Financial sustainability of local authorities Contents


After seven years of government funding reductions totalling nearly 50% and rising demand for services, local authorities are under real strain. Key services that support vulnerable people, such as social care and housing, are now under enormous pressure. Other important local services in areas such as planning, transport, and cultural services have seen spending cut by between a third and a half. Local authorities face an estimated funding gap of over £5 billion by the end of the decade. The harsh reality is that more and more local authorities are now showing signs of financial stress such as overspending on services. They now face a period of greater uncertainty as their funding framework beyond 2019–20 is unclear.

The Ministry of Housing, Communities and Local Government (the Department) has not yet developed a plan to secure their long-term financial future. It is not transparent enough about its understanding of the pressures faced by local authorities, meaning Parliament and the taxpayer cannot be sure that it genuinely understands or is addressing the issue. The Department is overly reliant on a favourable outcome from the 2019 Spending Review to address authorities’ financial issues. This is particularly complacent given that the previous Spending Review settlement resulted in many local authorities having to rely on reserves to fill the gaps in funding. This is an unsustainable situation. The recent announcement about additional money for the NHS did not include anything for social care. Given that social care is the other half of the equation, it is vital that there is a long-term solution.

Published: 4 July 2018