Financial documents have revealed that councils drew millions of pounds from their reserves last year to plug budget gaps, and some are expecting further large deficits in the coming years.
The Chartered Institute of Public Finance and Accountancy (Cipfa) has warned that rising demand for services is increasing the “depletion” of council reserves, with some authorities spending up to 70% of their budgets on social care.
Jo Pitt, Cipfa’s senior policy manager, said rising demand for adult and children’s services, along with reductions in grant funding and inflationary pressures, contributed to the “current lack of financial resilience in local authorities”.
She said that data compiled by Cipfa shows “an increased depletion of local authority reserves,” with councils responsible for social care using up to 70% of their budget to meet this demand alone.
“The use of reserves to balance budgets reflects the significant financial pressures that local authorities face,” she said.
“These financial pressures, compounded by the current fiscal landscape, exert a severe impact on the ability of local authorities to deliver both mandatory services and ambitious strategic outcomes.”
Surrey County council
However, the health think tank Nuffield Trust said budgets are being stretched due to inflationary pressures and that the system needs long-term funding to address severe workforce and capacity shortages.
NHS figures show total expenditure on adult social care in Surrey was £590.1 million in the year to March.
Of this, £116.1 million was spent on council-run services, £472.6 million on external businesses offering adult social care, and a further £1.3 million on grants to local charities to provide support.
Most of the funding (77%) went towards providing long-term care.
Surrey can offset the amount it spends on providing care through various income and funding streams, such as investment from the NHS and joint arrangements with patients.
Last year, it received £82.3 million, meaning its gross spending on providing adult social care was £506.8 million—up from £500.7 million in 2020-21.
The NHS uses gross expenditure to monitor how much adult social care costs local authorities annually.
This includes patients paying for services themselves – which amounted to £62.3 million in Surrey in 2021-22.
Across England, gross spending on adult social care services rose for the sixth year, reaching £22 billion – the highest point in real and cash terms since records began in 2005-06.
However, despite the continued rise in investment, the Nuffield Trust said the money available to deal with the increasing demand for adult social care services falls short of the required standard, given the inflationary pressures local councils and providers face.
Doesn’t take an economist or someone with a maths degree to realise, that if income (capped council tax) doesn’t cover rising costs, then you’re stuffed. The outgoing government simply turned the other way and blaming poor financial management. OK Woking and Croydon are basket cases, but the whole country?
Undoubtedly some councils can be accused of poor financial management. However, a bit like the Postmasters they cannot all be wrong, badly managing their council budgets. The Local Government Association has been warning Westminster for years about the impending crisis that is hitting local authority’s – even the most well run. We here at the WW believe Cllr Mark Merryweather Waverley’s Portfolio Holder for Finance has done an amazing job together with the council’s officers. But if Government continues starving councils of the seed corn they so desperately need to run vital services, we are, as you so rightly say, like chickens … stuffed!
Adult care cost is surprisingly high when many in Surrey have to pay for their own social care because the threshold for support excludes the majority. The strategic planning, policy and practice for social care is determined by Central Government so social care should be funded from national taxation. However Local Authorities have a legal duty to ensure that their alleged investments provide positive return above the bank rate and that the large grant pot is prudent and audited. It would also help if Local Authority Accounts were subject to independent audit.
WW has never understood why LA accounts aren’t audited independently.