Eight in ten councils fear for their financial future

New research out today reveals that nearly all councils in England plan to raise council tax (95%) and increase charging (93%) to make ends meet this year.

The 2018 State of Local Government Finance survey (conducted by LGiU and The Municipal Journal) also found that two thirds of councils will be forced to dip into their reserves.

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80% of councils fear for their financial sustainability amid growing concern that Northamptonshire CC is the tip of the iceberg. Councils face continued uncertainty about the source and level of funding post-2020 as political turmoil in Westminster has delayed crucial decisions on business rate retention, the new funding formula and devolution. According to the survey

  • 8 in 10 councils lack confidence in the sustainability of local government finance – no movement from last year.
  • Community services face further cuts: Despite three quarters of councils managing to sustain the quality of the frontline services over the past year, evidence suggests that their 2018/19 budgets will see activity further reduced in several key community services including parks and leisure (53% of councils), adult social care (40%) and youth centres (34%).
  • Children’s Services is now the top immediate pressure for councils, above Adult Social Care for the first time in at least three years, suggesting that councils are no longer able to shield these services from the worst of the ongoing budget cuts. Adult Social Care remains the top longterm pressure for councils, followed by Housing and Homelessness.
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The survey shows that local government is united in agreement about how to resolve this crisis, with over two thirds calling for a commitment to maintain 2017 levels of funding for 3 years in order to aid medium term financial planning. They are also calling for assurances that government will cover costs associated with changes to centrally-set business rate policy.

Though long-awaited, the government’s Fair Funding Review (which will dictate the slice of the diminishing pie reassess each council’s level of relative need) will not address the fundamental issues facing the funding system and risks irrelevance in the face of mounting structural pressures. Councils are calling for a formal consultation on how local government financing will work going forward.

Jonathan Carr-West, Chief Executive of LGiU, said: “Councils are on the edge. They are for the most part holding services together (though a significant minority are not). But they can only do this this by raising council tax, increasing charging and draining their reserves.

“The system is unsustainable and needs far more fundamental reform than is presently on offer. It’s simply not acceptable that we don’t know how local government will work post 2020. Councils are calling for assurances around funding for the next three years and for a fundamental redesign of the finance system. At present government is offering neither. That has to change.”

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Editor of The MJ, Heather Jameson, said: “Austerity has pushed council budgets to breaking point and they just can’t take any more. They have faced reduced budgets and increased demand for services – the sums just don’t add up.

“Last week saw the first local authority issue a freeze on its spending due to its cash crisis and it is not likely to be the last. The rising cost of adult social care and its impact on the NHS is well documented, but now children’s services are at risk.

“The Government needs to rapidly rethink its funding of local authorities before services – including those for the elderly and vulnerable children – start to crumble completely.”

*The LGiU and MJ conducted the survey from 10 January – 30 January 2018 and received 132 responses. Responses were collected from Chief Executives, Council Leaders, Directors of Finance and Cabinet Members for Finance across 113 Councils in England.

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