Local authority funding cuts are putting charities at risk

Local government is in crisis. Since 2018, eight English councils have declared themselves bankrupt, including four in the past 12 months. And, according to the Guardian, nearly one in five council leaders in England say they’re likely to declare bankruptcy in the next 15 months. 

While local authorities have faced financial difficulties for the last decade, the issues have been exacerbated by the same inflationary pressures that are pushing the cost of living up for everyone.

To stay afloat, they’ve been forced to make drastic spending cuts, including vital funding to local charities.

Considering council funding makes up 13% of the sector’s income, it’s a huge blow.

Financial pressure

Charity think tank Pro Bono Economics says that local authority funding for charities has fallen by 23% since 2010, equating to £13.2bn. And further cuts can be expected in the coming months.

Cause for concern

The financial challenges in local government pose a threat to the future of many local charities.

For instance:

• The Early Help Service in Birmingham has warned that thousands of children are at risk as a result of proposals by the bankrupt city council to cut an £8m early help contract, providing safety net services to thousands of families struggling with poverty, mental illness, and addiction.

• Community First bus services linking communities in rural Hampshire are under threat after Hampshire County Council, which faces a £132m deficit over the next two years, cut funding by £500,000. It’s also scrapped a £500,000 grant that funds volunteer and legal support for 650 local charities.

• Citizens Advice Woking faces closure after bankrupt Woking borough council cancelled its £180,000 grant.

Speaking out

In an interview with the Guardian, Dame Clare Moriarty, chief executive of Citizens Advice said of the financial crisis, “local government has been a crucial funder for charities like Citizens Advice, so the current crisis is deeply troubling. We’ll continue working to make sure we can be there for as many people as possible. But it’s vital the government considers the devastating knock-on impacts of local authority funding cuts on community services.”

Government response

In January, the government announced a £600m boost for English councils, most of which has been earmarked for social care services, but the Levelling Up, Housing and Communities Committee has warned the extra cash won’t tackle the underlying financial problems.

Comprising of a cross-party group of MPs, the Committee has called on ministers to urgently inject £4bn into English town hall budgets to head off an “out of control” financial crisis that threatens to drag well-run councils into bankruptcy and put more local services at risk.

Clive Betts, chair of the Committee, said “the government must use the local government financial settlement to help bridge the £4bn funding gap for 2024-25 or risk already strained council services becoming stretched to breaking point. If the government fails to plug this gap, well-run councils could face the very real prospect of effectively going bust.”

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