National Audit Office Report On Councils’ Financial Sustainability
The National Audit Office has released a new report, Local Government Financial Sustainability.
The independent public spending watchdog’s report delves into the challenges faced by local authorities, and analyses what is driving costs. It concludes that market-related challenges and economic factors such as inflation are the major reasons in driving costs.
It finds costs are concentrated in adult social care, children’s services, special educational needs and temporary accommodation.
The review found that while core spending power has increased by 4% between 2015-16 and 2023-24, when population growth and service pressures, particularly in social care and housing, were factored in this becomes a 1% fall.
The NAO said demand increases were making it harder for people to access services and that when they do they face delays. For example, only half of education, health and care plans for special educational needs were issued within the 20-week limit.
Cllr Tim Oliver, Chairman of the County Councils Network, said:
“Today’s report from the National Audit Office (NAO) reveals how unsustainable local authority finances are, and follows our own analysis which found that councils face major funding shortfalls over the next five years. As we have warned, councils have little choice but to spend more and more on the most demand-intensive services, at the expense of everything else – leaving them providing little more than care services.”
“The government has committed to a review of local authority funding, which is long overdue. But for county and unitary councils – who face the biggest financial pressures – the review could actually take money off these areas, rather than begin to solve their challenges, if government choses to distribute money exclusively based on deprivation.”
“As this NAO report shows, it is market-specific cost pressures, mainly in adult social care, children’ services, and special educational needs, that are driving councils’ costs rather than deprivation. Therefore government must recognise and address these pressures in its fair funding review, otherwise it will push many well-run councils to the brink.”
“We also support the NAO’s calls for government to address the deficits built up by councils in their special educational needs budgets. These deficits are unmanageable and projected to rise to £5.9bn next year but are kept off councils’ budget books currently due to the ‘statutory override’. With the clock ticking until the override expires in March 2026, councils need clarity and urgently.”
Pete Marland, Chair of the Local Government Association’s Economy and Resources Board, said:
“Councils in England face a funding gap of up to £8 billion by 2028/29. While they continue to innovate and transform services to deliver for communities and provide greater value for money, they desperately-need a significant and sustained increase in overall funding in the Spending Review to meet the requirements being placed on them.”
“Without adequate funding, councils will continue to struggle to provide crucial services – with devastating consequences for those who rely on them – and it will be impossible for them to help the Government achieve its reform and growth agenda.”
“The NAO rightly highlights that funding pressures are being exacerbated by a lack of reform which has weakened the financial sustainability of councils and left them with a complex, outdated funding system. Creating an improved and a more sustainable funding system for local government is also critical to strengthen the value for money of local spending and, most importantly, improve services for communities.”
