The pinch that stole Christmas

There will be no Christmas lights turning on in Newham this year as the London borough becomes the latest authority to approach the bankruptcy cliff-edge. As well as leading them to request exceptional financial support from central government, the extent of their financial pinch has forced them to realise savings wherever they can: from cutting Christmas and Eid lights, to cancelling fitness schemes for the elderly, to selling off property assets. The council may even have to scale back on the support it gives to those who cannot afford to pay council tax.?

Newham’s predicament offers a case study for a local government that is still undergoing financial crisis — and a central government response which is not yet addressing the underlying causes.?

Homelessness is one of the key statutory service areas creating significant pressure for local finances across England. Newham in particular is responsible for the largest numbers of households in temporary accommodation in the UK, with costs spiking due to rising rent prices (and subsequently rising evictions) and a lack of affordable housing. London Councils reported that “boroughs are collectively spending around ￡90 million per month — approximately ￡3 million every day — on temporary accommodation, up nearly 40 per cent from a year earlier”. ?

The central grants intended to assist with funding this service have not kept up with inflation. In addition, Newham have stated that they are affected by uneven distribution of the Homelessness Prevention Grant, with Newham receiving ￡1,816.82 per household in temporary accommodation, while lower-demand Wiltshire receives ￡8,604.26 per household.?

Newham’s financial situation demonstrates the peril of unfunded mandates, where a statutory duty is not adequately matched by the resources required for its fulfilment. The result is huge chunks of the budget being diverted into crisis management. In Newham’s case, nearly a third of its budget is consumed by temporary accommodation costs. This is happening across England. Currently, 19 other local authorities are receiving exceptional financial support. With the underlying causes unaddressed, further councils will likely require this expensive and short-term support in order to avoid bankruptcy.

Shifting this pattern will require a lot more than bailouts. Three big systems must be brought back to health to tackle the crisis: local audit, local service provision, and local funding. Reform will be bringing forward radical new thinking in each of these areas in the coming weeks — watch this space.?