London boroughs have enjoyed “surplus” funding of £2.4bn over the past five years, a new analysis for the County Councils network has claimed.
The study, by PwC, found that overall councils faced a funding gap of more than £50bn by 2025 with counties and county unitaries represented by CCN accounting for 41% of this gap and metropolitan authorities for 26%.
However, the report uses a new methodology for calculating how much councils need to spend to deliver services. While still accounting for differing costs in different parts of the country and rising demand, the report said the methodology was based on delivering a “more consistent level and quality of service provision across local government”.
It finds that councils in London have had a “surplus” in funding of £2.4bn between 2015 and 2020 while unitary authorities and metropolitan boroughs also began the period with surpluses of £147m and £18m respectively. The report said this “suggests these councils were providing a higher level or quality of service” in those years.
Conversely, the report said CCN authorities would have had a funding gap of £1bn in the first year of the period suggesting they “have ‘unmet need’ which is not reflected in their actual historic expenditure on services”.
CCN chair Paul Carter (Con) said: “Today’s report confirms the extent of historic underfunding for counties. More generous funding for London boroughs has allowed them to provide more services for their residents while maintaining some of the lowest council tax rates in the country.”
London Councils declined to comment on the ‘surplus’ funding claim but welcomed the report.
Chair Peter John (Lab) said it added to the “growing body of evidence that councils across the country are in an increasingly precarious financial position”.
“The entire sector is crying out for more certainty over our finances and better recognition of the costs we face. No matter what type of local authority you look at, we are united in the scale of the financial challenge we face and the need for the spending review to offer us all a long-term, sustainable funding settlement.”
Stephen Houghton, chair of the Special Interest Group of Municipal Authorities, also welcomed the CCN’s report as a “valuable contribution”.
He said: “While we may not see eye to eye on everything, and note that gaps in PWC’s methodology mean there remains more work to do as a sector, we are encouraged by CCN’s efforts to produce an independent and, for the most part, balanced analysis.”
The report said that even if council tax was increased by 2.99% every year over the period the overall funding gap would still be £30bn.
It said this would mean council tax accounted for 56% of council income by 2024-25, up from 45% in 2015-16. Amongst CCN authorities council tax would account for 68% of income. The CCN said this would mean average council tax would be more than £2,000 for the majority of rural households.
The report also found that even if councils used all their unallocated reserves, currently standing at £3.5bn, this would only address 11% of the cumulative funding gap.
Cllr Carter said the report showed the financial position of the whole sector was “fast becoming untenable”.
“This research demonstrates the need for government to provide all councils with additional resources at the spending review, with the most significant financial challenges being experienced by county and metropolitan authorities most in need,” he said.
The report was commissioned ahead of the government’s planned spending review, due to report in the Autumn. This is due to set the quantum of funding available to councils over coming years while the government’s ongoing fair funding review will determine how it is distributed.
PwC said its analysis showed funding decisions needed to take account of the “ability of councils to provide a more consistent level and quality of service”.
Cllr Carter said: “With the Ministry of Housing, Communities & Local Government expected to put together an ambitious but realistic submission for additional departmental funding in the spending review for local authorities to match population growth and rising demands and demographic pressures, particularly social services, it is imperative that the Treasury delivers.”