LGA responds to NAO report on financial sustainability of local authorities

Responding to a report by the National Audit Office on the financial sustainability of local authorities, Lord Porter, Chairman of the Local Government Association, said:


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“This stark report sets out the significant funding challenges facing all councils and the effect years of unprecedented funding reductions have had on the local services our communities rely on and other parts of the public sector. It is yet further compelling evidence as to why the Government must urgently secure the financial sustainability of local government and the 1,300 different statutory duties and responsibilities councils provide.

“Councils in England face an overall funding gap that will exceed £5 billion by 2020. We have repeatedly warned of the serious consequences of funding pressures facing local services from unprecedented funding reductions since 2010 and growing demand for services. Inadequate funding for local government has a knock-on effect on other parts of the public sector.

“As the NAO rightly recognises, councils are having to divert ever-dwindling resources from other local services, including filling potholes, maintaining our parks and green spaces and running children’s centres, leisure centres and libraries, to try and plug growing funding gaps in adult social care and children’s services. At the same time, they are struggling with cost pressures arising from government policies, such as paying for the National Living Wage and Apprenticeship Levy. Leaving councils to pick up the bill for unfunded government policies at the same time as managing spending reduction and such growing demand for services is unacceptable.

“The report also acknowledges the unsustainability of councils being forced to use reserves to plug funding gaps. As we have previously said, reserves are designed to help councils manage growing financial risks to local services and do nothing to address the systemic underfunding that they face. The size of the cuts councils are having to make is simply too big to be plugged by reserves.

“Councils’ ability to maintain local services at a time of inadequate resources and rising costs is already extremely stretched, and the NAO rightly warns about the huge uncertainty over how the Government intends to fund local services after 2020. Core central government funding to councils will be further cut in half over the next two years and almost phased out completely by the end of the decade.

“The Government needs to urgently address this cliff-edge and the growing funding gaps facing local services. It also needs to provide the financial sustainability and certainty needed to protect the local services our communities rely on into the next decade and beyond by committing to allow local government as a whole to keep every penny of business rates collected.

“Only with the right level of funding and powers, can councils continue to make a difference to people’s lives by building desperately-needed homes, creating jobs and school places, providing dignified care for our elderly and disabled and boosting economic growth.”