CFO Insights

CFO Insights – reviewing councils’ 2015/16 spend

We used our CFO Insights tool to review government spending for 2015/16

Local authorities understanding and adapting to their area’s needs, and the subsequent changes in budgeting and spend is critical to ensuring they deliver the most efficient service to their citizens.

Following our 2016/17 year budget review, we can now analyse the 15/16 spend. By comparing this to previous years and against their initial budget we can begin to understand the steps taken by different authorities.
Some initial findings from our analysis identifying key variances:

  • there was an overall reduction in spend between 2014/15 and 2015/16 of 1.09%.
  • 35% of councils overspent against their budgets in 2015/16.
  • while there was  only a relatively small reduction in expenditure, 60.4% of councils reduced their spend between 2014/15 and 2015/16

This reduction of 1.09% may be a little less than expected given the reported reductions in government funding, estimated by the National Audit Office to be over 37%. Further analysis of the 1.09% spend reduction identified that certain service lines increased their spend between 2014/15 and 2015/16.

Adult social care saw a reduction of just under 1%. Only 8 councils with adult social care responsibility decided not to adopt the Social Care Council Tax precept for 2016/17. The Secretary of State for Department for Communities and Local Government  (DCLG) has now confirmed an increase in the precept from 2% to 3% over the next two years, rather than 2% over the next three years as originally planned. This does not provide additional funding over the life of this parliament, but by bringing this forward it should have a short term impact on spend to budget, although not enough to fully tackle the social care funding gap, according to the Local Government Association  (LGA) and other sector bodies, should councils chose to utilise the full value of this precept.

The largest increase was seen in public health with a rise of 14.78%. Children’s social care saw an increase of 2.19%, while there was a very small increase in environmental service of 0.04%. All other service lines saw a reduction with the largest in percentage terms being housing at 12.94%; highways at 10.77% and cultural at 7.15%.

Map 1: Variance in spend by authorities between 2014/15 – 2015/16

Map 1: Variance in spend by authorities between 2014/15 – 2015/16

The overspend in 2015/16 suggests councils are finding it difficult to deliver their savings programmes. In looking at overspending councils, we noted varying performance levels between the different types of councils. The London Boroughs were the councils who were most likely to overspend their budget. When compared to their original budget, 58% of London Borough councils overspent. Districts were the least likely to overspend, with 28% of these councils overspending. This may be due to the range of services provided at different councils and the inherent difficulties of controlling those service budgets.

Map 2: Variance in authority spend in comparison to budget 2015/16

Map 2: Variance in authority spend in comparison to budget 2015/16

In order to identify the areas that saw the biggest changes in spend, we further analysed changes on a service line level between 2014/15 sand 2015/16 by different authority types, with the largest increase seen on public health, and the biggest reduction in housing.

Table 1: Variance in service level spend by authority type (%)

% Variance London  Metros Counties Districts Unitary All Councils
Education 3.17 -2.49 -1.84   -2.73 -1.2
Highways -6.92 -8.69 -7.84 5.08 -15.95 -10.77
CSC 4.02 -0.81 4.47   0.8 2.19
ASC -0.2 -1.61 -1.08   -0.72 -0.97
Public Health 11.78 13.96 19.7   12.57 14.78
Housing -13.85 -18.66 -24.52 -3.64 -8.95 -12.94
Cultural -3.13 -10.12 -8.61 -3.79 -8.64 -7.15
Environmental -1.52 1.04 5.01 2.03 -5.77 0.04
Planning -9.8 -15.61 6.53 9.25 -9.24 -4.13
Central -2.77 -5.31 12.05 -4.48 -7.15 -2.82
Total 1.52 -2.45 -0.44 -1.31 -2.78 -1.09

Understanding the changes from the previous year’s spend and the impact on outcomes for an area is key to ensuring future budgets are allocated in the most efficient and effective way. The variation in spend identified demonstrates the differing needs or priorities for an area, and continues to highlight the need for a place-based approach.

For more information or place based research visit CFO insights.

Author: Simon Hardman, Senior Manager, Local Government Advisory, Grant Thornton

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