21.12.18
Up to 15% of councils at risk of financial instability, CIPFA reveals
A staggering 15% of local authorities in England are at risk of financial instability, the UK’s leading finance and accounting body has discovered.
In a briefing yesterday, CIPFA, the professional body for people in public finance, said that there are “some signs of potential risk” to 10-15% of councils, compounding fears that many local authorities in England are on the brink financially despite communities secretary James Brokenshire’s boost to council funding announced last week.
Using CIPFA’s Financial Resiliency Index 2018, which provides aggregated statistics on councils across a suite of indicators, the measures found that the majority of councils are in a stable financial position, and are not showing signs of failure in spite of managing severe budget cuts.
CIPFA has said, however, that it will discuss professional support for chief financial officers in the authorities at risk, following the beta version of the tool being shared with council finance directors this month.
Chief executive Rob Whiteman said local government has faced “unprecedented financial challenges” in recent years, and the country is reaching a point where a number of well-run councils will be in the position to deliver little more than core statutory provisions.
“The National Audit Office report on financial sustainability in local authorities in 2018 indicates that there is a heightened risk of more councils over the next four years falling into special financial measures,” he added.
“With acute financial pressures continuing to put many councils under significant strain, the resilience index provides a useful tool for recognising potential signs of risk to councils’ financial stability, and prompting appropriate action.”
John Sinnott, CEO of Leicestershire County Council, said: “CIPFA has demonstrated that whilst many authorities are managing their difficult financial situation, some will need help sooner rather than later.
“Having this Resilience Index information benefits the whole sector so that we discuss what’s needed to ensure another failure like Northamptonshire is avoided. The sector can only benefit from being honest with itself, which hasn’t always been the case.”
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