The leaders of Hampshire County Council and Kent County Council have warned that without immediate government funding both authorities face “sleepwalking into financial disaster” and section 114 notices.
In a joint letter to prime minister Rishi Sunak, Rob Humby, Hampshire’s leader, and Roger Gough, Kent’s leader, detailed “in the strongest terms” that both councils do not think they can close their future budget gaps, even with “drastic cuts to services”.
Both leaders stated that, based on current forecasts, the councils will need to consider entering into formal talks with their auditors, the Department for Levelling Up, Housing and Communities (DLUHC) and the Treasury over the coming months.
The letter was also addressed to chancellor Jeremy Hunt and levelling up secretary Michael Gove. It stated: “We are writing to you now because without some immediate help and a clear plan for long-term financial sustainability we are likely to be considering section 114 notices within the next year or so.
“Whilst we fully recognise the difficult economic environment, we cannot sit by and let two great counties sleep-walk into a financial disaster.”
Over the next four years, Hampshire County Council has a predicted budget gap of £200m, while Kent County Council faces an overspend of £50.6m in 2022-23.
This comes as an analysis from the County Councils Network estimated that only one in five of England’s county councils are confident they can meet their legal obligation of setting a balanced budget this year.
The problem is simple: the extra money we can raise from council tax and business rates barely covers our normal costs of inflation each year. This leaves major growth, particularly in adults’ and children’s social care, totally unfunded.
Inflation and service pressure
In the letter, the leaders explained that councils have experienced more than 12 years of national austerity and budget cuts, with inflation and demand for services expected to grow over the next two years.
They added that the recent announcements of no changes to current settlements over the spending review period, no fair funding review and the lack of a new two-year deal for local government have increased their concerns over both authorities’ long-term financial sustainability.
Gough said: “The problem is simple: the extra money we can raise from council tax and business rates barely covers our normal costs of inflation each year. This leaves major growth, particularly in adults’ and children’s social care, totally unfunded.”
The letter outlined that without fundamental change in regard to how these services are funded or the statutory obligations of the councils, “all upper-tier local government will soon be over the cliff edge”.
Greater freedoms over council tax
Ahead of the Autumn Statement on 17 November, the leaders stated that they have consistently asked the government to put councils on a sustainable footing. This includes annual increases in funding that match the growth of adults’ and children’s social care services, and greater freedom and flexibility over setting council tax and charging for services, alongside legislative changes to help local government help itself.
“We are constrained by outdated laws created in the 1940s and 1960s and have no autonomy to be able to introduce initiatives for some local services to help generate our own revenue. As a result, our budgets are now at breaking point”, Humby added.
This comes as the chancellor hinted in the House of Commons on 15 November that he is set to make it easier for local authorities to raise council tax in the Autumn Statement. However, there has also been speculation that he intends to implement spending cuts of about £35bn.
Chris Tambini, president of the Society of County Treasurers and director of corporate resources at Leicestershire County Council, told Room151: “The financial position of Kent and Hampshire is mirrored in many county councils. If the Autumn Statement is anything like we expect, most county councils will be unable to provide statutory services as the funding available will be inadequate.”
In response to the council leaders’ letter, a DLUHC spokesperson said: “We understand that councils are concerned about the impact of inflation and we are working with them to understand how this will affect their budgets.
“This year, we have made available an additional £3.7bn to councils to ensure they have the resources to deliver vital services, including an extra £59m for Hampshire Council and an extra £75m for Kent County Council. We will announce details on next year’s financial settlement shortly.”
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