Page last updated at 07:55 GMT, Friday, 19 December 2008

Crunch raises state school demand

Pupil writing
A third of London boroughs reported higher demand for school places

One in 10 English councils is seeing increased demand for school places as parents switch from private to state to save money, a report suggests.

The Audit Commission's report into the effect of the credit crunch on councils showed an increasing demand for their services as well as a drop in income.

But the report says most councils are well placed to weather the downturn.

The commission questioned the chief financial officers of 122 councils in England between October and November.

The public services watchdog's study of council finances found that prices had risen faster than assumed when the government set the level of council grant for 2008/2009, with 77% of authorities receiving a cut in funding in real terms.

Less income

The largest concern reported by councils was the reduced income from planning fees due to the housing slump, with almost half recording substantial falls.

The survey found 52% of authorities had suffered a fall in income from car parking fees of 3% or more, as more people leave their car at home. One had seen a fall of 5%, with a fall in income of 200,000.

The research - Crunch Time? - also showed councils had been hit hard by increases in fuel bills, with the cost of lighting the streets up 40% in a year.

The report found the higher demand for state school places for children was a particular problem in London, and a fifth of all those councils questioned expected that trend to accelerate as the downturn deepened.

There was also growing concern "that the downturn will lead to more family breakdowns, with more children being taken into care."

The Commission's findings also include:

  • Two thirds of councils are reporting increases in applications for housing and other benefits as a direct result of the downturn
  • A third are already dealing with increases in homelessness
  • A quarter of England's councils have seen increased demand for elderly care
  • One in seven has made compulsory redundancies, or plans to do so
  • Many councils are reviewing recruitment, or seeking savings by leaving posts unfilled.

Alongside efficiency drives, a third of councils have dipped into their reserves, while about a third have signalled or imposed increases in fees and charges, and 16% were cutting services.

Realistic report

However, the study concludes most local authorities anticipated the increased costs, and loss of income to some extent.

It also says they have adequate reserves to cushion the estimated 2.5 billion impact.

Councils are now well-placed to fully support their communities - I expect them to make the most of their wide range of powers to do so
Local Government Minister John Healey

The report also considered that recent falls in inflation, fuel prices and interest rates were helping ease the pressure on councils.

Steve Bundred, chief executive of the Audit Commission, said the report "injected a little realism" after all the "doom-laden headlines".

"While councils are in the firing line and undoubtedly face some very tough choices in the longer term, they should keep a sense of perspective," he said.

"By and large councils knew this downturn was coming and have planned for it. The pressures are real but councils are coping with them well."

Local Government Minister John Healey said the government's three-year settlement for councils would give them the flexibility to manage their budgets through the downturn.

"Councils are now well-placed to fully support their communities - I expect them to make the most of their wide range of powers to do so."

'There to help'

Chris Lawrence-Pietroni of the Local Government Association also emphasised that the role of councils is to help people through the downturn.

He noted that some councils were providing interest-free loans for those struggling with mortgage costs and that authorities could be flexible with business rates.

He told the BBC: "The impact of the recession will be different in different parts of the country so we need local solutions which councils are well-placed to provide.

"Councils are there on people's side, on the side of businesses, to help them get through this."

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