Councils at risk of insolvency due to ‘uncontrollable’ costs of children’s placements
New analysis has revealed that England’s largest councils face overspending their budgets by over £600m this year, as ‘uncontrollable’ spending pressures drive up the cost of delivering services to vulnerable children.
County councils are warning that they are ‘running out of road’ to prevent financial insolvency as they project they will overspend on their budgets by more than £600m.
The overspends are contributing to a projected total funding deficit of £4bn for these councils over the next three years.
According to the analysis by the County Councils Network (CCN), the overspends combined with future funding shortfalls mean that one in ten councils are unsure or not confident they can balance their budget this year. This proportion increases to four in ten next year and six in ten by 2025.
The County Councils Network (CCN) and Society of County Treasurers (SCT), which conducted the budget survey of 41 of county and unitary authorities, says that a combination of stubbornly high inflation, rising demand and ‘broken’ provider markets for children in care are leading to the historically high overspends.
While all council frontline services are experiencing higher than expected costs, increasing demand and an acute rise in the costs of placing children in care mean in-year spending on children’s services is spiralling out of control, with almost half (£319m) of the projected £639m overspend attributable to this service.
The CCN is now calling for emergency funding for children’s services this year and next to prevent them having to undertake drastic spending reductions to other services and reduce their reserves to ‘unsustainable levels’.
The budget survey of 41 county and unitary councils, which cover half of England’s population, reveals adult social care also made up a quarter (25%, or £179m) of the projected overspend.
Over recent weeks several county authorities have sounded the alarm bells on their in-year financial position, based on their first quarter of 2023/24 projections. Derbyshire County Council have forecast that they are on course to overspend their budget by £46m, Shropshire Council by £37.6m, Suffolk County Council by £22m and Hertfordshire County Council by £16.4m. However, this survey shows for the first time the scale of the challenge across all of England’s largest councils.
With children’s services making up almost half the projected overspends, councils point to a sharp increase in post-pandemic demand in children’s services and the cost of care placements rising due to inflation and a ‘broken’ provider market. Recent research by the CCN showed there was a surge in over 20,000 extra referrals in county areas following the pandemic and over 1,000 more children in local authority care; a trend that has not abated since.
Recent reports by the Local Government Association (LGA) found that the largest private and independent providers of children’s social care made profits of more than £300 million last year at the same time as children’s social care budgets were stretched.
Cllr Barry Lewis, CCN Vice Chair and Finance Spokesperson, said the majority of the £639m of additional and unexpected spending this year is simply outside of councils’ control.
“The number of vulnerable children requiring care has risen dramatically post-pandemic, while inflation and a broken provider market in statutory care placements mean councils face no choice but to pay spiralling fees.
“County authorities will do all they can to bring down costs over the coming period and have pencilled in £2bn of unprecedented further savings to help balance the books. But after a decade of continuous cutbacks, the scale of reductions and use of reserves needed to fill the funding shortfall is simply unsustainable.”
Read the full report: https://www.countycouncilsnetwork.org.uk/
£38,223 to £40,221
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