In The News
It has been just over six years since Northamptonshire County Council was the first council in nearly two decades to issue a Section 114 notice, effectively declaring bankruptcy.
Since then, seven local authorities have issued such notices and the Local Government Association has cautioned that up to one-fifth of councils in England face 'bankruptcy' by the end of the year.
The impact of a council declaring 'bankruptcy' can vary depending on the scale of financial crisis but typically involves significant council tax rises and savage cuts to spending on local services.
Given that local authorities in England are responsible for the organisation of social care, the question of what happens to adult social care provision in the circumstance of a Section 114 notice being issued is pertinent.
Reporting for i News, Politics and Education Reporter Poppy Wood noted from the Levelling Up, Housing and Communities Committee's recent report that the UK's demographic shift towards an older population with more complex health needs has led to unsustainable expenses for certain councils in the area of adult social care
It's estimated that around 70 per cent of a top-tier council's budget is now devoted to adult and children's social care. This financial strain has been intensified by persistent staffing shortages and inflation within the sector. However, the committee emphasised on Thursday that while they acknowledge and appreciate the government's promise to enact substantial reforms in social care, what is truly necessary is a steady and lasting increase in funding over time.
Stuart Hoddinott wrote in a recent explainer for the Institute for Government about impacts that Section 114 notices can have on council services, particularly with regard to the social care sector - whilst local authorities do have a statutory duty to provide certain minimum social care services, that minimum level is often unclear and far below what is required for those in need of support.
In addition, he stresses the context in which the rise in 'bankruptcies' has occurred, citing that between 2009/10 and 2021/22, funding for local authorities in England fell by 10.2 per cent in real terms due to central government grant cuts. This has happened simultaneously as demand for adult social care increased substantially and is forecast to continue rising.
This has all led to several councils seeking other income to afford to spend and protect services, mainly through investments in commercial property. However, the dramatic rise in interest rates in the last two years has made servicing this debt much more challenging and threatened financial resilience.
Caroline Gall and Simon Gilbert for BBC News provide a genuine example of this with the recently announced proposals for Birmingham City Council to repair its finances. Although the headline-grabbing proposition is a 21 per cent increase in council tax, social care will be savaged by the cuts to be imposed.
Adult social care will be cut by almost £24 million in the next financial year, and the budgets for Adult Social Care and Children, Young People and Families face a combined £75 million in savings. This represents a cut of over five per cent to the adult social care budget and will significantly impact those needing care.
Interview
This month we sat down with Efua Poku-Amanfo, research fellow at the Institute for Public Policy Research, to discuss the impacts of the rise in section 114 notices, the outlook for local authority funding and the implications for adult social care funding.
Why are we seeing an increase in the number of local authorities issuing section 114 notices?
An estimated 75,000 local authority-owned assets valued at £15 billion have been sold in the past 13 years in a desperate bid to plug funding gaps. What’s more, our current funding formula is outdated and is no longer suitable for the needs of modern Britain.
We’ve also seen pots of funding by the government given to local authorities based on competitive bidding, rather than need. Consequently, local authorities have had to sell off integral assets to keep their head above water and haven’t had the investment to create a cyclically strong local economy.
Do you expect to see an increase in the number of section 114 notices over the coming year? Which local authorities do you believe are most at risk over the coming 12 months?
Research by the Institute for Public Policy Research indicates this trend of asset selling to plug short-term funding gaps will continue with a further 2,500 buildings and other assets at risk of sell off. It’s clear the authorities most at risk will be in the poorest part of the country, for example, towns and cities in the North and local authorities with high levels of housing needs such as coastal towns like Hastings.
We can change our funding formulas to be fairer and ensure we have an effective, clear accountability system that intervenes when appropriate
While some local authorities are clearly more at risk than others, the current funding formula is risky business for all due to how incompatible it is with the changing needs of the nation.
What are the implications for the provision of adult social care services in these areas?
The needs of the nation are changing rapidly; we are becoming sicker and poorer as a nation with a growing gap in healthy life expectancy between the most and least deprived parts of the country. Local authorities face a new set of challenges but are unable to respond properly due to a chronic deficit of assets and funding.
Statutory duties within social care are compromised and local authorities are forced to provide a fragmented service. This alongside a low-paid unstable workforce leaves individuals to find the funding themselves, depend on family, or simply accept the bare minimum of care.
Should evidence of financial mismanagement at a local level mean the ceding of spending control to local authorities in key areas should be reversed?
Local authorities should be trusted to take ownership of fiscal responsibility. We can’t shape governance with high-stakes accountability, but we can change our funding formulas to be fairer and ensure we have an effective, clear accountability system that intervenes when appropriate.
What we know is that local leaders and places are ready to get stuck into implementing new place-based policies to reach the full potential for the people living in their locality, but they can only do this if they have the resources, the autonomy and the capacity to grow their headcount and expand their work.
opinion
David Fothergill, deputy chairman of the Local Government Association, sets out his thoughts regarding the outlook for local authority funding of adult social care in 2024 given the rise of section 114 notices being given.
Councils enter a precarious year financially, with an inevitable knock-on effect on adult social care services.
As we enter the new year, councils are particularly concerned about the impact of the increase in the National Living Wage (NLW) to adult social care budgets, and what it could mean for people who draw on care and support if services do not receive additional financial support.
With no additional funding in the Autumn Statement or provisional Local Government Finance settlement to balance the increase in the NLW, 2024/25 will be an incredibly challenging year for adult social care and could well tip many councils over the edge.
A recent LGA survey found that one in five council leaders and chief executives in England surveyed think it is very or fairly likely that their chief finance officer will need to issue a section 114 notice this year or next.
Councils enter a precarious year financially, with an inevitable knock-on effect on adult social care services
The LGA estimates that councils in England face a £4 billion funding gap over the next two years just to keep services standing still but last month’s Autumn Statement failed to provide the additional funding needed to protect services from further reductions.
This is despite councils of all political colours and types warning growing demand and cost pressures are threatening their financial sustainability, with significant impacts on people.
In 2024/25, councils will be able to increase general council tax by 3% without the need for a referendum. Those with social care responsibilities will again be able to increase the adult social care precept by up to a further 2% again.
This means that councils continue to face the tough choice about whether to increase council tax bills to bring in desperately needed funding to provide services when they are acutely aware of the significant burden that could place on some households.
Councils are calling on the government to urgently work with people who draw on care, unpaid carers, councils, providers, the workforce and the voluntary sector to help secure additional funding for social care in the forthcoming Local Government Finance Settlement.
The ADASS Autumn Survey recently found councils are predicting that adult social care will overspend by £515 million this year despite the increase in budgets.
The adult social care workforce provides committed and compassionate care and support around the clock. The sector contributes significantly to the economy and plays a key role in helping to release some of the pressures facing the NHS.
The increase in NLW uplift is rightly good news for care workers and we hope it will address some of the recruitment and retention challenges facing the adult social care workforce.