Is winter coming for local sports provision?

Leigh Thompson, Policy Adviser, tackles the issue of local authority funding and how LA's management of funds will impact on sports participation, in his first blog of 2016.

Fans of Game of Thrones will be familiar with the oft-repreated line ‘Winter is coming’. While in the hit TV-series it is it usually uttered by a moody-looking Jon Snow in reference to the coming invasion of Westeros, but it could equally be applied to the likely impact of various policy initiatives on local authority support for sport and leisure.

Ok, so it’s a pretty torturous link but bear with me. We have now had time to digest the Government’s new Sports Strategy which sets out a pretty comprehensive new approach to the funding of sport and the measurement of success. While the Alliance welcomes much of the new strategy, a significant factor in its success will be the extent to which local authorities can juggle the additional responsibilities they are being given with continued budget cuts to maintain spending on local sport and physical activity provision. After all, local authorities are the largest single public sector funder of sport, spending around £1bn per annum (excluding capital investment) on sport and leisure in local communities.

At this point, it’s worth taking a step back to consider the broader local authority funding picture and the changes that will be phased in over the next few years. The Autumn Statement and Spending Review published in November 2015 set out some pretty radical changes to the landscape, notably a firm commitment to devolution deals involving the transfer of responsibilities for, among other things, health, planning, skills, housing transport and employment to newly-formed city regions. Possibly the most significant change is the move to transfer the responsibility for and funding of combined health and social care services, notably in Manchester.

In addition, the Government announced it was making major changes to the way in which local authorities will be funded in future years. Going forward, local authorities will increasingly have to rely on locally-raised revenue – principally revenue from Council Tax and business rates – as grant funding from central Government is reduced. By 2020 it is anticipated that local authorities will be funded pretty much entirely from local revenues (albeit there will likely remain some adjustment mechanism). DCLG is currently consulting on the provisional 2016/17 funding settlement for local authorities taking into account these proposals.

Taken together, these changes represent a huge shift from the current arrangements. What might this mean for sports funding at a local level?

The answer, I think, lies in the likely net impact of increasing demands on local authorities arising from their new responsibilities and the changes to their funding sources. Put simply, if rising demand for services outstrips local authorities’ ability to raise revenue at a local level to fund them, we will see increasing pressure put on budgets for discretionary spend on sport and physical activity provision.

Unfortunately, where we are most likely to see this happen is in more deprived areas where social needs are high yet local revenue-raising capability is constrained. Many deprived areas will, by definition, have limited business rate revenue (or at least limited scope to grow it) and at the same time have a smaller Council Tax base as more households are likely to be on lower incomes and so already in receipt of reliefs. In these areas, it is difficult to see how local authorities will have the flexibility to absorb any increases in demand for priority services such as social care without having to sacrifice other areas of expenditure like sport and leisure.

Admittedly, Government has provided local authorities with the ability to levy an additional 2% ‘precept’ on Council Tax bills to fund social care costs. However, this additional revenue-raising flexibility may be of little practical use to a local authority covering deprived communities if it can only levy it on a narrow band of households. 2% of a small number is still a small number and is unlikely to help much if demand for local services is rising rapidly – something will have to give.

Ultimately we could see a ‘two-tier’ system emerging whereby more deprived areas are left behind in terms sports and physical activity provision. The major problem with this outcome is that it is those in hard-to-reach communities – and who, after all, the new sports strategy is very much aimed at – who will be hit hardest.

Admittedly, I am speculating using some broad brushstrokes here. But there is some evidence to suggest this ‘perfect storm’ could well arrive. A recent report by the Joseph Rowntree Foundation, shows that there has been considerable variation in changes in business rate revenue over time and, in terms of the overall position, some of the more deprived communities have seen either modest growth or falls in business rate revenue relative to more affluent areas in the last five years (see Fig 1).

Fig. 1 Changes in non-domestic (business) rate income for all-purpose authorities in England with the highest and lowest changes 2009/10-2014/15

Source: Costs of the Cuts, Joseph Rowntree Foundation.

In addition, recent analysis by the Institute for Fiscal Studies suggests that those local authorities currently most dependent on Government grant funding will face the steepest reductions in spending power over the coming 4-5 years (see Fig 2).

Furthermore, it indicates that, beyond protecting social care in real terms, every 1% increase in adult social care spending by local authorities will require cuts of 0.5% to other areas of spending, such as libraries, transport and sport and leisure.

Fig 2. Percentage change in real spending power 2015/16-2019/20 by initial grant-reliance of local authority

Ultimately, I very much hope these predictions are wrong and that the changes that have been announced allow local authorities to thrive and invest in sport and physical activity provision for the benefit their communities. However, it’s difficult to shake off the nagging feeling that winter may, finally, be coming.