National Audit Office report on councils’ financial sustainability: CCN responds

Today the National Audit Office has released a new report, Local Government Financial Sustainability, today.

The independent public spending watchdog’s report delves into the challenges faced by local authorities, and analyses what is driving costs. It concludes that market-related challenges and economic factors such as inflation are the major reasons in driving costs.

It finds costs are concentrated in adult social care, children’s services, special educational needs and temporary accommodation.

Below, the County Councils Network responds to the report.

Cllr Tim Oliver, Chairman of the County Councils Network, said:

“Today’s report from the National Audit Office (NAO) reveals how unsustainable local authority finances are, and follows our own analysis which found that councils face major funding shortfalls over the next five years. As we have warned, councils have little choice but to spend more and more on the most demand-intensive services, at the expense of everything else – leaving them providing little more than care services.

“The government has committed to a review of local authority funding, which is long overdue. But for county and unitary councils – who face the biggest financial pressures – the review could actually take money off these areas, rather than begin to solve their challenges, if government choses to distribute money exclusively based on deprivation.

“As this NAO report shows, it is market-specific cost pressures, mainly in adult social care, children’ services, and special educational needs, that are driving councils’ costs rather than deprivation. Therefore government must recognise and address these pressures in its fair funding review, otherwise it will push many well-run councils to the brink.

“We also support the NAO’s calls for government to address the deficits built up by councils in their special educational needs budgets. These deficits are unmanageable and projected to rise to £5.9bn next year but are kept off councils’ budget books currently due to the ‘statutory override’. With the clock ticking until the override expires in March 2026, councils need clarity and urgently.”