Laura Sharman 23 November 2020

Over half of councils face financial failure without spending review funding increase

Half of English councils will be at risk of financial failure if the spending review just provides a ‘rollover’ of funding levels from this year for 2021/22, new analysis has warned today.

Research by Grant Thornton UK LLP shows 51% of councils would see their usable reserve levels fall at or below 5% of net revenue expenditure if they receive the same level of funding in 2021/22 as they received in 2020/21.

It found London boroughs and metropolitan districts are the most exposed in this scenario, with 72% found to be at risk by 2022/23.

Phillip Woolley, head of public services consulting at Grant Thornton UK LLP, said: ‘Simplifying the fragmented number of revenue grants, the competitive nature of some areas of grant funding, providing greater flexibility on the council tax referendum and focusing on greater fiscal devolution to the sector, would help to provide local government with the long term sustainability that is missing, but very much needed.

’Providing councils with the power to better control their own income levels would also help to reduce the sector’s reliance on central funding. These changes would also seem to acknowledge and recognise the significant contribution made by local government so far in addressing the ongoing impact of the pandemic.’

The analysis reveals that without an increase in funding, local government would face a funding gap of £5.6bn in 2021/22.

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