Latest Public Sector News

12.06.14

Councils facing financial crisis, survey shows

More than two-thirds of council leaders believe that some local authorities will get into financial difficulties within the next 12 months, a new PwC report has revealed. 

The ‘Local State We’re In’ report also suggests that nine out of 10 council leaders and chief executives believe that some local authorities will get into serious financial difficulty in the next five years and that eight out of 10 will fail to deliver essential services. 

Based on the responses of 125 council leaders and chief executives across the UK, and 2,000 members of the public, the study highlighted that just 35% of respondents accept the need to reduce or close services in their area, a drop of 10 percentage points from 2011.   

The survey did find, though, that Local Enterprise Partnerships (LEPs) are beginning to make their mark with 70% of respondents identifying them as key partners to achieving local growth – a 20% increase on last year, and second only to SMEs.

Jonathan House, PwC local government team, said: “The gap between how councils see their own financial outlook and the health of the sector as a whole has closed. While in previous years, leaders and chief executives thought it would be others who would end up in financial crisis, this year for the first time they are more significantly concerned about their own financial context.   

“It’s to the sector’s credit that they have managed the scale of savings to date, with only half the public aware of any reductions or cuts in services.” 

However, more than half of the members of the public surveyed are concerned about the impact of government cuts on services. Opposition to the cuts is highest in the North West (51%), South West (49%), Yorkshire & Humberside (46%) and the North East (47%). 

While council leaders praised the effectiveness of the New Homes Bonus and Business Rate Retention as positive government initiatives they want more financial freedoms. For example they would like greater control on raising council tax, business rates, levying and retaining property taxes, borrowing and investment which would enable greater reinvestment in infrastructure, housing and regeneration. But executives admit the prospect of wholesale local government reorganisation is slim. 

Responding to the report, Cllr Sharon Taylor, chair of the Local Government Association’s Finance Panel, told PSE: “Councils have worked hard to shield residents from the impact of cuts in recent years, but with another £10bn worth of savings still to be found, options are fast running out. 

“Local government has led the way at improving and modernising the way we do things through sharing services and becoming ever-more efficient. Government needs to find a better way of ensuring public money gets to the frontline where it is most needed and doesn't get lost in the maze of Whitehall.”

Graeme McDonald, Solace director, told PSE that the sector has stressed for a number of years that 2015-16 would represent a real challenge for a number of councils, and this is being reflected in the report. 

He added that “understandably” the public are now very concerned about the impact of these cuts on their community and their own lives. 

Looking ahead, though, McDonald said: “Integration is key for the future of local public services as budgets continue to be reduced. It drives efficiency, but more importantly enables early intervention and prevention. 

“Solace supports the continued pressure on Whitehall for greater financial freedoms for councils, with local leadership on council tax, business rates and borrowing for infrastructure. Local accountability must be the route taken for local solutions.” 

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