|Date:||06 March 2015|
|Authors:||David Innes and Gemma Tetlow|
|Publisher:||Institute for Fiscal Studies|
The spending power of local authorities in England has been cut substantially during this parliament. We find that local authorities’ spending per person has been cut by 23.4% in real terms between 2009–10 and 2014–15, using a comparable definition of net spending on services over time by single-tier and county councils.
However, the size of cuts varied markedly across the country – Westminster saw a cut of 46.3%, while North East Lincolnshire experienced a cut of 6.2%. On the whole, more deprived areas and those that saw faster population growth have seen larger cuts.
Further cuts planned for 2015–16 will generally be focused on the same local authorities that have lost over the last five years. For example, London boroughs face cuts of 6.3% on average next year compared with 1.9% cuts faced by shire counties. Without a change in policy, any further cuts over the next parliament are also likely to affect the same places again.
The report looks at how local authorities’ spending and different sources of revenue have changed across England and how these cuts to funding have translated into changes in spending on different service areas, such as social care, transport, housing, and environmental services.
Cuts to local authority spending have been large. They were driven by large cuts to local authority revenues, particularly grants from central government. In particular, we find that:
The cuts to local authority spending have also varied in size across different areas of England, with the cuts largest in areas more reliant on grants and with higher initial levels of spending.
Local authorities have not cut all service areas equally. Despite it being the largest component, social care (including adult social care and children’s and families’ services) has seen one of the smallest cuts to date.
There are likely to be further cuts to local government spending power beyond the election and there are a number of reasons to believe that these may be concentrated on many of the same authorities that have already seen the largest cuts. In particular, those areas with the lowest local revenue-raising power will continue to be the most exposed to cuts in central government funding, while those with higher population growth will find it harder to maintain levels of spending per person.
David Innes, a Research Economist at IFS and one of the authors of the report, commented:
“English councils – like many government departments in Whitehall – have experienced sharp cuts to their spending power over the last five years. But the size of the cuts has varied a lot across England. On the whole, it is more deprived areas, those with lower local revenue-raising capacity, and those that have seen the fastest population growth that have seen the largest cuts to spending per person. Further cuts are likely to come in the next parliament and they could well be focused on many of the same local authorities if the current mechanism for allocating funds is retained.”