According to the three-year economic forecasts councils are required to publish – known as Medium Term Financial Strategies – 96 per cent of councils estimate they face a funding shortfall by 2026-27. Only 14 of England’s 317 councils state that they will be able to balance their budgets or be in a surplus, with the remaining 303 expected to increase taxes, raise other revenue sources and reduce services over the next two years.
Charting this ‘geography of distress’ across England for the first time, the analysis reveals that:
- Councils in London and the South East are the worst affected regions, facing shortfalls of £3.9 billion by 2026-27. Councils in the North of England face shortfalls of £2.3 billion over the same period.
- Councils in London will need to make cuts to services or increase their income by £209 per person by 2026-27 compared with £103 per person in the South West – meaning the reductions will affect London, which includes some of England’s most disadvantaged authorities, twice as much as the South West.
- Councils that have issued Section 114 ‘bankruptcy’ notices signalling their inability to balance their annual budgets have significant distorting effects on regional shortfalls, with Thurrock accounting for 24 per cent of the entire shortfall in the East of England, which includes another 47 authorities.
The analysis also finds the scale of the financial challenge facing authorities differs according to their responsibilities:
- Large county councils with responsibilities over high-cost services such as social care and special educational needs must find £1.7 billion by 2026-27, equivalent to £79 million for each authority.
- Single-tier, unitary councils - such as Birmingham – responsible for social care and special educational needs but also housebuilding and homelessness, must find nearly £6.9 billion by 2026-27, equivalent to £52 million for each authority.
- Smaller district councils - such as Woking - with responsibilities for housebuilding and homelessness, but not social care or special educational needs, must find over £800 million by 2026-27, equivalent to £5 million per authority but more than double counties and unitaries as a proportion of their budgets.
Jack Shaw, Affiliated Researcher at the University of Cambridge’s Bennett Institute for Public Policy and co-author of the report, said:
“Councils are in historically unprecedented territory, with many of them now forced to provide skeleton services to meet their legal responsibilities and even then are still at risk of falling over."
Professor Andy Pike, Henry Daysh Chair of Regional Development Studies at the University of Newcastle’s Centre for Urban and Regional Development Studies and co-author of the report, said:
“The Conservatives bear substantial responsibility for the situation England’s councils are having to confront following over a decade of austerity, but it is the Labour Government that is now responsible for addressing those challenges. Nothing short of radical change will protect critical services for local residents and taxpayers.”
Report: Mapping the gaps: the geography of local authority financial distress in England
https://www.bennettinstitute.cam.ac.uk/publications/mapping-the-gaps/
