Watchdog warns councils are ‘struggling’ with finances

The financial health of councils across England is getting worse, the National Audit Office (NAO) has warned.

In a new report published today, the watchdog claims local authorities are ‘struggling’ to juggle increasing demand for services with central government funding cuts of nearly 50% since 2010.

The report warns many local authorities are relying on using their savings to fund local services and are overspending on services, which it adds is not financially sustainable.

The report goes on to show that if local authorities with social care responsibilities keep using their reserves at current rates, one in ten could have exhausted them within three years.

According to the report, Social care now accounts for more than half (54.4%) of local authorities’ total service spend, up from 45.3% in 2010-11.

There is further evidence that these spending reductions are impacting frontline services.

Since 2010-11, 33.7% fewer households have their waste collected at least weekly, the number of bus miles subsidised by local authorities outside London has fallen by 48.4%, and the number of libraries has reduced by 10.3%.

‘Current funding for local authorities is characterised by one off and short-term fixes, many of which come with centrally driven conditions,’ said the head of the NAO, Amyas Morse.

‘This restricts the capacity of local authorities and yet the weight of responsibility to respond to increased demand and maintain services remains very much on their shoulders.

‘The Government risks sleep walking into a centralised local authority financial system where the scope for local discretion is being slowly eroded.’

Responding to the report, the chairman of the Local Government Association, Lord Porter: ‘This stark report sets out the significant funding challenges facing all councils and the effect years of unprecedented funding reductions have had on the local services our communities rely on and other parts of the public sector.

‘It is yet further compelling evidence as to why the Government must urgently secure the financial sustainability of local government and the 1,300 different statutory duties and responsibilities councils provide.

‘Only with the right level of funding and powers, can councils continue to make a difference to people’s lives by building desperately-needed homes, creating jobs and school places, providing dignified care for our elderly and disabled and boosting economic growth,’ added Lord Porter.

To read the full report, click here.