08 January 2019

More than a third of councils face financial failure

More than a third of councils in England are at risk of financial failure in the next decade, with one in five on track to reach breaking point in the next three years, a new analysis has found.

A report from Grant Thornton found the most vulnerable councils are London boroughs, with 78% (25) forecast to crash by 2028, while half of unitary authorities and metropolitan councils are expected to be at risk of financial collapse in the next decade.

Overall, fewer district councils are set to become at risk the next 10 years, most likely due to the fact they don’t have statutory responsibility for demand-led social care services - the largest financial strain for councils.

The new analysis comes after a turbulent year exposed the acute failure of many council finances, as authorities struggle under the pressure caused by budget cuts and the rising demand for social care.

Paul Dossett, head of local government, Grant Thornton UK LLP, said: ‘The local government sector is facing unprecedented demand and financial pressures, and the risk of financial failure has never been more acute.

The very public struggles of Northamptonshire and Somerset County Council’s this year demonstrate the intense distress many councils, and in turn their citizens, are facing.’

The report also suggests if the proposed reduction on Revenue Support Grants were to be implemented in 2019/20, and no alternative funding sources were found, more than half (52%) of all authorities would be at risk of financial failure in the next decade.

Mr Dossett added: ‘We have seen an inexorable rise in the number of councils dipping into their reserves, as they struggle to balance the twin challenges of continued reductions in Revenue Support Grant and rising demand in areas such as adult social care, children’s services and homelessness.

‘The pressure on these essential services has been widely publicised but now even those universally used services such as parks and pot hole filling are visibly declining in quality. These issues combined mean financial sustainability will continue to be the biggest challenge for local government for the foreseeable future.’

Read our feature looking at the top actions that local authorities could take in order to address the financial pressures they currently face.

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