Local authorities are facing a £5.2bn funding deficit by April 2026, according to a new analysis by the BBC’s Shared Data Unit.
The BBC’s analysis of 190 upper-tier authorities in the UK has revealed that the average council now faces a predicted deficit of £33m by 2025/26. This is a 60% rise from £20m two years ago.
The analysis also found that councils expect to be £5.2bn short of balancing their books by April 2026 after making £2.5bn of planned cuts, with at least £467m of these cuts being from adult social services.
This research comes as both Kent and Coventry councils have warned that they face significant overspends in their 2023/24 budget, with the majority of their financial pressures coming from adults and children’s social care services.
In response to the BBC’s analysis, Tim Oliver, chairman of the County Councils Network (CCN), said: “This research by the BBC continues to demonstrate the scale of the financial challenges facing local authorities in England.
“Despite the government increasing funding for councils over recent years, a combination of high inflation and rising demand has left county and unitary authorities facing some of their toughest budgetary decisions to date this year.”
Oliver stated that councils will deliver savings to protect frontline services, however “there is now little fat to cut after a decade of financial restraint”.
He continued: “We must remember that while inflation is beginning to reduce, these costs councils have incurred won’t just disappear from our budgets overnight – they are now embedded into the future. Councils in county areas have also been historically underfunded, inevitably leading to higher council tax rates.
“The medium-term outlook therefore looks bleak unless these higher costs are recognised and councils are given longer-term financial certainty, alongside delivering long-promised reforms.”
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£1.1bn reserves drawdown
The BBC’s investigation also found that local authorities expect to use £1.1bn of reserves to balance their books this financial year.
Room151 reported in July that Bradford Council’s reserves were “close to exhaustion” as the authority had to draw down £100m in 2022/23 to balance its budget.
Also, just last week, Middlesbrough Council stated that it was at “significant risk” of exhausting its usable revenue reserves this financial year, which could lead to a potential section 114 notice being issued.
In addition, Kirklees Council warned two weeks ago that the authority could face a section 114 notice in 2024/25 if it does not reduce expenditure. This is due to Kirklees facing a £50m combined funding gap over the next two years, which if not dealt with, would reduce its reserves to below an “adequate” amount.
Other councils that have warned that they face potential s114 notices in the future include Guildford, Hastings and Southampton.
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