Only one in five of England’s largest councils are confident of setting a balanced budget next year

Only one in five of England’s largest councils are confident they can meet their legal obligation of setting a balanced budget next year, with a new survey revealing the extent of planned service reductions due to soaring inflationary pressures.

Council leaders warn that ‘everything is on the table’ in reducing local services if the Chancellor does not spare councils from further cuts and provide more funding for local government in Thursday’s Autumn Statement as they grapple with £3.5bn of additional costs this year and next.

The survey, carried out by the County Councils Network (CCN), finds that in order to make up the shortfall and stave off bankruptcy councils are likely to have to reduce economic growth projects, their spend on climate action, and reduce adult social care packages and support for young people. They are also likely to reduce other essential everyday services such as bus route subsidies, waste centres and streetlighting. This comes off the back of councils seeing a reduction in spend each year between 2010 and 2018.

The survey, which received a 90% response rate, asked councils about the impact inflation and demand were having on their budgets over the next two years and reveals:

• Only one in five (22%) of councils are confident of preventing financial insolvency next year if there is no additional support in the upcoming Autumn Statement. Councils are legally obliged to set a balanced budget, unlike the NHS, meaning they must use their reserves or cut services if spending exceeds their funding.
• This is because councils are grappling with £3.5bn of additional costs this year and next due to inflation and rising demand; more than double the expected rise. Even if local authorities raised council tax by 3% and the Chancellor does not reduce their budgets further, those councils face a funding gap of £821m. In addition they face £700m of extra costs for their capital expenditure over this year and next, which is for one-off projects such as new buildings and roads.
• At a time when economic growth and levelling-up is a key aim of the new government, councils say they will have little choice but to cut back on growth-related activity. Almost two-thirds (65%) of respondents said it was ‘likely or very likely’ that they will pause or cancel some economic growth and major road projects as well as routine road maintenance, whilst 81% said it was ‘likely or very likely’ they would have to pause or cancel projects such as building new leisure centres and bus or train station improvements. In addition, 78% said it was ‘likely or very likely’ they would have to scale back climate change action.
• Services for the elderly, vulnerable people and children could be scaled back. In total, 72% of councils said it is ‘likely or very likely’ they would tighten eligibility for adult social care services, and 56% said they would likely have to reduce reablement and community-based adult social care services. In addition, 63% would scale back school transport services, with almost half – 44% – councils said it is ‘likely or very likely’ they would have to cut support packages to young people with special educational needs, with 45% reducing the number of children’s centres and youth services.
• Highly valued everyday services would also see reductions, unless further funding is made available. In total, 75% of respondents said it was ‘likely or very likely’ they would cut some or all bus route subsidies which enables services to run on uncommercial routes. Almost two thirds – 63% – said it was ‘likely or very likely’ they would turn off an increased amount of streetlights or turn them off at certain periods in the night. Over half (56%) of councils also said they would likely reduce the number of libraries and (53%) household waste recycling centres or cut their opening hours

The release of today’s questionnaire follows CCN publishing a document with the Society of County Treasurers and LG Futures last month, which projected councils’ funding pressures over the next 18 months due to inflation and demand. You can download it here.

With inflation soaring this current year, significant shortfalls have opened up in every single county authority’s budget. To address this, CCN members are using their reserves this year but these can only be spent once and are viewed as a very short-term solution.

The CCN says that many of its councils are facing a ‘cliff edge’ where even making substantive cuts to frontline and highly-valued services may not be enough to prevent them from issuing a Section 114 notice. For all of its member councils, difficult decisions over what services to reduce will have to be made with many likely to offer just the bare minimum in local services.

The CCN has written to the Chancellor to outline the scale of the challenge facing its members, which calls on the Treasury to maintain existing 2021 Spending Review commitments for local government at the very minimum, and not propose any reductions. However, the councils say that the government needs to go further to support councils to cope with rising inflationary costs by increasing direct funding or reprioritising existing spending commitments.

Cllr Sam Corcoran, Labour Vice-Chairman of the County Councils Network said:

“The next two years are shaping up to be some of the most challenging for councils in recent memory. After a decade of austerity and with inflation soaring, if the Chancellor does not spare councils from further cuts and provide more funding for local authorities, everything is on the table when considering which vital services to cut.

“This County Councils Network budget survey paints a clear picture of what will happen if we do not receive more funding to address inflationary and demand pressures. Councils will have little choice but to reduce vital everyday services and those for the most vulnerable in society, as well as economic growth projects and those aimed at tackling climate change. Reducing these all create a false economy that stores up problems for the future.

“Even these decisions will not be enough, with less than one in five councils confident of setting a balanced budget next year without further support. This is why it is vital that the government recognise the value in supporting councils – with investment in local government allowing us to continue vital economic growth and climate action, supporting people to stay outside of hospital settings, and provide vital services people rely on every day.”