More than half of local authorities in England plan to cut more services while also raising council tax by the maximum possible amount, as they turn to increasingly “desperate” measures to remain financially solvent, a survey has revealed.
Nine out of 10 councils are raising council tax from April. This alone will not balance their budgets, meaning most are also proposing to cut spending (52%), increase fees for services such as parking and waste (93%), spend their “rainy day” financial reserves (67%) and sell off assets such as land and buildings.
At least 12 councils are on the edge of “effective bankruptcy”, the survey warns, as they struggle to meet their official obligation to balance their budget while trying to maintain legal minimum levels of core service provision, from adult social care to roads repair, libraries and homelessness.
“This is an unsustainable situation. Eventually, there will be no more cuts that councils can make without endangering their essential services. Our evidence suggests that for just under 10% of councils, this is the situation they find themselves in now,” said the survey by the Local Government Information Unit (LGIU), a membership body and thinktank.
Just under a quarter of councils plan to take the axe to arts and culture services such as theatres and museums, while a fifth will cut back on parks and leisure services such as swimming pools. More than a quarter say they will have to reduce support for local businesses.
The precarious state of local government finances and the “desperate measures” taken by councils to address it, with most asking ratepayers to pay more even as they reduce services, is laid bare by the survey. It finds dismal levels of confidence among council leaders in a funding system many consider no longer fit for purpose.
“Citizens across the country are failed in three ways: their bills rise, their services are cut and the councils they rely on edge ever closer to financial ruin,” said Jonathan Carr-West, the chief executive of the LGIU.
Although local authority finances have been in trouble for years as a consequence of austerity cuts, 2023 is proving “an unusually difficult year”, the survey finds, as councils come under extra pressure from rampant inflation and increased demand from residents hit by the cost of living crisis.
In the last three years, three councils – Croydon, Slough, and Thurrock – have declared effective bankruptcy, while Woking has warned it faces a potential financial predicament “worse than bankruptcy”. All four borrowed hundreds of millions to invest in commercial deals to try to offset funding cuts.
The LGIU survey reveals that despite increased scrutiny of the potential risks of pumping huge sums into income generation schemes, 52% of councils say they are increasing their commercial investments. More than a quarter of respondents planto sell assets to raise cash.
“Putting councils in a situation where they are increasingly reliant on commercial activity to balance their budgets will inevitably leave them more exposed to financial risks, another factor which diminishes their sustainability,” the report said.
The survey, carried out last month, analyses 138 responses from what amounts to a regionally and politically representative group of councils in England.
James Jamieson, the chair of the Local Government Association, said: “Many councils are still grappling with significant challenges when setting their budgets and trying to protect services from cutbacks due to the deep underlying and existing pressures they face.”
The Department for Housing, Levelling Up and Communities was approached for comment.