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A Quiet Crisis: Local government spending on disadvantage in England

Authors: Adam Tinson, Carla Ayrton, and Issy Petrie

This report is about the services that English local authorities provide to support people facing disadvantage. Using a composite measure of ‘spending on disadvantage’, it looks at how such spending has changed, both in terms of service volume and responsibilities, how this compares with what has happened to demand for these services, and how the picture varies across the country.

Background

Local authorities are receiving less funding from central government and retaining more of the revenue they raise themselves. Since 2011, this has led to larger funding cuts for more deprived councils, who used to receive more from central government based on higher need and who usually have less capacity to raise their own revenue. Councils have responded to these circumstances in a range of ways. Originally this was through increasing efficiencies, but more recently councils have resorted to reducing services, charging fees to service users and increasing thresholds for eligibility to make savings.

In 2018, headlines have been made by councils who have either been forced to make sudden, drastic cuts to services (Northamptonshire) or have said they are going to have to do so shortly (East Sussex). The National Audit Office estimates that 1 in 10 councils are now using their financial reserves at a rate which is not sustainable for more than three years. This council crisis is part of the backdrop to this study. But just because most councils are not in crisis does not mean that their services are necessarily secure or sufficient for local need. This question, about services, has be studied at a detailed level.

Local authority spending on disadvantage

Our measure of disadvantage is drawn from spending lines within adult (working-age) social care, child social care and housing as well as a few other smaller categories. Its main elements are:

  • Adult social care (age 18 to 64): learning disability support; mental health support; other support (including physical, sensory and memory support); asylum seeker support (adults)
  • Child social care: looked after children; youth justice; asylum seeker support (children)
  • Housing: temporary accommodation; Supporting People and other welfare services; homelessness prevention; support and discretionary payments
  • Other: substance misuse support; local welfare assistance schemes

Local authorities in England spent around £17bn on these services for people facing disadvantage in 2016/17. This represents 26% of local authority spending. The largest categories of spending on disadvantage were adult social care (£9.5bn), of which learning disability support was the largest single element (£5.4bn). This was followed by looked-after children (£4.4bn) and temporary accommodation (£0.9bn).

Changes over recent years to spending on disadvantage

Spending on services for those facing disadvantage fell 2% in real terms over the five years from 2011/12 to 2016/17. This compares with an 8% cut in overall local government spending over the same period. Does this lesser fall mean that spending on services for people who are disadvantaged has therefore been protected during this period of sustained financial pressure on local authorities or has at least held up better in difficult times? For a range of reasons, no such positive conclusion is possible.

First, there is considerable variation between categories which make up the total. For example, spending on disadvantage in child social care has risen by 5%, whereas spending on disadvantage in adult social care has fallen 2%, and spending on disadvantage in housing has fallen by 13%. At a more detailed level (and over the three years to 2016/17 for which comparable data is available), spending on youth justice has fallen 14% while spending on substance misuse has fallen by 59%.

Second, most of these services will have faced rising demand. The three largest areas of spending have all seen sizeable increases. The National Audit Office estimated that that the number of people with a learning disability supported by local authorities had risen by about 4% since the start of the decade. It also found an 11% increase in the number of looked-after children over the five-year period of this report, with a particularly steep rise in the last year. There has also been a 60% increase in the number of households in temporary accommodation since 2011.

Third, there has been a switch away from preventative services and towards crisis services. For example, within housing spend on disadvantage, there have been large cuts (46%) to preventive services and big increases in crisis services (58%). Other preventive services, such as the Supporting People programme, local welfare assistance or carer and family support have also been cut by more, ranging from 5% to 46%, with funding diverted to crisis services.

These findings are in-line with the attribution of rising demand to cuts to preventive services asserted by other organisations. Even if dealing with a crisis is cheaper for the local authority in the short term than trying to prevent it, there are costs with this approach which fall elsewhere, especially on other family members, frontline NHS services and schools. These costs are not captured in the local government finance statistics.

Where the biggest cuts have fallen

Almost the entire burden of the reduction on spending in disadvantage has been concentrated in the most deprived fifth of all councils. This reflects the larger cuts in revenue which deprived councils have experienced relative to less deprived councils. Metropolitan districts in the North of England and the Midlands make up one third of these. Unitary and district authorities especially in the North West, Teesside and the East Midlands make up almost a half. The rest are London boroughs, mainly in the eastern half of the capital. A third of the total are coastal districts. By contrast, the least deprived councils in England have increased spending on disadvantage.

Finally, different types of council have faced different demand pressures, and so have responded to revenue cuts in different ways. The most striking case is London, which has increased spending on housing disadvantage by 20% in the face of a 30% increase in its homelessness acceptance rate. This is in contrast to cuts ranging from 16% to 45% elsewhere. London has also cut spending on disadvantage in adult social care more than other areas and has cut, rather than increased, its spending on disadvantage in child social care.

Conclusions

Although spending on disadvantage has been reduced by less than overall spending, reflecting a mixture of prioritisation and statutory responsibility, it has still been cut overall and in the context of rising demand for many of these services.

Changes to the local authority funding model – further reductions in central government grant and a greater reliance on locally generated revenue, both from council and business rate, further undermine the link between an area’s need and an area’s capacity to fund. Without a change of direction, some authorities may be trapped in a downward spiral when it comes to spend on disadvantage. Even if a council as a whole is not in crisis, many of the people who depend on its services may be.

There needs to be a broader debate on how many services local authorities are expected to deliver with a reduced revenue base, whether statutory or preventive, and to what extent differences in this delivery – and ultimately the level of service and outcomes achievable for some of our most disadvantaged and vulnerable citizens – should be tolerated across the country. The risk is instead that the areas and people that face disadvantage are left further behind.