Helen Belcher OBE
Wiltshire & Corsham Town Councillor, PPC For Reading West and Mid BerkshireLocal government finance faces increasing strain, highlighted by parliamentary debates and rising deficits. Amidst calls for reform, local councils grapple with escalating challenges in service provision.
Financial Strain and Section 114 Notices:
Around half of councillors expect their councils to be ‘technically bankrupt’ in 2025/26, resulting in a section 114 notice and commissioners being appointed by Whitehall to make financial decisions. Section 114 was expected to be used rarely, primarily to prevent ‘rogue’ councils from misusing public money. But we’ve seen half a dozen councils, from Birmingham to Woking, issuing section 114 notices in the last couple of years – a far higher number than had issued notices in the preceding 30 years. Roughly one in five council leaders and chief executives fear having to issue such notices in the next couple of years – meaning that around 70 councils will only be able to provide statutory services.
It can be difficult to take party politics out of this analysis, particularly in the run-up to a general election. But as the Institute for Government notes, councils run by all parties have issued section 114 notices.
Local Impact: Wiltshire’s Hig
In Wiltshire, where I’m a councillor, the biggest threat is a growing deficit caused by continued and growing government underfunding of the High Needs Block, essentially funding for those with special educational needs (SEND). Wiltshire, along with many other councils, have been ‘invited’ to join a Safety Valve project, whereby the Department for Education agrees to write off most of their current SEND deficit on the basis that the council will undertake a project, with government help, to restructure their provision for these children.
Wiltshire’s current accumulated SEND deficit has grown to around £28 million over the last three years but threatens to exceed £130 million in the next three. With the Safety Valve project, this will be cut by around £60 million, leaving the council to find around £70 million from somewhere. This is about 15 per cent of its annual revenue. Wiltshire has reasonable reserves. Other councils are not so lucky.
Added to this, while the current rate of inflation, measured by the Consumer Price Index, is around 4% per cent, the Local Government Alliance estimates that the rate faced by councils is nearer 8 per cent. The LGA reported in October 2023 that, for 2023/24, local councils were being underfunded to the tune of about £2.4 billion. A further gap of £1.6 billion is estimated for 2024/25. Cllr Shaun Davies, chair of the LGA, states that “Inflation and wages are forecast to be higher,” than when their analysis was produced, so the real gap will be even more – just to keep the current level of services. Davies states that councils “do not have enough funding simply to stand still”.
Pressures not faced by the regular consumer are wage pressures for contractors and uncapped energy price rises. Additionally, many councils enter annual contracts so cannot chop and change to take advantage of the latest deal. Balance that against an effective cap of a 5 per cent rise in council tax revenue, and a decade of cuts in central government funding, and it’s easy to see why an increasing number of councils may now be facing very stark choices.
Most councillors stand for office to make the lives of the residents in their communities better. Few stand so they can inflict cuts that will adversely affect the most vulnerable in their society. There is a general acceptance that improving culture and funding sports is a good thing. But more and more councils are having to strip those services to the bone, or cut them out entirely, as the number of people who need statutory services grows.
This is not necessarily a new problem. As Davies notes, there was “a 24 per cent real terms reduction in core spending power from 2010/11 to 2024/25”. Even before that, councils were adjusting the thresholds of how they determined whether someone was in genuine need or not to try to reduce the growth in the statutory demands on their finances.
The repeated absence of any medium- or long-term funding agreement for councils means they cannot easily make long-term decisions or take advantage of locking themselves into price-saving long-term deals. Again, not a new problem. The annualization of central government funding has been an issue for many years.
So, what needs to happen? The LGA is calling for the funding gap, both now and in the future, to be eliminated, that Whitehall should return to medium-term funding arrangements for councils, that funding is sufficient to recruit and retain skilled staff, and that there should be “a renewed focus on prevention to address existing and future demand for services”. The LGA notes that councils are frequently the last port of call when providing services to vulnerable people.
There are also calls to reform and renew the council tax system. The size of a council’s tax base, crudely, the number of houses within it adjusted by the number of households on benefits, drives the basic level of council tax in each council. It’s partly why eligible properties in the Northeast pay more council tax than larger properties in the southern shires – there’s a smaller tax base with, often, a larger per capita demand. Additionally, properties have not been ‘re-banded’ since 1991, just before council tax was introduced.
More and more councils are pointing the finger at Whitehall processes and government policies. The latest round of government funding relies on all councils increasing council tax by the maximum 5 per cent. It is becoming harder for the party in government to distance itself from the deterioration in public services, and a sense of unfairness is being expressed by an increasing number of people. A constant refrain I hear on doorsteps is that nothing works any more, which includes the provision of social care, the state of the roads, and access to social housing.
As Will Hutton wrote in The Observer at the beginning of February, “Neglect and civic shabbiness have settled over every community in the country,” and voters have noticed. No one is talking about closures of libraries or arts centres anymore – it goes far deeper than that – and the average person is beginning to absorb the local government explanations transferring the blame to Westminster and Whitehall.
Proper funding of local councils would have a transformative effect on many local areas. We can see what a restriction of funding has done.
This is just one of the articles that will be appearing in the ‘Levelling Up’ section in the sixth edition of Chamber’s Journal, centred around the theme of ‘Inspiring Inclusion.’ To read more, sign up to our newsletter here.
To gain more insight on levelling up and challenges affecting councils across the UK, click here to view Curia’s ‘Levelling Up Commission’.
