Budget settlement represents real-terms cuts

20 February 2023

Southwark Council received more from central government in its budget settlement than expected, but it is still not enough.

The gap between what the council needs and what we receive will impact on investment for the ambitious commitments for revenue that we promised residents, such as the street cleaning, leisure centres, libraries and parks.

Adult and children’s social care services take the lion’s share of statutory services and budget expenditure, and the council has to commit a large sum to those we must support.

Raising council tax and tenants’ rent may seem the answer, but so little of it benefits councils directly. The drop in the Revenue Support Grant (money that can be spent on any services, not specific ones) over the years, and inflation at a high of 10.5% means that the council has to operate on less money in real terms.

Much of the money is ring-fenced to statutory duties that the council has to provide. While we have a duty to individuals and their services, there is also a collective responsibility which we agreed to do, to support others who are vulnerable.

Year on year, the money residents have per-person for services has reduced in real terms. The grant amounts, given to councils for ring-fenced services have to stretch further and further.

One commonly misunderstood fact is that councils cannot make a profit – every penny is, by law, ploughed back into services for people. Parking revenue, money from commercial rent, the cash we ask for events, it all has to be spent on vital services, from looking after vulnerable adults and educational services for children, to street cleaning, maintaining parks and trees, to provision of temp accommodation for those who are homeless. There is no pot of gold.

Many families understand what it is like to have to budget for their loved ones with only half of the income they had several years ago, and in the context of rising costs. This is magnified for councils, with 307,700 people to pay for. Now also imagine that the needs of those families has grown – post lockdowns, post Covid – new crises of poverty, mental and physical health, exacerbated by the cuts to the NHS.

And the cost of living has created further expense for the council too. We have done all that we can to support those struggling, allocating payments to look after those who are in desperate financial situations, sometimes having to choose between eating, staying warm, or paying for the roof over their heads. We have opened warm spaces, worked with the CAB to offer bespoke advice on bills and money, and made sure that residents can contact us if they are suffering.

The council cannot afford to be wasteful with such pressures applied. There is no spare budget and much of what we receive cannot be spent elsewhere from its designation, the grants are project-specific – we cannot spend arts money on housing, or street improvement money on social care. Every penny is accounted for and with years of austerity, the council has become adept at chipping at the corners of services without compromising on quality or having to cease providing them.

Cllr Stephanie Cryan, cabinet member for Communities, Equalities and Finance, said: “It is devastating to be faced with stark choices about how we spend our depleted budget year on year, the erosion of funds for services that people need and want and in real terms. More flexibility and devolution from the Government would help us provide what residents tell us they want, and would allow us more certainty to plan ahead. But as it stands, it is a tough challenge with a loss in money in real terms, as what we receive is outstripped by inflation.”

“Budget Settlement has only been given to councils for one year in recent times, but we cannot work hand-to-mouth and have to look to our goals for 2030, and our long-term capital investment plans, in order to manage public money wisely and look to the future.”

The council set out what it planned to spend it its Council Delivery Plan – a clear set of objectives which follows what the administration promised, and what we said we had to provide to meet the needs of many. This budget aligns with those promises.

The council needs to see if its bold investments can remain viable in a world where the money we receive from the Government does not match the costs of services that inflation affects, or even pre-austerity levels of funding – the gap widens. Devolution of funds to local authorities would greatly assist in that, but in simple terms – we do not have enough.

Page last updated: 20 February 2023