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Half of all
councils will be cutting spending on services on top of council
tax rises
New research out
today from the Local Government Information Unit (LGIU) reveals
more than half of councils will be cutting spending on services,
increasing commercial investments, or spending reserves to make
ends meet in the year ahead. The 2023 State of Local Government
Finance report found that these desperate measures are being
taken on top of the more than 90% of councils that would also be
increasing council tax or increasing fees or charges.
This survey (last
conducted in 2020) found that 91 percent of councils would be
increasing council tax this year with most respondents saying
they would need to increase council tax by the largest
permissible amount without a referendum (2.5-2.99%).
A quarter of
councils believe residents can no longer access the same level of
frontline services as last year. And, nearly 20% think their
2023-2024 budgets will lead to cuts that will be visible to the
public. Most worryingly, just under 1 in 10 believe that
financial constraints represent a threat to their capacity to
fulfil their statutory duties with over 50 percent of councils
saying they would be cutting spending on services.
Thirty years on
from the introduction of council tax in the UK, just 14 percent
of councils across England said they were confident in the
sustainability of local government finance and only 8% felt
confident that the government would prioritise local government
in wider policy decisions.
For 2023/24,
housing and homelessness was named as the top immediate pressure
for council finances (25%), followed by children’s services and
education (17%) and adult social care (15%). Adult social
care was identified as the top long-term pressure for council
finances (40%), followed by environment and waste (16%) and
children’s services (12.5%).
To cope with these
immediate and long-term pressures, 24% of councils plan to
increase their level of borrowing. Over 67% of councils plan to
use their reserves with most of these councils (80%) also having
used their reserves last year. Additionally, 97% of councils with
social care responsibilities intend to make use of the social
care precept in 2023/24.
Looking to
alternative models of local government funding, nearly three
quarters (73%) of councils felt 100% Business Rate Retention was
their preferred mechanism. Other alternative funding models that
councils preferred included scrapping the council tax referendum
requirement (28%), a local share of income tax (26%) and
devolving funding for other public services (21%).
Over half of all
respondents said they would be increasing their commercial
activity this year. The most popular options were local housing
and commercial developments, and asset sales, each of which over
a quarter of all councils will be doing.
The 2023 State of
Local Government Finance report is part of the wider work of the
LGIU’s Local Democracy Research Centre which was set up by the
LGIU to investigate the things that matter to our members and to
local government around the world. Further analysis on how other
parts of the UK and councils around the world are managing their
finances will be conducted in the coming months. To get involved
in this ongoing research contact greg.stride@lgiu.org.
Jonathan Carr-West,
Chief Executive of LGIU, said: “In the 10 years since we started
this survey, we have seen consistently low confidence in the
sustainability of the local government funding system but this
year’s results - at just 14 percent of councils across England -
are at an all-time low.
Day in and day out,
councils continue to display extraordinary dedication, innovation
and resilience in serving their communities but they are let down
by a funding system that is not fit for purpose. This year’s
State of Local Government Finance report lays bare the depths of
this failure.
Despite repeated
promises from central government, we have seen no reform of local
government finance and no return to multi-year funding. Instead,
there has been a disjointed series of one-year settlements
predicated on local authorities raising council tax by the
highest amount permitted.
And, even with
these tax rises, councils are having to cut services, borrow more
money and dip into their reserves year after year. Citizens
across the country are failed in three ways: their bills rise,
their services are cut and the councils they rely on edge ever
closer to financial ruin.
There’s no single
solution to this problem. Instead, local government is crying out
for a toolbox of fiscal devolution measures. It’s time to give
power to councils and let them succeed where central government
has comprehensively failed.”
ENDS
Notes to
editors
The LGIU conducted
the 2023 State of Local Government Finance survey from 9 February
– 23 February 2023 and received 160 responses. Responses were
collected from Chief Executives, Council Leaders, Directors of
Finance and Cabinet Members for Finance across 138 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. 2020 was the
last time this survey of councils in England was carried out.
Prior to that, It was conducted annually since 2012.
