Financial Crisis Looms: £54bn Shortfall Threatens Essential Council Services Across England

Escalating expenses in social care and school transportation are projected to create a £54 billion deficit for local authorities. The increased allocation for mandatory services necessitates reductions in funding for other sectors, including libraries and public transit.

Political correspondent @alixculbertson

Thursday, October 3, 2024, 3:

Local councils in England are facing a £54 billion deficit in funding due to increasing expenses in social care and school transportation, and they have alerted that without assistance from the government, this financial gap cannot be bridged.

A new report from the County Councils Network (CCN) reveals that over the next five years, councils will experience a significant shortfall, primarily because of the expenses associated with adult social care, children's services, and transportation for students to and from school.

The study revealed that these three sectors are projected to represent 83% of the overall rise in expenditures that local authorities will likely incur on services by 2030.

The report discovered that increasing council tax by 3% annually might decrease the total deficit to £38 billion within the next five years.

The County Councils Network (CCN), representing county and unitary councils that account for 47% of the population, has expressed concerns that the government's expectation of 3% increases in funding is insufficient. They argue that councils will still need to secure billions of pounds annually to meet their financial requirements.

The CCN stated that this would cause reductions in services that could not be maintained.

Over the last ten years, council tax has consistently increased. However, local governments, forced to allocate more funds to heavily demanded services, have consequently cut back on funding for routine public services including libraries, public transportation, road upkeep, and programs for young people.

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Councils are obligated by law to offer certain services, necessitating the reallocation of funds from other vital sectors.

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Local authorities have indicated that they are compelled to allocate increasingly larger portions of their budget to social care, a move that might result in them offering very few services beyond that in the near future.

A recent poll of council chief executives indicates that 16 local governments might face bankruptcy by the 2026/27 fiscal year, with an additional six potentially following suit in 2027/28 unless they secure additional financial support from the government.

Over 16 million people in England could be affected by the bankruptcies.

The County Councils Network has indicated that local authorities are confronted with a difficult choice between cutting crucial services or facing bankruptcy.

The organization argues that such outcomes can be prevented if the government swiftly allocates additional resources and undertakes significant, root-level changes in services including children's social care, adult care, and transportation for children with special educational needs from home to school.

Learn more: Expenses for temporary shelters for the homeless in London surge by 25%. Most local governments lack the resources to offer additional aid for winter utilities.

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Barry Lewis, the vice-chair of the CCN, stated: "To avert bankruptcy declarations by 60% of councils by 2028, ministers will inevitably need to fundamentally reconsider the legal obligations assigned to local authorities."

"Nevertheless, this undesirable compromise can be circumvented by allocating significant resources to bolster services in this legislative session, followed by implementing profound and comprehensive reforms aimed at tackling the underlying issues of demand and market inefficiencies that escalate costs in children's services, special educational needs, and adult social care."

"Immediate action is required, with a strategy to be implemented in the next 18 months. Failing to do so could compromise the extensive objectives of local government and disrupt the government's strategic public-service reform and the movement toward more devolved powers to councils."

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Following the report, a representative from the government stated: "We are committed to assisting individuals in leading self-sufficient, dignified lives and ensuring that every child has the best opportunities for success."

"Despite the legacy we've inherited, we are committed to collaborating with local authorities to rebuild their core functions and restore their stability. Our approach includes ensuring consistent support through long-term financial agreements, eliminating the need for competitive grants, and overhauling the local auditing process."

"Further specifics will be provided during the upcoming Spending Review and Local Government Finance Settlement. However, we are prepared to discuss any financial challenges with councils in need of assistance."

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