William Eichler 27 February 2025

Council bailouts could ‘create longer-term risk’, warns NAO

Council bailouts could ‘create longer-term risk’, warns NAO   image
Image: TippaPatt / Shutterstock.com.

The public spending watchdog has called for a ‘whole-system’ approach to fixing local government finance and warned that short-term bailouts could ‘create longer-term risk.’

A new report from the National Audit Office (NAO) found that council funding increased by 4% between 2015-16 and 2023-24 to £55.7bn but fell 1% per person against a backdrop of increasing demand on frontline services.

The spending watchdog estimates that £72.8bn was spent by local government in 2023-24 – over half of which went on adult and children’s social care.

The NAO acknowledges that the Government has committed to reforming the funding system with spending per person forecast to increase by 7% between 2023-24 and 2025-26, but criticized ‘repeated delays.’

It also warned that the £5bn in ‘exceptional financial support’ provided to struggling councils fails to address underlying financial pressures and could ‘create longer-term risk.’

NAO head Gareth Davies said: ‘Action to address this must resolve the systemic weaknesses in local government financial sustainability through a comprehensive, cross-government approach.’

Councils have also been able to use a 'statutory override' to keep SEND deficits off their balance sheets, with the measure due to expire next March.

The NAO said that unless the Government addresses the issue before then, 43% of councils could be forced to issue Section 114 notices, declaring themselves effectively bankrupt.

Responding to the report, Cllr Pete Marland, chair of the Local Government Association’s Economy and Resources Board, said a lack of reform had left councils with a ‘complex, outdated funding system.’

The NAO also warned that the ongoing financial pressures were undermining the ability of councils to invest in prevention.

Cllr Claire Holland, chair of London Councils, commented: ‘Boroughs want to invest more into early intervention and prevention because we know this brings the best long-term results for our residents.’

Patrick Melia, Solace spokesperson for local government finance, added that the Government should use the Spending Review to develop a long-term reform plan for the sector.

SIGN UP
For your free daily news bulletin
Highways jobs

Senior/Principal Regeneration Officer

Fareham Borough Council
£45,465 - £55,379
Our town centre regeneration is moving from planning to delivery, and we're looking for someone who wants to help make regeneration happen. Fareham, Hampshire
Recuriter: Fareham Borough Council

Social Worker

London Borough of Richmond upon Thames and London Borough of Wandsworth
£40,260 - £54,507
Social Worker£... London
Recuriter: London Borough of Richmond upon Thames and London Borough of Wandsworth

S106 and Monitoring Officer

Essex County Council
£49435.1400 - £54930.6000 per annum
Maldon District Council is working in partnership with Essex Shared Services to support the recruitment of the role of a S106 and Monitoring Officer, England, Essex, Maldon
Recuriter: Essex County Council

Trainee Revenues and Benefits Officer (Part Time)

Isle of Wight Council
Career Grade 3-6, £26,017 to £29,071 per annum pro-rata (actual salary £17,227.47 to £19,249.72)
The Benefits team is currently seeking a part-time Trainee Revenues and Benefits Officers Ryde, Isle of Wight
Recuriter: Isle of Wight Council

Legal Officer

Isle of Wight Council
Grade 9, £35,572 to £38,726 per annum
Ideally you will be a qualified paralegal or will offer an equivalent qualification or experience. Newport, Isle of Wight
Recuriter: Isle of Wight Council
Linkedin Banner