Local Authorities in Dire Financial Position After Autumn Statement

In the build-up to the Autumn Statement, the County Councils Network (CCN) expressed significant concerns regarding the substantial financial strain faced by its members. Projections indicated that local authorities were set to overspend by nearly £650m this year, primarily attributed to escalating costs in children’s social care and home to school transport, resulting in a funding deficit of £4bn over the next three years.

Following the Autumn Statement, which did not provide any additional core funding for councils and announced an increase in the National Living Wage, a snap CCN survey revealed that nine out of ten councils reported a considerably worsened financial position. This was due to an additional cost burden of approximately £230m for the next year, compounded by the already substantial savings targets established by councils.

In a concerted effort to address this alarming situation, over 30 council leaders jointly penned a letter to the Secretary of State for Levelling up, Michael Gove, highlighting the necessity for additional funding for children’s services. They cautioned that failure to rectify the financial strain would inevitably result in drastic measures such as painful cuts to frontline services, maximum council tax hikes, and depleting reserves to balance budgets – ultimately rendering the financial situation unsustainable.

The CCN’s survey has illuminated the impact of these warnings, with local authorities now preparing for even more profound service cuts and higher council tax rises. In fact, the survey revealed that half of the authorities are planning more substantial service reductions than initially anticipated, and nine out of ten are contemplating maximum council tax rises of 4.99%.

Regrettably, even these measures may prove inadequate, as an increasing number of councils are expressing uncertainty about their ability to balance their budgets. What was previously a concern for four out of ten councils has now escalated to seven out of ten, indicating a stark increase in financial uncertainty.

The urgency of the situation was underlined by the recent issuance of a Section 114 Notice by Nottingham City Council, making it the most recent local authority to take this step in the past 18 months. While specific financial issues led to this decision, the CCN is cautioning that other well-managed local authorities could potentially face similar challenges in the near future.

To circumvent an impending crisis or severe cutbacks to local services, county leaders are urging the Department for Levelling up, Housing and Communities to allocate more funding for councils in the upcoming Local Government Finance Settlement, set to be unveiled this month.

Cllr Barry Lewis, Finance Spokesperson for the County Councils Network, underscored the critical nature of the financial predicament, emphasising the need for additional funding to address the mounting pressures in children’s social care and school transport services. He stressed that the government must take decisive action to alleviate the financial strain experienced by local authorities, which is largely beyond their control.

The CCN’s latest survey provides a sobering insight into the financial challenges confronting local authorities, amplifying the pressing need for immediate intervention to avert a looming crisis in the provision of essential services to residents.