England & Wales Press Releases

2020 State of Local Government Finance

Only 3 per cent of councils happy with Government progress on local finances

Nearly all councils forced to raise council tax and increase charges to make ends meet

New research out today reveals near universal disappointment (97%) in the Government’s progress in delivering a sustainable funding system for councils. The 2020 State of Local Government Finance report (conducted by the LGiU and MJ) also found that only 20% of councils are confident this will be prioritised going forward.

The 8th annual survey of councils across England found nearly all councils (97%) plan to increase council tax in 2020/21 to make ends meets, with most (93%) planning to raise it by more than 1.5%. Despite the increase, one in ten councils (12%) believe there is a danger they will be unable to fulfil their statutory duties.

As they face another year of financial uncertainty and continue to await the outcome of the Fair Funding Review, nearly all councils (97%) plan to increase fees and charges, with some being forced to raise them ‘by the maximum possible amount’ (14%). Nearly a quarter of councils (23%) believe these financial plans will lead to cuts that are noticed by the public.

For 2020/21, children’s services and education was named as the top immediate pressure for council finances (36%), followed by adult social care (24%) and housing and homelessness (18%).  Adult social care was named as the top long-term pressure for council finances (37%), followed by children’s services (21%) and housing and homelessness (15%).

To cope with these immediate and long-term pressures, three quarters of councils (75%) plan to increase their level of borrowing. Over half of councils (57%) plan to use their reserves with most of these councils (74%) also using their reserves last year. Additionally, 90% of councils with social care responsibilities intend to make use of the social care precept in 2020/21.

While there was some agreement (39%) that the Government would prioritise immediate adult social care funding needs, the sector was damning in its assessment of a long-term social care strategy with 98% saying they were unhappy with progress so far and 76% lacking confidence that the issue will be prioritised moving forward.

Looking to the future, three quarters (77%) of councils lack confidence in 100% Business Rate Retention as a mechanism to fund local government. Alternative funding models which had support include introducing a local share of income tax (46%), having more freedom to levy other local taxes (40%), a local share of the new digital tax (38%), tourist tax (36%) and a local share of corporation tax (31%). Two thirds (66%) think that councils will become more reliant on income from commercial investments and commercialising council services remains a popular income-generation option with two thirds of councils (66%). Energy projects have moved up the list this year, with almost half of councils (47%) considering this as a source of income, compared with around a quarter (28%) in 2019/20.

Jonathan Carr-West, Chief Executive of LGiU, said: “The state of local government finances is dire. Eight years later and the message continues to be the same, a broken record. It is simply unacceptable that the Government has let things get to this point. Councils deserve better as they work tirelessly, day in and day out, to deliver the best quality services for their residents.

This isn’t local government asking for more money. This is about a fundamentally flawed system that has been broken for years and the Government continually refusing to acknowledge or engage in a proper solution. Sticking plasters will not solve these critical issues. Our social care system is no longer on the edge, it’s fallen off the cliff. Our children’s services aren’t at breaking point, they’re broken. These are issues can not wait another year to be solved. That is why we look forward to working with the new Government to develop solutions in the weeks and months ahead.”

Heather Jameson, Editor of The MJ, said: “The local government funding system is in desperate need of an overhaul. Despite a decade of austerity, local government is doing a valiant job of holding their services together, but they can’t go on forever without proper funding.

While the Government is reviewing the current funding system, the reforms are unlikely to go far enough to pay for the vital services that care for our elderly, protect our children, and help our communities thrive.

As a country, we need to have a serious debate about the state of our state. We need to consider what services we want and how to pay for them. And we need to give local government the powers to get on with the job.” 


Notes to editors

The LGiU and MJ conducted the survey from 13 January – 27 January 2020 and received 195 responses. Responses were collected from Chief Executives, Council Leaders, Directors of Finance and Cabinet Members for Finance across 152 Councils in England. We received responses from a broad cross-section of councils, encompassing county, district and unitary authorities, a mixture of political control, and all regions.

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. 

About LGiU

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.