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Austerity: a prolonged car crash that’s in danger of turning into a pile-up

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LGC’s essential daily briefing.

A few years ago, discussions about austerity and budget cuts often came with a warning that it would be the latter years of this decade when councils would really start to struggle.

One might not have needed to have Nostradamus-type qualities to predict that but seeing it happen makes it no less shocking.

After Northamptonshire CC issued a section 114 notice at the beginning of the year, concerns have been raised about the state of the finances of a number of other local authorities – from Torbay Council to Lancashire CC, via Somerset CC, Surrey CC and Birmingham City Council.

Warnings from some of the sector’s representative bodies have been getting louder too.

Today LGC research has revealed how 80% of councils are collectively predicting they will spend more than their budgets allow this year - by a combined £0.5bn.

Rising demand in children’s and adults social care is placing unprecedented pressure on vital services.

Although the figures are alarming, the full extent of councils’ budget pressures will have been masked as extra in-year savings have already been found, or reserves have been used, to help cover some of the additional costs.

While the budget pressures are categorised as an overspend, councils would argue they are underfunded. Local authorities have borne the brunt of austerity and, starved of adequate resources from central government, it is no surprise they are struggling to live within their means.

And yet LGC understands the government will not provide any extra funding for councils in next year’s spending review – widely seen by the sector experts as more crucial to councils’ financial futures than the outcome of the fair funding review.

That led Richard Watts (Lab), chair of the Local Government Association’s resources board, to say: “If the government fails to adequately fund local government there is a real risk to the future financial viability of some services and councils. Many local authorities will reach the point where they only have the funds to provide statutory responsibilities.”

A County Councils Network spokesman said the outlook for councils finances looks “undoubtedly bleak”, while London Councils ominously warned: “The financial position of councils is no longer sustainable.”

The financial crisis facing the sector is like a slow-motion car crash that is now in danger of turning into a pile-up. An emergency has been declared but it would appear help is not forthcoming, or at least not in a hurry. If it does not turn up soon, the chances of survival for some are slim and the outlook in general is very bleak indeed.

By David Paine, acting news editor

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