With 2024 marking the fourteenth year of austerity and demand for councils’ services soaring, is there enough space in councils’ budgets for investment to meet their net zero targets?
Councils are set to play a key role in helping the UK decarbonise and enabling the government to achieve its net zero by 2050 target, with over 300 local authorities declaring climate emergency plans so far.
However, in March, the Local Government Association (LGA) revealed that only two-thirds of councils are confident that they will hit their net zero targets due to the lack of a “sufficient” funding plan.
This comes as the sector has faced significant underfunding over the past decade, with 19 local authorities having to claim exceptional financial support from the government as they were unable to balance their budgets last financial year.
In addition, only two weeks ago new analysis was published by the County Councils Network (CCN), which revealed that local authorities are set to spend £12bn on special educational needs and disabilities (SEND) services by 2026, increasing the “risk of widespread insolvency”.
‘Can’t afford net zero’
At CIPFA’s Public Finance Live conference in July, Cecilia Booth, executive director of corporate services and section 151 at Peterborough City Council, stated that her “immediate instinct” is to say that “we [local authorities] can’t afford net zero” when looking at the budgetary pressures facing the sector.
Currently, Peterborough City Council is facing a budget gap that has increased from £3m to £28m, she told delegates.
“We are just doomed. The thought of investing in net zero and new technology is very difficult to think of, while we have children in care and homelessness pressures that are soaring.
“Today, we just haven’t got the funds to do it. It’s very difficult to see how we can prioritise this over other things.” Booth said.
Despite stating this, Booth did acknowledge that local authorities “can’t afford not to” invest in net zero, with Peterborough City Council currently committed to a target of net-zero carbon by 2030.
Financial ‘obstacles’
Alongside Peterborough, Ryan Jude, the cabinet member for climate, ecology and culture at Westminster City Council, stated that the authority also faces “challenges” when responding to the climate emergency.
“Like other local authorities, Westminster faces challenges at a time of rising costs and pressures on council finances, but our commitment to net zero is unwavering.
“As such, our approach has been to explore ways of embedding climate action into everything we do, from outreach and engagement to incorporating energy efficiency measures into our social housing upgrades,” Jude told Room151.
Westminster council has committed to two climate targets: a net zero by 2030 target for itself, and a 2040 goal for the city, with Jude explaining that the authority is currently making “progress” towards achieving these.
“We achieved a 17% year-on-year corporate carbon footprint reduction in 2022/23. However, we still face delivery challenges, with leveraging financing for action required being one of the biggest obstacles,” he said.
Private investment and LCBs
Despite this, Jude explained that Westminster has been able to earmark some funding for net zero, with the authority ringfencing a £5m reserve in 2019 to establish and initially fund its climate emergency response.
Alongside this, “The council’s 2024/25 budget includes a commitment to fund £218m programme to retrofit existing homes,” he added.
However, Jude acknowledged that achieving net zero by 2040 for the city cannot be solely funded by the council and will require investment and funding from a “range of stakeholders and partners”.
“In 2023, we introduced the Westminster Green Investment, which reached £1m in nine days,” Jude explained.
The Westminster Green Investment scheme is a type of Community Municipal Investment (CMI) called a Local Climate Bond (LCB), which enables local authorities to raise capital to fund decarbonisation projects in their communities such as wind farms, solar panels and rewilding.
LCBs are open to all investors from £5 via a crowdfunding platform hosted by Abundance Investment.
To help raise private finance for net zero, other councils such as West Berkshire and Winchester, have either launched or are considering launching a CMI.
The most recent authority was Winchester, which announced in January that it has begun the process of identifying carbon-saving and high-nature projects suited to CMI investment “in conjunction with appropriate stakeholders”.
Government action?
However, there is a sense in the industry that the burden of funding the decarbonisation of local government can’t just be focused on councils and the private sector, with the UK government also needing to play its part.
The LGA’s survey in March revealed that three-quarters (73%) of councils stated that the “bureaucracy” and “uncertainty” of government funding is unattractive to private investors.
Some councils surveyed also said that potential local climate action is being “strangled” by hard-to-reach Whitehall funding pots.
But with a new Labour government in place which seems to be more focused on climate action, could it resolve some of these financial obstacles?
So far, deputy prime minister Angela Rayner has committed to removing competitive bidding and providing local government with multi-year funding settlements, which could potentially enable more finance for net zero.
However, with many local authorities warning of issuing section 114 reports last financial year, 19 requesting government support, and soaring demand for services, net zero is unlikely to be a government funding priority, at least in the short term.
—————
FREE bi-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
