Over half of the councils in Room151’s annual treasury and finance survey estimate that they will have insufficient funding to deliver net-zero pledges in 2023.
The survey of more than 100 section 151 officers, treasury managers, finance directors and other senior finance professionals across Great Britain showed that 52.1% of respondents anticipated that their authority would have insufficient funding to deliver decarbonisation pledges in 2023. Of those, 17.4% expected to be over 60% underfunded.
Only 6.6% of councils said that they were fully funded to meet net-zero pledges and 41.3% didn’t know.
Kelly Watson, head of local government relationships at CCLA Investment Management, announced the results at Room151’s Local Authority Treasurers’ Investment Forum and FDs’ Summit today (13 September). She highlighted concern from respondents that net zero was “pretty much unfunded in its entirety”.
“I think that is reflective of how are we [local government] going to do it? What action plans are we going to put in place? And then how on earth are we going to fund it going forward as there isn’t a budget for it,” she said.
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Responses were received by 121 local authorities, which included a mix of district (35.5%), unitary (19.8%), London borough (18.2%) other borough (9.9%), county (7.4%), met (4.1%) and police/fire/transport/other (3.3%).
What action plans are we going to put in place? And then how on earth are we going to fund [net zero] going forward, as there isn’t a budget for it.
Net-zero investments
The survey highlighted that 59.5% of respondents were “likely” and 22.3% were “highly likely” to invest significantly in decarbonisation pledges.
Watson added: “One thing that did start to come out of the survey was the uncertainty that we [local government] have of how we are going to meet the climate challenge that we have in front of us. We know it needs investment, but how are going to manage and fund it?”
Just over 50% of councils suggested that they are either “likely” or “highly likely” to undertake significant borrowing over the next five years to fund the delivery of their net-zero pledges.
The survey also looked at other issues impacting local government finance, with inflation identified as the greatest risk to councils’ funds over the next five years. This was mentioned by 86.8% of respondents (participants were able to pick two options), followed by service demand (51.2%), recession (29.8%) and political stability (13.2%).
Nearly three-quarters of respondents (73.6%) said that, with inflation eroding the value of cash and interest rates rising, treasury managers should explore options for increasing yield within sensible risk-adjusted parameters.
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