A recent report by the Local Government Information Unit (LGIU) has painted a stark picture of the financial pressures facing local councils in England. The LGIU’s 12th annual "State of Local Government Finance" survey has brought to light significant challenges, compounded by new pressures such as local government reorganisation and increases in National Insurance Contributions.

Persistent Financial Strain

Local councils continue to navigate a perilous fiscal environment with surging service demands being identified as the primary concern. More than 90% of councils pinpoint this escalating demand as a major issue, especially in sectors such as temporary accommodation, children’s services, and adult social care. These areas are under immense strain due to demographic changes, statutory responsibilities, and financial shortages.

Responses to Fiscal Challenges

In response to these financial challenges, councils are adopting various strategies to balance their budgets. A significant majority (94%) are increasing council tax, while others are raising fees and charges (88%) or selling public assets (60%). Additionally, 63% of councils are planning to cut spending on services, despite efforts to save through restructuring and efficiency measures. Alarmingly, most councils are also drawing on their reserves for the second consecutive year, indicating a reliance on temporary fixes rather than sustainable solutions.

Local Government Reorganisation: A Double-Edged Sword

The survey highlights deep concerns about the ongoing local government reorganisation. Only a fraction of the officials believe that the reorganisation timescales are realistic, or that these changes will lead to financial improvements. Many view the reorganisation as a distraction from the critical task of balancing the books, fearing it will only add to the uncertainty and challenges they face.

Urgent Need for Comprehensive Reform

The LGIU report highlights the urgent need for a fundamental change in how local governments are funded. With the sector on the brink of widespread financial instability, as evidenced by the potential for numerous councils to issue section 114 notices, indicating effective bankruptcy, there is a desperate call for more radical reforms. The report advocates for multi-year financial settlements, which 92% of respondents believe would enhance financial planning and stability.

Conclusion

The LGIU’s findings are a clarion call to the central government and policymakers to reconsider the trajectory of local government financing. Without significant reforms and a more sustainable approach to funding, local councils will continue to struggle, potentially leading to severe consequences for the delivery of vital local services and the overall health of local democracy. This report should act as a vital reference for those aiming to understand and address the complexities of local government finance in these turbulent times.

Read the full report HERE