Local Government Funding Crisis: Navigating The Impact On The Voluntary Sector

In a new report, NAVCA and Lloyds Bank Foundation for England and Wales urge central government to provide guidance for councils in financial difficulty or after issuing a section 114 notice and set out recommendations for voluntary organisations affected by local service cuts.

The report captures a range of voices within local authorities, including leaders, former leaders, portfolio holders, senior officers and commissioners appointed during the formal s114 stages. It calls urgently on the new government to issue updated guidance for councils in financial difficulty and wants greater oversight, advice, and support to councils pre-s114 to anticipate areas that could become vulnerable.

Since 2018, eight councils in England have issued 13 section 114 notices. Prior to this, two had only been issued, both nearly 25 years ago. An s114 is issued when a local authority cannot balance its books, often with a significant impact on local services and the community.

Jill Hopkinson, Policy Manager at NAVCA, said: “Financial instability is affecting many councils, and this is having an immense impact on communities. When councils are taking hard decisions to balance their budgets and cutting funding for voluntary and community sector (VCS) organisations, it can produce cliff edges which are detrimental to people and communities. Good relationships and communication between councils, local VCS infrastructure support organisations (LIOs) and the VCS are vital. Voluntary organisations are key partners, and collaboration with the sector facilitated by LIOs, can be an opportunity to reshape ways of working.”

As government funding fails to meet the growing costs of delivering essential services, pressure on local authorities is mounting. Many are already cutting services and funding to the voluntary sector, and several councils are on the brink of issuing an s114, where the consequences for communities will be significant.

Earlier this year, Leicester City Council declared that filing a Section 114 notice was all but inevitable. Councillor Mustafa Malik, Assistant City Mayor of Leicester with responsibilities for communities, adult learning, jobs and skills explains: “Since 2010, local government has faced a significant decrease in funding from central government, which has fallen by almost half. Simultaneously, the costs, particularly in social care, have escalated significantly. Councils have worked hard to manage demand and safeguard the most vulnerable but regrettably, they have been left with no other option but to cut services that reduce future need.”

The charity Leicestershire Cares, whose services are commissioned by Leicestershire Council, took part in the research. Kieran Breen, Chief Executive Officer, said: “Underfunding is a huge issue for everyone across Leicester and Leicestershire. The city council has declared they may require a section 114. This is generating a lot of uncertainty. Many services have already been cut, including many trusted and relied upon by a community still struggling after the pandemic and wrestling with rising living costs. Discussing this financial insecurity collaboratively and giving clarity on what a section 114 would mean for voluntary sector services and the people they help, would benefit everyone.”

Gary Beharrell at Lloyds Bank Foundation, said: “Small frontline charities are already picking up the pieces of more than a decade of local government funding cuts by subsidising contracts that don’t cover the full cost of delivering services and absorbing increased demand due to reduced support elsewhere. The pressure on small charities is further exacerbated when a section 114 is issued. Some of this pressure on small charities, and the eventual impact on communities, can be alleviated if local authorities and the voluntary sector collaborate and develop a strategic approach. For this to be achievable Government must provide greater support for local authorities struggling financially, and ultimately, for a review of local government finance arrangements.”

To see the full report and guidance, visit www.navca.org.uk/s114

A free webinar, How the voluntary sector can navigate local government financial difficulty, will take place on 20 November, 11am. To book, visit https://us02web.zoom.us/meeting/register/tZYqceCpqj8qE9Z2ZfRb0VIoXZDuhT853s3l#/registration