Lewisham council will be dipping into reserves for the fourth consecutive year to fund an estimated overspend of £13 million for 2017/18, roughly £3 million more than the overspend last year.
Unlike central government, local councils cannot borrow to pay for day-to-day costs and are required to balance annual budgets. Reserves are used to finance any expenditure which exceeds income.
Councillor Maja Hilton who chairs the Public Accounts Committee told EastLondonLines: “Lewisham is particularly susceptible to reduction of government grants because of the model used to allocate funding which is based on population size not need. Relatively affluent boroughs such as Bromley receive the same amount of funding due to its similar size despite not facing the same pressures.”
“This has resulted in a £597 reduction of government funding per Lewisham household in real terms over ten years.”
Lewisham ranks as the 48th most deprived of all 326 local authorities nationally, placing it in the 20% most deprived areas in England.
Government funding per head has declined in recent years, falling by 17% from 2015/16 to 2017/18. The neighbouring ELL boroughs were similarly affected: funding was cut by 15% for Hackney, 16% for Tower Hamlets and a whopping 23% for Croydon in the same period.
Lewisham Council estimates that government grants will have reduced by 63% in the subsequent decade since initiation of the austerity agenda in 2010 by the Conservative and Liberal Democrat coalition government.
In 2013, the Local Government Association alleged that England’s communities were being “short changed” by £4.1 billion a year by the Barnett formula, which determines the level of public spending in the UK. The LGA analysis was disputed by the UK government.
The funding formula has attracted criticism for accounting only for population and not need.
In a statement released to EastLondonLines, the LGA senior vice-chair, Nick Forbes, said: “Rising demand and years of growing funding pressures have stretched councils to the limit. Councils face an overall £5.8 billion funding gap in the next two years, yet the Budget disappointingly offered nothing to ease the financial pressure on local services.”
“Smoothing out funding cuts over the next few years, introducing a fairer funding system and allowing local government to keep every penny of business rates collected to plug funding gaps is now the only way the government can ensure local authorities are able to protect the services communities rely on over the next few years.”
The Lewisham annual budget is based on an aggressive savings program of £160 million between 2010/11 and 2017/18 previously agreed on by the council, of which £153 million have been delivered as of last year.
The program is regarded as crucial to ease pressure on dwindling reserves. Insufficient reserves would result in disruptive in-year cuts to council services.
However, there are concerns whether the council will be able to continue delivering savings while maintaining the current level of services provided. When asked, the council’s Public Accounts Committee chair confirmed that spending on services will continue to be scaled back, although “we are currently still deciding what will be cut, as the obvious places have been exhausted”.
The council has committed to an additional £22 million savings in 2018/19, with only £4.85 million potential savings currently identified. If these proposals are agreed, it would still leave a gap of £17.15 million to be plugged by reserves.
The most significant service area targeted for savings for next year relate to the delivery of Adult Social Care services for frail, disabled and other vulnerable adults. This area also represents the council’s most significant expenditure in the annual budget.
Half the people reliant on Adult Social Care services in the borough are over the age of eighty-five. Lewisham also has the fourth highest number of autism diagnosis in the country (by head of population).
Lewisham council have only increased council tax 3 times in the last 8 years, two of which took place consecutively in 2016/17 and 2017/18. The government provided £5.2 billion in national funding to freeze council tax rates between 2010-2015.
The council is currently sitting on general reserves of £13 million and reserves of £316 million which are earmarked for ongoing and anticipated activity.
A sum of £5 million has already been committed as part of the 2017/18 budget with a proportion of the projected overspend of £13 million also due to be financed by the reserves if alternative savings are not found.
The 2018/19 budget will be tabled at a full council meeting in February.