What Do Councils Actually Do?

This episode of IFS Zooms In: The Economy explores the often misunderstood role of local government in the UK, focusing on the financial pressures councils face despite recent funding increases. Host Helen Miller, joined by experts David Phillips and Aileen Murphy, unpacks how councils are funded—primarily through council tax, business rates, and central government grants—and reveals that over 75% of local authority revenue now goes toward adult and children's social care, not just bin collection. The discussion highlights a critical disconnect: while funding has risen since 2020, spending pressures from an aging population, rising wages, and increased demand for services like homelessness prevention are growing faster, creating a widening fiscal gap. The episode also examines the consequences of financial mismanagement, including councils issuing Section 114 reports to halt non-essential spending, and the growing number of councils seeking exceptional financial support. Despite reforms like the Fair Funding Review and multi-year financial settlements, many councils remain fragile, especially those with low reserves, high debt, or poor governance. The episode concludes with a call to action for greater public engagement, noting that many new councillors lack experience and that political changes alone won’t solve systemic financial challenges without sound fiscal planning and long-term reforms. Key takeaways include: 1) Social care now dominates local budgets, consuming over 75% of spending; 2) Rising costs—driven by demographics, wages, and demand—outpace funding growth; 3) Councils are increasingly reliant on asset sales and exceptional financial support, signaling deeper systemic stress; 4) Reforms like the Fair Funding Review are positive but create winners and losers; 5) New councillors face steep learning curves due to complex financial constraints; 6) Public debate on local government should focus on sustainable solutions, not just party politics; 7) Immigration and housing pressures are intertwined, with complex trade-offs in cost and service delivery; 8) Long-term solutions require shifting toward preventative care and workforce reform, but policy delays (e.g., the Casey review) delay action.