventive services that can help people before they get into trouble in the first place. Local charities are doing their best to help councils pick up the pieces but as a country, we can and must do better than this. The Government needs urgently to look again at how it funds local councils to enable them to provide and fund services for those who need it the most, regardless of where they live.”

Adam Tinson, Head of Research, New Policy Institute, said

“This research shows how councils have been put in a position where they have to cut preventive services to maintain crisis provision. Other research suggests these cuts are contributing to rising demand for crisis services. Even if dealing with a crisis is cheaper for the local authority than trying to prevent it, there are costs with this approach which fall elsewhere, especially on other family members, the NHS and schools.”

Access the full report on NPI website or for the summary report click here.

For more information, please contact Lloyds Bank Foundation Press & Communications Officer Imthiaz Rehman on 020 3988 3742 or irehman@lloydsbankfoundation.org.uk.

[1] This 2% overall cut to spending on disadvantage masks differences between areas of responsibility, with spending on child social care rising 5% and spending on disadvantage in housing falling by 13%. For more information, see Lloyds Bank Foundation's A Quiet Crisis report.