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Strictly embargoed until: 00:01 Friday 10 February, 2017
Nearly eight in ten councils lack confidence in the sustainability of local gov finances
Over 90 per cent forced to increase charges to make ends meet
New research out today reveals that nearly 80 per cent of councils have little or no confidence in the sustainability of local government finances. The 2017 State of Local Government Finance survey (conducted by the LGiU and MJ) also found that 84 per cent of councils think the current needs assessment formula is not fit for purpose.
As councils struggle to finalise their 2017/18 budgets, nearly all (94 percent) say they will be forced to increase council tax for residents (up from 86 per cent in 2016) as well as increase charging for services (also 94 percent).
To cope with their immediate and long term pressures around social care, housing and homelessness, 65 per cent say they will be forced to dip into reserves to balance the books while nearly nine in ten councils said it was a high priority or essential to explore other sources of income including commercialising council services. This year’s survey also saw a spike in proportion of councils who intend to borrow to fund infrastructure, up to 79% from 57% in 2016/17. Despite these efforts, over 40 per cent of councils say their 2017/18 budget will lead to cuts in frontline services that are evident to the public.
Councils were uncertain about the new measures being introduced by the Government to help alleviate their financial pressures. On 100% business rate retention, nearly 50 percent said they would lose from the transition. And, while eight in ten councils said they are likely to take up all or part of the increased social care precept offered by Government only 4% of councils believe this will close the funding gap. Additionally, nine in ten councils feel council tax rises are a not viable way to address the social care funding gap.
Looking to the future, councils say they want to see increased powers over charging and trading, the ability to reband council tax and raise specific local taxes as well as scrapping the requirement for a referendum for council tax increases above 2 percent per year.
Jonathan Carr-West, Chief Executive of LGiU, said: “Local government finances across the country are in a dire state. Council budgets are stretched beyond measure. Increased demand coupled with the management of nearly a decade of cuts from the Government has left local government at breaking point. Everyone is expecting someone to fail. They are just hoping it won’t be them.
This year’s survey tells us that the Government’s proposals for sustaining local government finance are simply a stopgap. Until they begin to prioritise the solutions outlined by local authorities and acknowledge the pressures facing local government, we will continue to mend the cracks in a system that so desperately needs overhauling.”
Heather Jameson, Editor of The MJ, said: “Councils have seen their budgets slashed for years. They have done what they can to make ends meet, but it’s not enough to make up for the woeful underfunding.
We are not just talking about accountancy problems, we are facing the collapse of vital services which protect vulnerable children and the elderly. Local authorities are trying to run 21st Century services with an outdated funding system and less and less cash – something has got to give.”
Notes to editors
The LGiU and MJ conducted the survey from 05 January – 26 January 2017 and received 163 responses. Responses were collected from Chief Executives, Council Leaders, Directors of Finance and Cabinet Members for Finance across 131 Councils in England and Wales.
The LGiU and MJ have jointly conducted the state of local government finance survey since 2012. Please note that survey data should be credited to the LGiU & the MJ.
The Local Government Information Unit (LGiU) is a think tank and membership body with over 200 councils and other organisations subscribing to our networks. We work to strengthen local democracy and put citizens in control of their own lives, communities and local services. For more information, visit lgiu.org.
About The MJ
The Municipal Journal (MJ) is the UK’s leading weekly magazine for council chief executives and senior managers in local authorities and allied sectors. It offers an insiders’ view of what’s going on and what people are thinking in today’s ever changing and challenging world of local politics – the latest news, incisive comment, in-depth features and interviews, business analysis and the top recruitment vacancies.