Local authorities in England are teetering on the edge of a financial crisis, with most planning to increase council tax from April while continuing to cut services, a survey has found.
The annual finance survey from the Local Government Information Unit thinktank (LGIU) comes days after Northamptonshire county council became the first town hall in two decades to declare effective bankruptcy. Severe financial pressures had left the council unable deliver a workable budget.
The LGIU warned that the Northamptonshire crisis was potentially the “tip of the iceberg”, with four-fifths of councils concerned about their financial sustainability amid uncertainty over funding and the accelerating costs of social care.
“Councils are on the edge. They are, for the most part, holding services together – although a significant minority are not. But they can only do this by raising council tax, increasing charging and draining their reserves,” said Jonathan Carr-West, chief executive of the LGIU.
Lord Porter, the Conservative chair of the Local Government Association (LGA), said the survey showed some councils were being pushed “perilously close to the financial edge”, adding that many more would face huge challenges in setting budgets for the coming year.
“Extra council-tax-raising powers will helpfully give some councils the option to raise some extra income, but will not bring in enough to completely ease the financial pressure they face,” he said. “This means many councils face having to ask residents to pay more council tax while offering fewer services as a result.”
Local Tory MPs and Labour politicians have called for Northamptonshire to be taken over by government commissioners. The council forecasts a £21m overspend for the current year, and has warned that its finances will remain “grave” in the near future as it struggles to make £34m of cuts on top of the £376m made since 2010.
Earlier this week, ministers sought to head off a rebellion by backbench Tory MPs in shire areas by announcing an additional £150m of funding for adult social care in 2018-19, together with extra cash for rural areas. However, critics warned this was inadequate to meet long-term pressures.
The Ministry of Housing, Communities and Local Government said: “Our finance settlement strikes a balance between relieving growing pressure on local government while ensuring that hard-pressed taxpayers do not face excessive bills.
“We have listened to representations made from councils and delivered on these with extra funding. Overall, councils will see a real-term increase in resources over the next two years, more freedom and fairness, and with a greater certainty to plan and secure value for money.”
The problems facing local authorities are underlined by a National Audit Office (NAO) report that says England faces a recruitment crisis in social care, driven by poor wages and working conditions. It says current low rates of recruitment will not meet the estimated need for between 350,000 and 700,000 extra care workers by 2030.
Ministers have no up-to-date workforce strategy and have effectively ignored the growing crisis in social care staffing, the NAO report concludes. It says workforce planning is difficult while there remains little clarity about the sustainability of local authority spending on social care, which has fallen by 5.3% since 2010.
Brexit barriers on overseas workers could exacerbate the care worker shortage, the report suggests. There were 95,000 non-British European Economic Area nationals working in care in 2016-17, equivalent to 7% of the total workforce, although this rises to as much as 20% in parts of London and the south-east.
The LGIU survey found spiralling demand for adult social care remained the greatest long-term pressure on council budgets, although a third of councils now say children’s social services funding is the biggest short-term challenge, fuelled by rising numbers of children being taken into care.
The thinktank said the vast majority of councils planned to make ends meet in 2018-19 by increasing council tax and drawing on “rainy day” financial reserves, as well as raising or introducing charges for services including parking, garden waste disposal, burial, planning, home care and meals on wheels.
Some of the respondents to the survey said charges would rise above inflation. One said charges would be imposed “wherever we can”. Another said parish councils would be asked to see if local residents would fund services such as grass cutting on roadside verges, youth clubs and street lighting.
“The situation is dire,” one respondent said, adding: “We pay for parking – why not pay for [access to] domestic waste sites, bus passes, etc?”
At the same time, many councils admit they are planning to reduce services further, with over half aiming to cut spending on parks and leisure centres, and a third lining up cuts – or further cuts – to social care, youth centres, libraries, art galleries and museums.
Almost all councils (95%) say they are planning to raise council tax this year – a far cry from 2012, when the same proportion froze rates, encouraged by ministers. Many councils plan to increase council tax by 6% in 2018-19 – the maximum allowed – including 3% earmarked to fund social care.
With conventional funding sources shrinking, three-quarters of councils say they are considering investing in local commercial property developments, commercialising council services or buying investment properties as a way of generating cash.
England’s councils have experienced a 40% cut in their funding from central government since the start of the decade. The LGA estimates that they face a £5bn funding gap by 2020, which could potentially push many councils to breaking point.
The LGIU survey analysed responses from about 113 individual county, district and unitary councils – around one third of the total in England. Nearly 70% of those that responded are under Conservative control.
A Department of Health and Social Care spokesperson said: “Everyone is entitled to good-quality care and we recognise there are challenges – that’s why we will shortly publish a health and care workforce strategy to address these issues.”