WFA contributes to IFS Green Budget chapter on local government finance
7 October 2021
The Institute for Fiscal Studies today unveiled the latest chapter from its 2021 Green Budget, which features analysis by WFA.
The chapter, which explores the impact of COVID-19 and planned social care reforms on local government, includes new analysis of the support provided to Welsh councils over the past 18 months.
The Welsh Government provided £478m (£151 per person) to fund additional COVID-19 expenditure on services other than education in 2020-21, while compensation for non-tax income losses totaled £146m (£46 per person).
Although funding for the council-element of outbreak management and contact tracing was lower than in England, this was offset by increased support elsewhere – most notably, through more generous compensation arrangements for council income losses and one-off payments to care workers.
The chapter also assesses the outlook for Welsh council finances over the next three years. It finds that local authority spending will need to increase by more than £1.1 billion between 2019−20 and 2024−25 to maintain the same level of services. This represents an increase of 16.7% (equivalent to 3.1% each year).
Cian Siôn, a researcher on the Wales Fiscal Analysis project, and a co-author of the chapter commented:
“Even though the Welsh Budget is set to grow in real terms over the next three years, growing demand for social care services, and significant post-pandemic pressures for other areas of the Welsh Government’s budget mean that the outlook for local government remains challenging. Any additional funding that makes its way to social care services as a result of the new Health and Social Care Levy will likely be met by new responsibilities and is therefore unlikely to ease existing cost and demand pressures.
“We know that Welsh councils are relatively more impacted by changes to government grant funding, and by implication, UK government spending plans than their English counterparts. This only serves to highlight the importance of the upcoming Spending Review in determining whether Welsh local authorities will be able to meet pressures in future years.”