By Richard Johnstone | 5 December 2013
A majority of councils fear that financial pressures will reach a ‘tipping point’ within the next four years when they will not be able to meet some statutory responsibilities to deliver a range of services.
A poll of 120 councils by Grant Thornton for its annual ‘financial health check’ report on English local authorities found that most do not expect to reach a crisis point – where financial failure becomes a real risk – in the current spending review period to the end of 2014/15. This is despite revenue funding to local government falling by 28% over the period.
However, a majority of the councils polled felt that a tipping point would be faced in 2015/16 or 2016/17 – 46% and 33% respectively. This could mean councils are unable to set a balanced budget or demonstrate the characteristics of an insolvent organisation, such as being unable to pay creditors.
The report has also rated all councils in England as red, amber or green on areas of financial performance including strategic financial planning, financial governance and financial control.
Overall, Grant Thornton found county and district councils were performing well, but unitary authorities had the lowest number of green ratings for good performance. Around 40% of these authorities fear they will face a tipping point in the short term, compared to 20% for other local authority types.
Metropolitan districts were also the only category of authority with ‘red’ risk ratings across the strategic financial planning, financial control and financial governance assessments.
Paul Dossett, Grant Thornton’s head of local government, said the report’s tipping point scenarios were possible or even probable across local government from 2016 onwards.
‘As funding reductions start to bite harder and deeper after 2015, councils will be faced with a great challenge. In order to remain sustainable, authorities will need to have a relentless focus on generating additional sources of revenue income. This can range from investments in the commercial property portfolio to regeneration and inward investment and the skills agenda to boost local economic activity.’
Dossett added that councils will also need to continue improving their efficiency through partnerships such as shared services, as resources may never return to their pre-2010 levels.
