Almost one in five council leaders and chief executives have warned that they could be forced to issue a section 114 notice either this year or next year due to a lack of funding, a new survey by the Local Government Association (LGA) has found.
The research, based on responses from 114 chief executives and 71 council leaders, revealed that around half are not confident that they will have enough funding to fulfil their legal duties next year. Whilst nearly one in five council leaders believe that it is “fairly or very likely” that they will issue a section 114 report in the next 15 months.
Previous predictions by the LGA found that councils in England face a £4bn funding gap over the next two years to keep services standing still. However, the national membership body for local authorities highlighted that last month’s Autumn Statement didn’t provide additional funding to protect services from further cuts.
This was reflected in their survey, which found that nearly two thirds of respondents said that there were no announcements in the statement that they thought would help them to manage their council’s financial position.
The survey was conducted before the Department for Levelling Up, Housing and Communities (DLUHC) published its finance policy statement yesterday (5 December), which revealed that local authorities’ core spending power will increase by £4bn to £64bn next year.
Commenting on the research, Shaun Davies, the LGA’s chair, said: “The lack of funding for local services in the Autumn Statement has left councils facing a growing financial crisis.
“No council is immune to the risk of running into financial difficulty. As our worrying survey shows, many now face the prospect of being unable to meet their legal duty to set a balanced budget and having section 114 reports issued.”
Only last week, Nottingham City Council became the latest authority to issue a section 114 notice following on from Birmingham, which declared that it was unable to balance its budget in September.
“While councils have worked hard to reduce costs, find efficiencies and transform services, the easy savings have long since gone. The government urgently needs to act to address the acute financial challenges faced by councils,” Davies added.
Authorities in ‘significantly worse’ position
The LGA’s survey also comes as research by the County Councils Network (CCN) has revealed that following the Autumn Statement nine in ten councils are now in a “significantly worse” position.
The CCN’s analysis also found that seven in ten of England’s largest councils are now unsure if they can balance their budget next year, with five in ten planning even more reductions to services than they were before the chancellor’s announcement last month.
The CCN warned that whilst Nottingham’s and Birmingham’s situations were due to “specific financial issues”, even well managed local authorities “could follow suit in the coming years” due to the challenges councils face.
Barry Lewis, the CCN’s finance spokesperson, said: “The results of our new survey show that our councils’ financial position is significantly worse than before the Autumn Statement.
“The majority of the CCN’s member councils will now have no choice but to increase their planned level of service reductions, reduce investment on growth-creating capital projects, and levy higher council tax rises: all of which impact our residents. For some even this drastic action will not be enough, with seven in ten now no longer confident they can balance their budget next year.”
Both the CCN and the LGA stated that the government needs to “urgently” use the forthcoming provisional local government finance settlement to provide councils with more funding to help them set a balanced budget for next year.
The CCN has told Room151 that this research still stands following the publication of DLUHC’s finance policy statement yesterday (5 December).
—————
FREE weekly newsletters
Subscribe to Room151 Newsletters
Follow us on LinkedIn
Follow us here
Monthly Online Treasury Briefing
Sign up here with a .gov.uk email address
Room151 Webinars
Visit the Room151 channel
