The LGA’s Budget submission

Despite increased government support, councils need a further £2.6 billion in this financial year to plug funding gaps arising from the pandemic.

On 3 March, Chancellor Rishi Sunak will deliver the Government’s first Budget since the end of the transition period following the UK’s exit from the European Union, amid the continued impact of the COVID-19 pandemic. 

This is an especially challenging time for us all – communities up and down the country have suffered unique impacts and will have a unique set of opportunities to grasp as they look to the future. 

With sustainable funding accompanied by appropriate devolved powers, councils will be able to support residents through these challenges and seize the chance to deliver on government and local priorities for communities and economic recovery.

The pandemic has highlighted how the public service decisions taken closest to the people they affect improve outcomes and protect lives. Equally, the path to future prosperity cannot be planned from the centre. 

Our international competitors have long been able to demonstrate the positive impact greater devolution has had on accountability, financial efficiency and growth. 

As we look towards the long process of economic and social recovery, this gap in local power and autonomy across England needs to be addressed if we are to keep pace on the global stage.

With local economies at a standstill during the current national lockdown, it is vital that funding dedicated to COVID-19 in both the current financial year 2020/21 and in 2021/22 is kept under review to ensure councils are fully compensated for the financial impact of the pandemic, and for their efforts in helping government deliver the vaccination and test and trace programmes. 

The LGA estimates that up to £2.6 billion more will be needed to cover the cost pressures and non-tax income losses of 2020/21 in full.

The impact of the UK’s new economic relationship with the EU and the potential decline of the pandemic due to mass vaccination provide the Chancellor with an opportunity to give councils the funding and powers they need to kickstart the economic recovery. 

Councils are ambitious about delivering high quality services and maximising the economic growth potential of their areas, including redefining and revitalising high streets, while supporting communities to thrive. 

Their work supports national priorities, such as everyone having a home they can afford and the employment they need. And it protects the vulnerable, including older people and children. Consequently, the Government must finally set out the steps needed to ensure a sustainable adult social care system for years to come. 

And with children’s education disrupted and vulnerable families disproportionately affected by the pandemic, councils need £1.7 billion of early intervention funding reinstated so that local preventative services are there to support children and families when they need it – and before they reach crisis point.

“The Budget is the final opportunity to compensate local government for doing whatever it takes to help local communities through this pandemic”

The Chancellor has committed to publishing a final report on the Government’s fundamental review of business rates this spring and the Budget is a prime opportunity to do so. He should also restart the Fair Funding Review.

The 2020 Spending Review and the 2021/22 local government finance settlement have provided some financial certainty to councils, especially with the upfront payments to cover COVID-19 pressures. However, there is no basis on which to plan for 2022/23 and beyond. 

As soon as possible, the Government must deliver a multi-year comprehensive spending review, covering the rest of this Parliament, which allows councils to support their communities to rebuild and recover from the pandemic. 

Above all, local government needs a funding system that raises sufficient resources for vital local services in a way that is fair for residents and gives local politicians the tools they need to be the leaders of their communities. 

The priorities for local government

COVID-19 and funding 

The LGA estimates that up to £2.6 billion more is needed to cover the full impact of the pandemic on councils in 2020/21. Local authorities welcome the COVID-19 funding package for 2021/22 and government pledges to compensate for 75 per cent of lost income from council tax, business rates, and fees and charges. However, the remaining 25 per cent amounts to hundreds of millions of pounds, and an estimated £0.5 billion of losses in commercial income is not covered.

It is vital that the Government guarantees the costs to councils of COVID-19 will be met in full. The Budget is the final opportunity to compensate local government for doing whatever it takes to help local communities through this pandemic.

Adult social care reform 

The pandemic has revealed to the public at large both the strengths and value of social care, and its many challenges. However, adult social care was under significant financial pressure before COVID-19, with care providers in a perilous state and significant unmet and under-met need. The Budget should set out a clear timescale with specific deadlines for how reforms to adult social care provision, eligibility and funding will be introduced.

Children’s social care 

There is ample evidence that the pandemic will lead to increased demand on children’s services. Unfortunately, significant cuts to council budgets over the last decade and increasing demand for child protection services prior to the current crisis mean that universal and early help services have been scaled back or even closed. Returning the Early Intervention Grant to 2010/11 funding levels (an extra £1.7 billion) would enable councils to reinstate some of these lost services which help tackle and prevent emerging problems and avoid costs escalating later.

Public health 

Public health has been at the heart of the local response to COVID-19. The Budget should strengthen local capacity and resources and ensure public health teams can continue to manage local outbreaks effectively, while providing the vital public health services which support communities to be healthy. Local authority public health funding is three to four times more cost effective in improving health outcomes than money spent in the NHS. The Government should commit to increasing the public health grant to at least £3.9 billion by 2024/25, matching growth in overall NHS funding.

Mental health 

Targeted mental health support will continue to be needed for some groups who have been made increasingly vulnerable by COVID-19 and the measures needed to mitigate its spread. The Government should recognise that the mental health and wellbeing recovery is best led locally by councils with their partners, and provide recurrent local funding for children and adult services to invest in effective, locally tailored mental health services to meet existing, new and unmet demand that has built up during the pandemic. 

EU, regulation and UKSPF

The 2021 Budget should address the challenges faced by council regulatory services, including trading standards and environmental health, as they tackle COVID-19 and implement the new trading agreement with the EU. The Government should progress the recommendations of the Regulatory Future review on charging businesses that benefit from regulation.

The Budget should confirm that the UK Shared Prosperity Fund, as well as pilot schemes, will not be subject to a bidding process, with funding allocated to all areas, while respecting devolved decision-making. The fund should meet the quantum of the EU funds it is replacing and provide the same longer-term planning that the European Structural and Investment Funds (ESIF) programme provided. See p21. 

Devolution, economic recovery and jobs 

Councils are ready to work with the Government and industry to create new jobs and enable local residents to re-skill following the pandemic, but need appropriate funding and devolved powers. A reformed approach to devolution should form a central part of the national recovery strategy, developed by national and local government in partnership. The Government should commit to publishing its Devolution and Recovery White Paper by early summer.

Sector-led improvement

Sector-led improvement (SLI) delivers good value for money, pays for itself multiple times through realised savings, and has proven flexible to changing priorities such as COVID-19 and climate change. Outcomes for councils and value for money for the Government could be further enhanced with a three-year allocation of SLI funding.

This is an edited version of the LGA’s Budget submission. You can read it in full at www.local.gov.uk/parliament/briefings-and-responses/lga-march-2021-budget-submission. It provides more depth on the issues referenced here and covers additional areas including business support, leisure services, tackling health inequalities, skills, roads and local infrastructure, public transport and buses, housing, planning, net zero carbon, waste and recycling infrastructure, children’s homes, and special educational needs and disabilities (SEND).

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