By Chaminda Jayanetti

Councils in England are set to run up crippling deficits of hundreds of millions of pounds due to the funding squeeze in adult social care and children's services.

Figures reveal how years of government funding cuts are driving councils towards financial crisis, with the reported extra funding for adult care in this week's Budget unlikely to end the strain on often lifesaving frontline services.

Analysis by of council reports from across England shows that many have been frantically trying to cut spending during the year by cutting high-cost care packages for elderly and disabled people and holding open staff vacancies.

Most councils are currently forecasting a deficit in 2016/17, forcing them to raid their reserves in order to meet the legal requirement to run a balanced budget at the end of the year.

Among the drivers of the budget overruns are pressures that have been growing for years while the government has continued cutting funding for councils:

  • growing numbers of people with ever more complex needs requiring social care services
  • rising fees demanded by care homes
  • children with multiple needs entering the children's care system
  • rising demand for school transport for children with special needs and disabilities
  • growing demand for temporary housing for homeless people, especially in London

These council reports monitor their budgets roughly three-quarters of the way through the financial year. Finances in some areas will improve by the end of the year, but overspends at this stage are much harder to eradicate than earlier on – as Birmingham council notes in a report (para 1.4, page 3) on its forecast £37million overspend, "this is an exceptional level of challenge at this stage in the year".

Enfield, in north London, is currently forecasting a deficit of more than £6million, nearly six percent of its total budget. This is being driven by a £3.8million overspend in adult care and a £2.5million overspend in children's services, driven by rising demand for care for elderly and disabled people and school transport for children with special needs.

The council can only meet the legal requirement to balance its budget by raiding £3milion from its reserves while carrying out a raft of mid-year spending cuts, including cutting personal budgets for adult care users by a fifth and targeting high-cost adult care packages for reductions (appendices 4 and 5, pages 12-13).

The total combined forecast deficit across 91 councils is £215million. Given that there are 152 English councils that provide adult and children's care services, that means the total forecast deficit across all councils may be as high as £360million.

This masks considerable differences between councils. Some are looking relatively healthy, but others are expressing clear concerns. Southwark, forecasting a £9.6million overspend, noted: "Sadly this month 8 monitor of our financial position in 2016-17 brings little comfort to us".

Southwark, like many other councils, is being buffeted by rising demand for care services, particularly in the wake of the Care Act. "Legislative reforms in regard to … additional support for people with disabilities and carers have been welcomed but are not fully funded by government causing financial burden on the council."

Like many others, Southwark is supporting its budget by using reserves – its predicted overspend comes after it has already committed nearly £10million in reserves.

Kirklees in West Yorkshire is using £6million of its reserves to cope with demand in children's services – its overall general fund reserves (excluding schools, housing and capital building projects) are expected to fall by nearly half in 2016/17 (para 2.4, page 2).

Total earmarked "reserves and provisions" in Norfolk are set to fall by 30% this year (Table 2, page 122). The council notes in its report that "reserves do not represent a long term solution to the continued funding reductions facing the Council".

Blackpool's general non-earmarked reserves are expected to fall by more than half this year, contravening the council's own rules (para 9.2, page 10). This cannot go on much longer.

Even where the picture looks healthier on the surface, problems exist. Surrey Council made headlines earlier this year by calling a local referendum on a 15% council tax rise to fund adult care, before calling it off after apparently receiving reassurances over future funding from the government.

It is currently expecting to meet its budget targets, but states in a report: "The cost reductions the council has achieved in 2016/17 are largely due to spending delays and one off savings measures.

These short term actions do not remove the continuing pressures on the council’s financial position shown by the £17million shortfall against its planned efficiencies." This latter point, referring to difficulties achieving planned savings, is again common to many councils.

The government is expected to pump £1.3billion over two years into adult social care in tomorrow's Budget. While this would make a difference, it is unlikely to solve the problem. The Local Government Association has previously said that the funding gap in adult care will hit £2.6billion by 2019/20, as the elderly population continues to rise and funding from government continues to fall.

Care pressures are driving the council overspends. Adult care departments are predicting a combined £257million overspend this year across 82 councils – potentially £475million across all 152 local authorities, which comes after a year spent freezing staff vacancies and cutting high-cost care packages in order to bring spending back into line.

And while the adult care crisis has made headlines – largely because of its knock-on impact on the NHS – the new funding will not address the similar crisis in children's services, which has gone largely unreported. Children's services departments are expecting to overrun their budgets by £226million across 82 councils – a potential £420million overspend across all local authorities. Savings in other departments are unable to cover these deficits.

In Reading, children's services are predicting a £7million overspend – 20% higher than its budget. Driving this are significant costly agency staffing to cover vacancies, rising demand for placements for children in care, and difficulties making savings on home-to- school transport for children with special needs.

Similarly, Devon is struggling to achieve its budgeted savings. A council report (para 2.5, page 1) says of its predicted £8.8million overspend: "It is important to note that £5.1 millions of management action savings remain to be delivered to achieve the overall overspend forecast. This represents an area of high risk."

Merton has overspent two years running, but this year's £6million forecast overspend is considerably worse (chart 1, page 3) – a pattern repeated across numerous councils.

Where councils cannot manage down the costs of rising demand during the year, these overspends then just add to the cuts and savings required in the following year's budget – the trouble piles up year on year.

Since the axe started fall in the wake of the financial crisis, councils have implemented various demand management measures, cuts, restructurings, efficiency reforms, and all manner of other changes that were meant to ensure care services were sustainable in the long term.

Austerity has now been underway for at least seven years, with no end in sight. And yet despite more than half a decade of these cuts, changes and reforms, the funding squeeze from Westminster means that councils across England are struggling more than ever.

It turns out life-saving services don't come for free.

Chaminda Jayanetti is a freelance journalist. You can follow him on Twitter here.

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