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Levelling up: billions have been cut from councils in England - the worst hit local authorities

Council finances are the “elephant in the room” when it comes to levelling up - why doesn’t the Government put its money where its mouth is and fund local services?

Boris Johnson’s embattled government has at last revealed its long-awaited plan for levelling up, after years of confusion over what the much-touted phrase actually means for England’s left behind communities.

The Levelling Up White Paper, which was unveiled last week (2 February), sets out 12 central missions to “transform the UK by spreading opportunity and prosperity to all parts of it”.

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But the plan, at this stage at least, contains no new money – a point not missed by critics.

It also made no mention of what the think tank Institute for Public Policy Research North (IPPR North) describes as the “elephant in the room” on levelling up – funding for councils.

Local authorities in England have endured years of savage budget cuts, which in many areas has led to big hikes to council tax rates.

Research by the government spending watchdog the National Audit Office (NAO) estimates that central government funding for councils almost halved between 2010-11 and 2017-18, with billions upon billions of pounds stripped away.

Critics have pointed out that new money previously announced for levelling up – such as through the Towns Fund – pales in significance compared to what councils lost during austerity.

NationalWorld has analysed the latest government data to find out how badly hit each council has been. You can find out how big the cuts have been in your area below.

Why is council funding important for levelling up?

Councils in England are responsible for a huge range of local services touching every aspect of people’s lives, from education to housing, leisure to health, culture to street cleanliness.

Many of these services are directly relevant to the Government’s levelling up ambitions – from supporting adults to gain new skills or improve their literacy, to ensuring children get a good start in life, and providing sports and recreation facilities to keep the population healthy.

Jonathan Webb, senior research fellow at the think tank IPPR North, says the decade of central government austerity was “an appalling failure” that “actively harmed” people and disproportionately eroded the resilience of local government in the North.

“A commitment to reverse austerity and to provide the investment needed to realise ‘levelling up’ was missing in this week’s long awaited white paper,” he said.

“Although many of the ambitions set out by government this week are a step in the right direction, none of them will be achieved without an acknowledgement that austerity has failed, and action to reverse it.

“The Government should put its money where its mouth is, immediately.”

How are councils funded?

Councils have three main sources of funding for services – council tax, business rates, and central government grants.

Each year the Government reveals the funding that has been allocated to each council – known as the ‘funding settlement assessment’.

This is made up of business rates (paid locally but sent to central government first to be dished back out) and the ‘Revenue Support Grant’, a pot of core funding that councils are free to spend on whatever day-to-say services they want.

Some other central government money comes in the form of specific grants, some of which are ring-fenced and pass straight through councils to their destination, such as the Dedicated Schools Grant. The Government does not include these grants when it measures the level of general funding councils get.

Every year councils look at their budgets to see how much money they need to deliver services. They then subtract what they know they are getting from the Ggovernment, or from their own income streams such as from investments.

Whatever is left is what they need to raise from council tax – so cuts to government funding can mean steep tax rises for residents to plug the gaps.

How much funding has been cut?

The House of Commons (HoC) Library publishes data on the level of cuts councils have seen to their settlement funding between 2015-16 and 2020-21.

It is difficult to directly compare funding for the years before this, because of major changes to the council financing system – while the NAO made estimates at a national level, it has not published the underlying figures.

The HoC data shows that councils in England received £13 billion in the funding settlement in 2020-21.

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After adjusting for inflation, that was a real terms drop of £9.3 billion, or 41.6%, compared to 2015-16, when they got the equivalent of £22.3 billion (in 2020-21 prices). These figures exclude specific grants.

That’s the equivalent of £163.91 less per person in England, based on Office for National Statistics (ONS) 2020 population estimates, with cuts ranging from 9.2% to 56.2% depending on the council.

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While the NAO acknowledges cuts were most severe in the years before 2015-16, the HoC data shows funding still continued to fall every year between 2015-16 and 2020-21.

The chart below shows how much each council has lost in the last six years.

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Council tax rises to shore up ‘spending power’

Another way of looking at council funding over time is by ‘spending power’. This is a measure of the overall resources councils have available to them to spend on services, once council tax is taken into account alongside central government funding.

This measure includes some specific grants excluded from the funding figures, but not the ring-fenced ones such as the grants that are passed straight onto schools.

According to the House of Commons Library, councils had combined spending power of £45.2 billion in 2020-21.

After adjusting for inflation that was a decrease of £2.2 billion, or 4.6%, compared to 2015-16, when spending power stood at £47.4 billion (in 2020-21 prices).

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Council tax now accounts for a much greater proportion of councils’ spending power than it did in 2015-16, compensating for the big cuts to government funding.

You can see how your council’s spending power has changed over time in the chart above.

How much have councils cut back on their spending?

All these cuts have had a huge impact on the services available to people, with councils making swingeing spending cutbacks to save money.

NationalWorld’s analysis of Department of Levelling Up, Housing and Communities data shows council spending on day-to-day services fell by £6.7 billion, or 8.5%, in real terms between 2010-11 and 2020-21.

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That is despite a massive increase in demand for support in areas such as child social services, adult social care, and homelessness prevention and support. The size of the population has also increased during that time, putting more pressure on services.

Spending did begin to increase again in 2018-19, but was still far short of the level it had been – even with the impact of some emergency Covid spending at the end of 2020-21.

You can find out how spending has changed in your local council in the chart below.

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We have excluded all spending on education and health as these figures are not comparable over time – more schools have transitioned into academies and now get their funding straight from central government, while responsibility for public health passed to councils in 2013 and spending went up as a result.

Spending on police and fire services has also been excluded.

To give the complete picture on the level of services being provided, we have looked at the  total amount councils spend. But councils will claw back some of their costs through charges and sales, such as the fees we pay to use leisure centres.

This is one reason why the amount councils spend is much higher than their actual spending power.

What does the Government say?

The Department of Levelling up, Housing and Communities did not respond to a request for comment.

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