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Financial frailties will force a rethink on austerity - one way or another

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A guest briefing from New Local Government Network director Adam Lent.

Welcome to the quadruple whammy: the confluence of factors rearing into view that could push local government and the wider public sector over the edge within the next few years.

The first wham is well-evidenced in the report published today by the Association of Directors of Adult Social Services (Adass): tipping-point austerity. We have known for a long while of the stress suffered by public services because of the cuts. It seems, however, we are moving into a new phase where stress gradually turns to breakdown.

As the Adass report revealed, only 34% of financial directors of councils that provide social care are fully confident they have sufficient funding to meet their statutory duties in this financial year – a figure that falls alarmingly to 10% for 2019-20.

The report also details a sector increasingly dipping into reserves while still overspending on social care. It is hard in this context to conclude, despite ministerial assurances, that Northamptonshire and Somerset do not mark the start of a grislier financial period for local councils.

The second wham is economic weakness. Today saw grim findings from the well-respected ManpowerGroup survey which showed 2018 being the slowest year for hirings since 2012 when fears of recession were widespread. This comes on top of an unexpectedly sharp fall in manufacturing output and a slew of other indicators which suggest an economy tottering between stagnation and contraction.

Stagnant labour markets, redundancies and weaker pay drive higher demand for the acute services that respond to the personal and financial consequences of economic turmoil. But maybe more significantly, a weak economy means low tax returns, squeezing a chancellor’s options for easing the pain imposed by cuts.

The third wham is an emerging labour crisis. Over 100,000 jobs in health and social care remain unfilled. This is despite a recent study suggesting the workforce will have to grow by 450,000 over the next 15 years to keep up with demand.

The upside to this might be lower salary costs, but the Adass report showed that the financial pressure on social care will grow because of planned rises in the National Living Wage, with £378m of extra salary costs this year and £585m next year.

Lastly, there is rising demand. As with the cuts this is nothing new. But the length of time that demand has been rising for, combined with the three other pressures, is creating a more perilous situation.

As the recent National Audit Office report concluded, unrelenting growth in demand will ultimately push local government towards provision focused on only the most basic social care, as discretionary services are jettisoned to protect statutory duties.

Pressure like this ends one of two ways. Either services enter a state of slow, long-term decline punctuated by moments of deep crisis or there is a wholesale rethinking of public service delivery based on new ways of working – many already developed by councils – and a more realistic and sustainable fiscal settlement.

So far, the government has shown no serious appetite to consider the latter. But when the former scenario takes a grip, it will, as in the past, be the realities of electoral politics that will force a change – one way or another.

Adam Lent, director, New Local Government Network, @adamjlent

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