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Children’s services at risk as councils raid schools reserves

Crisis facing local government worsens as a fifth of earmarked cash is used up in England

Sat 10 Feb 2018 16.36 GMT

Last modified on Sat 10 Feb 2018 23.30 GMT

Corby in Northamptonshire whose county council effectively declared bankruptcy last week.
Photograph: Andrew Fox for the Observer

Councils across England have burned through a fifth of the reserves earmarked for schools and special ne pupils in a single year, in the latest sign of the cash crisis facing local government.

The huge raid on schools reserves – the highest figure for more than a decade – meant they fell by half a billion pounds in the last financial year, according to figures published by the government.

Schools reserves fell from more than £2.3bn at the start of the financial year to £1.8bn by the end of it. This comes after an Observer investigation revealed that operators of academies, which are not controlled by local authorities, were also sounding the alarm over cuts – with some needing emergency cash advances from the government to keep running.

Four councils – Bury, Cumbria, Bournemouth and Kingston – have experienced such severe overspends that their schools reserves have been wiped out and gone into deficit, with councils likely to raid other pots of money to plug the gap.

The revelation comes after Northamptonshire council’s effective bankruptcy last week, while an annual survey by the Local Government Information Unit (LGiU) found that council tax is set to rise in 95% of authorities.

Council schools reserves are made up of unspent school funds from previous years, and money held back by councils to fund students with special educational ne and disabilities, as well as nursery placements. When schools or the council overspend on these budgets, the reserve goes down. Councils blamed squeezed school budgets and inadequate government funding for special ne students for decimating these reserves.

A Department for Education spokesperson said the drop in council schools reserves was partly due to a number of schools becoming academies and taking their surplus reserves with them. But the sudden drop came after five years when schools reserves had been largely static, in contrast to the gradual conversion of schools into academies.

Government figures show that council “usable” reserves – a combination of money earmarked for specific ne and emergency funds – also fell in 2016-17 by nearly 5%.

The government data shows that Somerset County Council reduced usable reserves by 53% in 2016-17, although the council said most of this was planned spending in response to recent flooding rather than cash raided because of funding pressures. Children’s services are nevertheless nearly £15m over budget this year.

Somerset’s most recent external audit warned that failure to fundamentally redesign services – which it said was unlikely to be achievable within the next 18 months – “could impact on the future sustainability of the council”. It added that the council’s use of reserves was not sustainable over the medium term.

A Somerset council spokesperson said: “Our overall financial position is robust and supported by our auditors. Our general reserves are currently at a level considered adequate for an authority our size. Like many councils, we have prioritised spending on vulnerable children, which has helped deliver an improved Ofsted rating for our children’s services. All authorities are dealing with the pressures of continually falling funding, but we are managing spend carefully and will continue to lobby for fairer funding from central government.”

With two emergency cash injections from the government for adult social care, children’s services – such as children’s centres, disabled children and children in care – is now the top pressure for councils, according to the LGiU survey. Funding for children’s services fell from about £10bn in 2010-11 to about £7.6bn in 2015-16, according to the Children’s Society. The Local Government Association expects a further fall of £2bn to emerge by 2020.

Somerset is planning to close two-thirds of its children’s centres as part of an overhaul. Its 24 Sure Start centres are set to be replaced with eight “family centres”. The remaining 16 buildings are to host early childhood services such as nursery places.

Cuts have led to some parents taking matters into their own hands. Siobhan Lennon-Patience used to attend a group for parents of children with additional ne after her son Lorcan was born with a form of restricted growth. But the group ended and was not replaced.

With the help of a local charity, she started her own monthly group in a cafe in Minehead. However, she challenges the idea that her group is part of the “Big Society idea talked about by David Cameron”.

“We’ve had to do this and it is not because we wanted to. We did not want to step in – we had no choice. I’ve got a million hospital appointments to go to, I’ve got forms to fill in for my son, I’ve got to ensure we have proper support at school … on top of that, I then fill a gaping hole to support other families. I shouldn’t have to.”

Sam Royston, director of policy and research at the Children’s Society, said there was a danger that falling council reserves would end more services. “If current funding for early intervention funding is £1.5bn, we expect by 2019-20 that to have fallen to £900m,” he said. “If what local authorities have been doing up to now is propping up service provisions or reductions in funding by spending reserves, there’s a limit to how long they can do that for. The big worry is that actually, they can’t do it for much longer.”

A spokesman for the Ministry of Housing, Communities and Local Government said: “Overall, councils will see a real-term increase in resources over the next two years, more freedom and fairness and with a greater certainty to plan and secure value for money.”

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