Local authority spending

The London Intelligence – Issue 4

Local authority spending

Ten years after the financial crisis, London’s public services are feeling the pinch of austerity. In this special section of The London Intelligence, published just after the May 2018 borough elections, we look at how London borough spending has been reduced in recent years, where the cuts have fallen, how London boroughs compare to other UK local authorities, and how spending is influenced by political control.

Overall expenditure

London’s local authorities have seen their expenditure fall significantly over the last eight years. Total budgeted service expenditure (excluding education, public health and police services) by London’s 33 councils fell from £7bn in 2010/11 to £6.3bn for 2017/18, a fall of 10.3 per cent.

Outturn – the actual amount spent by councils over the year – fell at a slightly slower rate: between 2010/11 and 2016/17 (the latest available year) total spending fell 8.7 per cent. The last two years have seen outturns higher than budgets, as councils are beginning to draw down their financial reserves, having built them up for the previous four years.

Ministry of Housing, Communities & Local Government

When population growth over this period (from 8.2 to 9 million) is accounted for, the fall is even steeper. Budgeted spend per head was £879 in 2010/11, but fell to £715 by 2017/18, a drop of 19 per cent. These figures do not account for inflation, so the real terms fall will have been steeper still.

Council budget change, per head

The extent to which councils have seen a reduction in their budgeted service expenditure (per head) varies across the capital, as demonstrated in the map below. We have excluded the City of London Corporation’s figures from this map, as the particular circumstances of the City make comparisons difficult.

Ministry of Housing, Communities & Local Government

Some of the largest reductions have come in Inner London boroughs – Camden and Westminster saw budgets fall 29 per cent each – but the council with the largest per capita fall was Newham (-33 per cent).

Only Sutton, Barnet, Bexley, Richmond and Havering had falls of less than 10 per cent. The variation in spend per resident has dropped over time, with the range between the highest and lowest spending boroughs (excluding the City) falling from £670 to £460 per person between 2010 and 2017.

Spend by service area

Ministry of Housing, Communities & Local Government

Breaking down London councils’ budgets by service area shows what proportion of spend is made up by each service, and where expenditure has fallen the sharpest. Social care services for children and adults have seen the smallest falls in expenditure per person, falling 2.8 and 10.6 per cent respectively. Larger falls have been experienced by planning and development (55 per cent), cultural and related activities (41 per cent) and highways and transport (38 per cent).

An increasing proportion of funds are spent on adult and child social care – accounting for 38 and 24 per cent of these totals in 2017/18, compared to 34 and 20 per cent in 2010/11. Other service areas saw a declining proportion of overall spend, with planning and development accounting for the least – only 2 per cent in 2017/18, down from 4 per cent seven year prior.

Political differences

Ministry of Housing, Communities & Local Government

Labour councils, on average, spend more per head compared to Conservative-run councils (as well as those run by Lib Dems, or with no overall control). However, this gap has closed in recent years as Labour councils have seen larger proportional drops in service budgets. The gap between boroughs run by the two main parties has gone from £273 in 2010, to £130 in 2015, and £92 in 2017. Part of this is a selection effect as Labour took control of 5 additional councils in the 2014 elections (2 from Conservative, 3 from NOC) who had lower previous per capita spend.

Overall, councils who Labour controlled both before and after the 2014 elections saw expenditure falls of 6.4 per cent, while councils they gained saw more modest falls of 4.3 per cent.

Planning and Development services

Ministry of Housing, Communities & Local Government

Despite the urgency of London’s housing crisis, planning and development services have borne the brunt of cuts. Budgets fell by 50 per cent (per head this was 55 per cent), and within this development control and planning policy budgets have seen drops of 63.5 and 31.9 per cent respectively. While local authority spending in this area has fallen, the number of planning permissions they are deciding on has remained relatively constant over the last seven years, though the higher targets in the new draft London Plan will pose a further challenge.

“Despite Government announcements on an expected planning application fee rise by 20 per cent in advance of 2017-18 budgets being set (which eventually took effect in January 2018), it is interesting that these budgets still show a general decrease.

“It is also of note that planning policy budgets overtook development management budgets in 2015/16. This could be due to: the Government’s deadline of ‘early 2017’ for having new Local Plans in place; the expensive evidence base requirements for Local Plans; and additional requirements placed on policy services from the Government such as on Brownfield Land Registers and Self-Build land requirements.

“Authorities received over £15k per annum for each of these latter requirements as part of ‘new burdens’ funding from the Government.”

Rob Krzyszowski, Spatial Planning Manager, Brent Council