Survey finds local government finances in crisis

The LGIU’s Local Democracy Research Centre has published its 12th annual State of Local Government Finance in England survey.

Each year, the LGIU’s Local Democracy Research Centre surveys council leaders, chief executives, cabinet members for finance, and senior finance officers to find out how local authorities are managing financially.

This year, the research looked at how local government reorganisation and rises in National Insurance Contributions represent additional challenges.

This is against a backdrop surging service demand and councils pulling all the levers available to them.

A high proportion of authorities believe it is likely that they will issue section 114 notices in the short and medium term.

The survey revealed that councils are continuing to struggle under inflation, workforce shortages, high debt burdens, the local authority audit backlog, and ring-fencing constraints.

Local government figures have raised concerns about reorganisation - only one 1 in 10 believe they have been adequately involved in reorganisation, while fewer than 1 in 5 feel there has been sufficient clarity surrounding the government’s plans. Only 1 in 5 think the proposed timescales for reorganisation are deliverable, while fewer than 1 in 4 believe that it will improve council finances.

Of the 150 councils that the LGIU surveyed, 6% said it was likely that they would issue a section 114 notice in the next financial year, with 35% indicating a likelihood of doing so in the next five years.

Surging service demand is still the greatest threat to the sustainability of local government finance, with over 90% of councils identifying it as a major issue. The most critical areas of concern include: temporary accommodation; children’s services; and adult social care.

In response to the survey, Cllr Claire Holland, Chair of London Councils, said: “This stark report chimes with what we see in the capital, where severe and worsening pressures are pushing London boroughs towards bankruptcy.

“The combination of years of structural underfunding, fast-rising demand for services, and spiralling costs have created a perfect storm for London boroughs’ finances.

“The Spending Review is a crucial opportunity to restore sustainability to council funding. This would put us in a much better position to invest in priorities such as sustaining local services, building more affordable homes, and driving the economic growth we all want to see.”