Twelve councils reportedly at risk of failing to deliver statutory duties amid financial pressures, research shows

More than half of councils plan to cut spending on services, increase commercial investments or spend reserves to balance their budgets in the year ahead, with 12 councils reporting that financial pressures are threatening their ability to meet their statutory duties, a report from the Local Government Information Unit (LGIU) has found.

The LGIU's 2023 State of Local Government Finance report – which considered 160 survey responses from Chief Executives, Council Leaders, Directors of Finance and Cabinet Members for Finance across 138 English councils – found widespread concern among senior council figures about their local authorities' long and short-term resilience, with only 14% of senior council figures reporting to be confident in the sustainability of council finances.

Adult social care, housing and homelessness and children's services were the greatest pressures on council finances, according to the report. Of these, adult social care was the most frequently cited long-term pressure, and housing and homelessness were most often chosen as a short-term pressure.

Ninety per cent of councils are increasing council tax amid the pressures, most often by the maximum amount possible without triggering a referendum.

In addition, 52% of councils said they would be cutting spending on services, with 20% going further and reporting that their budgets would lead to cuts in frontline services that would be felt by the public.

The LGIU reported that of these councils, 7.5% (12 different councils) said there was a danger that financial constraints could risk their capacity to deliver their statutory duties.

Alongside cuts, councils appear increasingly reliant on commercial activity to fill the gap in their funding, according to the report. Fifty-two per cent of the councils surveyed told the LGIU they would be increasing commercial activity this year, primarily through local housing and commercial developments and asset sales.

When asked about central government's approach to local government finance, just 5% reported that they were happy with the progress that has been made in delivering a sustainable financial system, and only 8% felt confident that the government would prioritise considering councils in wider policy decisions.

Respondents also criticised the Government's Levelling Up funding which requires councils to submit bids for funding.

This process was" widely regarded as an ineffective way to distribute funds and a serious waste of time and resources for councils," the report noted.

Just over 80% of all respondents said their council had made at least one unsuccessful bid and 21% that all of their bids had been rejected.

Commenting on the findings, Jonathan Carr-West, Chief Executive of LGIU, said: "In the 10 years since we started this survey, we have seen consistently low confidence in the sustainability of the local government funding system but this year's results - at just 14% of councils across England - are at an all-time low."

He added that councils have been "let down by let down by a funding system that is not fit for purpose.

"Despite repeated promises from central government, we have seen no reform of local government finance and no return to multi-year funding. Instead, there has been a disjointed series of one-year settlements predicated on local authorities raising council tax by the highest amount permitted."

Carr-West concluded: "There's no single solution to this problem. Instead, local government is crying out for a toolbox of fiscal devolution measures. It's time to give power to councils and let them succeed where central government has comprehensively failed."

Adam Carey