Councils pressure PM over "knife edge" finances
Last month, Nottingham City Council became the 7th local authority to declare effective bankruptcy
Last updated 14th Dec 2023
A group of council leaders have warned the Prime Minister that " council finances are on a knife edge", unless there is emergency intervention from the government.
The Special Interest Group of Metropolitan Authorities (Sigoma), which represented 47 councils in some of England's most deprived areas have called for the proposed ÂŁ64 billion of levelling up funding to be increased.
Sigoma said the promised funding from the Department of Levelling Up, Housing and Communities would add ÂŁ4 billion to budgets for the next financial year in 2024/25.
They called annual rise of 6% "regressive" and "is not nearly enough to fix the financial situation councils find themselves in".
It added "This additional funding will fall short of what is needed as budgetary pressures have grown beyond council tax bases and will mean councils are still forced into making savings and at risk of issuing a section 114 notice."
Sigoma identified a funding gap of at least ÂŁ1.5 billion in adult social care next year if support is maintained at current levels, meaning the overall extra ÂŁ1 billion allocated for these services "will do little in the face of rising demand".
Usually salary and wage increases are not covered by government funding but Sigoma is asking for the government to intervene after a year of high inflation.
The letter said it is crucial that funding elements increased in line the CPI inflation figure for September of 6.7%.
The groups said the cost of about ÂŁ1 billion putting "significant pressure on service provision", while the increase in the national living wage will also come at a "significant cost"
The analysis identified a funding shortfall of at least Ă‚ÂŁ1.6 billion in children's services, the biggest single pressure facing Sigoma members, with no new money allocated and restrictions applied to the social care grant limiting spending decisions in this area.
Sigoma also called for an end to single-year settlements that limit vital strategic planning.
The letter, signed by Sigoma chair and Labour leader of Barnsley Council Stephen Houghton, added: "Whilst we appreciate the difficult national financial position, council finances are on a knife edge.
"We hope there is still the opportunity for the Government to provide local authorities with more assistance, even at this late stage.
"The local government finance settlement is a last resort and must be used to stabilise council finances.
"Without this support, as we head into next year, the current proposals by the Government will see a surge of S114 notices."
A total of seven councils have issued at least one section 114 notice since 2020, three of which were issued this year.
Nottingham City Council, which issued its second declaration of effective bankruptcy last month, is a Sigoma member.
The council faces a ÂŁ50 million budget gap in the next financial year.
Nottingham city council has proposed cuts to youth services, care homes, public libraries and water features in public squares, leading to the loss of 500 jobs.
A Department for Levelling Up, Housing and Communities spokesperson said: "We estimate that the upcoming Local Government Finance Settlement will make available approximately Ă‚ÂŁ64 billion to the sector, and expect that councils will see, on average, an above-inflation increase in the funding available to them next year.
"Councils are ultimately responsible for the management of their own finances, but we stand ready to talk to any council that is concerned about its financial position."