Councils in ‘significantly worse financial position’ after the Autumn Statement, with seven in ten now unsure if they can balance their budget next year

CCN Latest News, CCN News 2023 | 06 December 2023

England’s largest councils say they are in ‘significantly worse’ financial position than before the Autumn Statement, as a new survey reveals that local authorities now plan more severe cuts and seven in ten now no longer confident they can balance their budget next year.

In the lead up to the Autumn Statement, the County Councils Network (CCN) warned that its members were under extreme financial pressure. The authorities they represent were set to overspend by almost £650m this year due to spiralling costs, particularly in children’s social care and home to school transport, which was contributing to a £4bn funding deficit for those authorities over the next three years.

However, with no new core funding announced for councils coupled with an increase in the National Living Wage – which is set to cost those local authorities around £230m next year – nine in 10 councils in a snap CCN survey said that they were now in a ‘significantly worse’ position. This is because this extra cost burden is on top of significant savings targets councils already had.

In a joint letter outlining their concerns, over 30 leaders of those councils have written to Levelling up Secretary Michael Gove, warning that failure to rectify the situation and provide additional funding for children’s services would mean councils are likely to face the prospect of outlining painful reductions to frontline services.

In addition, they say they could have to raise council tax to the maximum permitted and use their reserves – leaving them at unsustainable levels – to balance budgets.

You can read the cross-party joint letter here.

The CCN’s survey shows the impact of those warnings: with councils now planning for deeper service cuts and higher council tax rises following the Autumn Statement. Five in ten authorities now plan even more reductions to services than they were before and nine in ten suggesting they will now levy maximum council tax rises of 4.99%.

But even this many not be enough, with more councils now concerned they will be unable to balance their budgets. Before the Autumn Statement, four in ten of these councils were not confident they could balance their budget, with the survey revealing this figure has risen to seven in ten.

Last week, Nottingham City Council was the latest local authority to issue a Section 114 Notice over the last 18 months. Whilst that council, alongside others like Birmingham City Council, had very specific financial issues, the CCN is warning that even well managed local authorities could follow suit in the coming years, such is the extent to their financial challenge.

To avoid this scenario – or severe reductions to local services – county leaders are calling on the Department for Levelling up, Housing and Communities to provide more funding for councils in the forthcoming Local Government Finance Settlement, due to be unveiled this month.

The snap CCN survey lays bare the extent of the challenge facing local authorities currently:

  • Due to announcements in the Autumn Statement, such as the minimum wage increase, nine in ten councils said they were in a worse position than before. Five in ten councils said that now need to make even more cuts as a result.
  • When asked what type of service reductions were more likely seven in ten councils said they would have to propose staff reductions, whilst the same number also said they were now more likely to cut adult social care services and school transport services.
  • Five in ten councils said they now were more likely to pause or cancel major economic growth and regeneration projects, such as leisure centres, as well as closing and/or changing the opening hours of both libraries and household waste and recycling centres.
  • Based on the survey’s responses, the increase in the National Living Wage is set to cost an average £6.3m per county local authority and £230m for all of those councils.
  • When asked how they would fund the minimum wage increase, eight in ten councils said service reductions and four in ten said higher council tax rises. Before the Autumn Statement, seven in ten councils said they planned to levy the maximum 4.99% council tax rise, with this now rising to nine in ten.
  • But even these measures together – as well as use of ‘rainy day’ reserves – might not be enough, as CCN’s temperature check on its councils’ budgets shows. Before the Autumn Statement, four in ten councils were unsure or not confident of delivering a balanced budget in 2024/25 but this has now risen to seven in ten. Looking further ahead, almost eight in ten local authorities are unsure or not confident of setting a balanced budget in 2025/26.

Cllr Barry Lewis, Finance Spokesperson for the County Councils Network, said:

“We understand that public finances are tight but the Autumn Statement provided no further funding to help ease the existing financial pressures for councils – pressures which are largely outside of our control. In fact, those have been added to with the increase in the National Living Wage, adding hundreds of millions to our budgets.

 “The results of our new survey show that our councils’ financial position is significantly worse than before the Autumn Statement. The majority of the County Councils Network’s member councils will now have no choice but to increase their planned level of service reductions, reduce investment on growth-creating capital projects, and levy higher council tax rises: all of which impact our residents. For some even this drastic action will not be enough, with seven in ten now no longer confident they can balance their budget next year.

“When finalising the Local Government Finance Settlement later this month, the government must address those pressures with additional funding focused on children’s social care and school transport services.”