Town halls raid emergency funds as financial pressure mounts

A root and branch review of town hall accounts from 2010/11 to 2016/17 showed the financial positions of local authorities across England has “worsened markedly”, the National Audit Office (NAO) said.

It has warned the Government faces “sleepwalking” into a centralised local authority financial system as years of short-term fixes, dipping into reserves and cutting back on essential services such as road repairs, refuse collections and libraries leave councils at the brink.

The review found that two-thirds of English authorities with social care responsibilities used their reserves in 2016-17 - and just weeks’ away from the start of the new financial year, analysis by The Yorkshire Post has shown the trend is set to continue, with councils across the region reliant on emergency funds to prop up their budgets as demand for social care increases.

East Riding Council has withdrawn £4.3m from its reserves for 2018/19 - something it has done “almost every year” in recent years. Last month the authority approved a 5.99 per cent increase in council tax, which includes three per cent for social care.

Leader Coun Steve Parnaby said: “In two years’ times those reserves run out and that’s the reason why we have an £8m shortfall in our four-year financial plan.

“We’ve already taken £158m out of the budget but ultimately other services will suffer. There needs to be a solution on a national level because we can’t keep putting more and more on council tax.”

North Yorkshire has had to take £3m from its reserves for the year ahead.

Leader Coun Carl Les said it had consciously built up reserves with the knowledge that they would be used in future “to bolster” its revenue budget.

He said: “But once we use it - it’s gone. Although we are happy to commit our reserves, what we are looking for is the Fairer Funding Review the Government said it would do, and further, a cross-party discussion about how social care will be funded in future.

“We still have healthy reserves, some of which are earmarked, but they are there for a reason. Last week’s bad weather for example probably cost us nearly £1m.

“We are certainly looking at drives for efficiency but there will come a time when we cannot take any more low hanging fruit. At that point, we will be looking at service delivery.”

The NAO found that Government funding for Yorkshire’s single tier and county authorities fell by 49.5 per cent from 2010/11 to 2017/18, and the council’s average revenue spending power dropped by almost 30 per cent over the same period. Adult and children’s social care as a share of all spending went up from 47 per cent in 2010/11 to 58 per cent in 2016/17.

Across England one in 10 councils with social care obligations will have exhausted their reserves within the next three years if the current rate of raiding the emergency coffers continues, the watchdog said.

Spending on children’s social care was the only local authority department to increase from 2010/11 to 2016/17 in Yorkshire, by an average of 3.2 per cent. Spending on adult social care fell by 3.3 per cent.

In comparison, spending on planning and development fell by 59 per cent, housing services by 49 per cent, cultural services by 37 per cent and highways and transport by 29 per cent.

The report said: “A combination of reduced funding and higher demand has meant that a growing number of single-tier and county authorities have not managed within their service budgets and have relied on reserves to balance their books. These trends are not financially sustainable over the medium term.”

Meg Hillier, who chairs the Public Accounts Committee said councils “have had to make stark choices about which services they continue to provide”.

She said: “Councils need to know what their long-term future is, but instead of sorting this out, Whitehall has used a series of short-term fixes to paper over the cracks.”

A Government spokesman said it had delivered a “real terms increase” in resources over the next two years, with “more freedom and fairness”. It is currently working with councils to undertake a review of their needs and resources, and “all responses will be considered” as it looks to devise a new funding system.