Only one in five of England’s largest councils confident of preventing insolvency without dramatic reductions to services

Just one in five of England’s largest councils are confident of setting a balanced budget next year without dramatic reductions to frontline services, a new survey reveals.

The survey, carried out by the County Councils Network (CCN), comes as the network predicts a £1.7bn funding shortfall next year for their 36 councils, which is likely to be exacerbated by the second lockdown.

CCN says that the survey shows a failure to provide more funding for councils at this month’s Spending Review will result in local authorities implementing ‘visible and damaging changes’ to frontline services next year to balance their budgets, and could hamper their efforts to continue to tackle the spread of Coronavirus.

Download a report looking into the key findings from the survey here.

The respondents, who are England’s largest county and unitary councils, said that after years of austerity, there is limited scope to reduce non-care services such as libraries, bus routes, and school transport. This means that the most severe reductions are likely to fall on social care services, despite pressures created by Coronavirus.

The survey, which received a 100% response rate, shows that over the next two years:

• Just one in five (22%) are ‘confident’ they can deliver a balanced budget next year without ‘dramatic’ reductions to services. Confidence drops further in 2022/23, with just one local authority confident of setting a balanced budget that year. Over half (56%) said service reductions would impact their efforts to tackle Coronavirus, with 60% stating it will lead to a ‘fundamental reduction’ in frontline services.
• Just one council said they would be able to invest in adult social care over the next two years if extra funding was not made available. Over half (56%) said they were planning to reduce access to care packages and/or introduce new charges for services ‘moderately or severely’, with 42% implementing the same severity of reductions to personal budgets and mental health services. As a result, almost half (46%) said it would mean less people would be able to access council-arranged care packages and 65% said it will lead to more demand on the NHS.
• There is less scope to reduce services in children’s social services, with all councils seeing a rise in vulnerable children. However, 27% of councils said they will have to implement moderate or severe reductions to services for children in council care and subject to safeguarding, and 33% planning the same severity of reductions to early years and youth services. Three-quarters (75%) of councils say these reductions to preventative children’s services will lead to more costs in future years.
• Roughly a third of councils say that they have no scope for savings in libraries, bus subsidies, and school transport because these services have already been reduced to minimum levels. However, for those that have not, 33% plan moderate or severe cuts to libraries and 24% say the same severity of reductions is planned for bus route subsidies.
• Just under a third of councils (29%) say that they will plan ‘moderate or severe reductions’ to road repairs and pothole filling. As a result, half of respondents said that this would lead to a further deterioration of local roads.
• When asked about the Coronavirus task in hand, two-thirds (68%) said they will not be able to invest in supporting the economic recovery, and as a result, the same number said it would impact on their efforts to assist local recovery efforts. In total, 60% of councils said service reductions mixed with council tax increases next year would result in greater economic hardship for residents.

Our video below rounds up the headline findings from the survey:

Councils say that the government has provided emergency funding to cover the majority of additional council expenditure to date as a result of the virus, but they face millions in potential unfunded lost income from council tax and business rates. Every council in the survey said that lost council tax income would impact on their finances moderately (29%) or severely (71%) next year.

CCN says these losses could run to £800m next year, increasing the 36 councils’ funding gap next year to £2.2bn. So far councils say they have only been able to identify £485m worth of savings, leaving a £1.7bn gap.

Last month the government provided its fourth tranche of emergency funding for councils. However, county authorities only received 18% of the pot despite representing 48% of the population of England, and leaders of those councils say they have ‘very little room for manoeuvre’ when they are inevitably faced with additional expenditure demands resulting from the second wave of Coronavirus.

At this month’s Spending Review, councils say the government needs to make a multi-billion commitment to increase council funding for the next year alongside an ‘income guarantee’ to protect councils against losses in local taxation.

Cllr David Williams, chairman of the County Councils Network, said:

“Over the past decade, councils have done all they can to protect frontline services, transforming their organisations so they are more efficient. But as this survey shows, we are quickly running out of ways to meet the funding shortfall without dramatic reductions which will make visible and damaging changes to highly-valued services.

“The financial support provided by government over the past year has been very welcome. But even before the onslaught of a second wave, councils were facing difficult choices and they are now left with little room to manoeuvre over the coming months as they face further escalating costs resulting in an immediate cliff-edge next year.

 “Councils have pulled out all the stops throughout this pandemic to protect residents, maintain vital services and support the economic recovery. To ensure that they can continue to do whatever it takes over the winter to combat Coronavirus and to prevent severe reductions to services next year, they need a significant increase in funding for 2021/22, alongside an income guarantee to protect against losses in council tax.”

Cllr Carl Les, leader of North Yorkshire County Council, said:

“We pride ourselves on being a well-run local authority, but the onset of a second lockdown has exacerbated underlying funding gaps in our budget, creating huge uncertainty. With expenditure owing to the virus set to rise throughout the winter period, it is imperative that the Spending Review provides clarity and, above all, an uplift in funding for local authorities who have stepped up to the national effort.”

Cllr Nick Rushton, leader of Leicestershire County Council, said:

“We have taken tough decisions since 2010 to put our council on a sustainable footing, but Coronavirus has dramatically changed the situation and we are now facing severe funding shortfalls and uncertainty next year. The big difference from last year is the drop in council tax income and this is why an ‘income guarantee’ for councils can stave off major service reductions.”

Notes to editor

• The survey was carried out during October and received 35 responses – a 100% response rate. Northamptonshire County Council was unable to respond as it ceases to become a county council next year due to local government reorganisation.
• The £1.7bn figure is calculated using estimates from Pixel Financial Management contained in CCN’s Comprehensive Spending Review Submission (see here).
• Pixel estimate that losses in council tax and business rates (assuming that there is a 5% increase in non-payment for both income streams) could amount to £800m in 2021/22, a figure that is added to an estimated £1.4bn for the 36 county authorities, which is a funding gap based on pre-existing funding shortfalls before Coronavirus. A separate study from the Society of County Treasurers finds that those councils have identified £485m in savings next year, bringing the total funding gap to £1.725bn for 2021/22.
• Below is a detailed breakdown of how confident county authorities are in setting a balanced budget over the next two years:

How confident are you that your council would be able to deliver a balanced budget in the absence of dramatic service reductions for the following years: