Councils faced with £6bn 'black hole' in their finances

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Councils across England are facing a funding gap of £6.2 billion over the next two years, according to a new report.

The analysis comes in a white paper produced by the Local Government Association (LGA), which says the deficit is being driven by the rising costs of - and increased demand for -  adult social care, children's services and home-to-school transport for children with special educational needs and disabilities (SEND).

While Lancashire County Council has said it is in a stronger financial position than many other local authorities, it is nevertheless facing challenges on all the fronts identified by the LGA.   In April, it emerged the authority was going to be spending £8.4m more than it had budgeted for on SEND transport and it has also unveiled plans to create 15 new children’s homes of its own as the bill rockets for using private sector facilities.

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At a cabinet meeting in January, members agreed almost £14m of new savings and income generation - part of a total £97.8m of cost-cutting needed over the next three years. It also put up council tax bills by the maximum-permitted 4.99 per cent this year, with leader Phillippa Williamson saying it would be imprudent to do anything else.

Cash is tight for all local authorities - including Lancashire County Council Cash is tight for all local authorities - including Lancashire County Council
Cash is tight for all local authorities - including Lancashire County Council | unknown

The LGA is calling on all political parties to commit to a “significant and sustained increase” in funding for councils in the next spending review, alongside multi-year funding settlements for councils - to give them more certainty in their financial planning - and long-promised reform of the local government finance system. 

 Without this, the organisation has warned that cost and demand pressures will continue to stretch council budgets to the limit - leaving more councils of all political colours and types unable to deliver their legal duties for their residents and putting vital services at further risk of cutbacks. However, the LGA says the challenge for councils extends beyond funding  - and that there needs to be a major review to understand how all public services can work together within their local communities, focusing on a joint approach to investing in more preventative services for people in need and reducing demands for high-cost services.

Cllr Kevin Bentley, senior vice chairman of the LGA, said:

"We all rely on local government to keep our streets clean, collect our bins, fix our potholes, build more homes, create jobs, keep children safe and support people of all ages to live fulfilling lives.

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"However, a funding gap facing local services of more than £6 billion over the next two years - fuelled by rising cost and demand pressures - means a chasm will continue to grow between what people and their communities need and want from their councils and what councils can deliver.

"On July 5, the next government will be faced with many challenges, whether it is building more affordable housing, improving care for adults and children, reducing homelessness, boosting inclusive growth or tackling climate change.

"Local government’s offer to the next government is huge. Respect us, trust us and fund us. By working together as equal partners, we can meet the fundamental long-term challenges facing our communities.”  

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