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SIGOMA calls for urgent action in the provisional local government finance settlement

Posted on December 14, 2023

Dear Prime Minister,

The financial situation for many of our councils is reaching breaking point. Following Nottingham City Council’s announcement last month, seven councils have now issued Section 114 notices since 2020. A recent survey from the Local Government Association found that 1 in 5 councils across the country are now at risk of issuing a S114 notice. SIGOMA’s recent survey found that up to 30 per cent of our 48 members felt they might face this decision over the next couple of years.

The current proposed funding settlement of £64bn by the Department for Levelling Up, Housing and Communities will add around £4bn to budgets, providing an increase of around 6%. While this increase is welcome, it is not nearly enough to fix the financial situation councils find themselves in.

Firstly, the Government is proposing that around half of the total increase will be from assumed council tax rises, which are regressive and raise funding in a way unrelated to need. 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.

The funding gap in adult social care is estimated to be at least £1.5bn. This is the amount of funding required just to maintain current levels of service, so the additional £1bn in the settlement for social care will do little in the face of rising demand.

The pay increase announced in the Autumn Statement for local government staff is not funded by government and will put significant pressure on service provision. The pay deal for this current year will cost councils more than £1bn. The increase to the National Living Wage is welcome, but as it is not funded by central government, it will come with a significant cost to local authorities including in the cost passed on through contracts and commissioned services.

Children’s services has an estimated funding shortfall of at least £1.6bn and is the biggest single pressure our members are facing. However, there is no new money for this sector. Restrictions on the Social Care Grant mean that some councils are not able to spend as much of this as they need on children’s services.

Finally, councils have now faced half a decade of single-year settlements, hindering their ability to effectively plan ahead. At a recent appearance at the Levelling Up, Housing and Communities Committee, the Secretary of State stated he did not want to “gaze into the crystal ball” for the future of local government finance. Unfortunately, single-year settlements force councils to do just that.

If the Government is truly committed to levelling up and supporting the most vulnerable adults and children in our society, it must urgently address the financial situation councils find themselves in through the local government finance settlement. The measures below make a good starting point:

  • Social care funding should be un-ringfenced funding and have less restrictive reporting conditions, so the funding can go to where it is needed.
  • Where the Consumer Price Index is used to uplift funding, as a minimum it must be the September figure of 6.7%.
  • The social care precept makes up a growing share of social care funding. There should be full equalisation to ensure that local authorities with smaller council tax bases who raise less from council tax increases are not disadvantaged and a postcode lottery doesn’t develop for care services.
  • There must be a guarantee that from now on there will only be multi-year settlements to allow proper financial planning.

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.

Yours Sincerely,

Cllr Sir Stephen Houghton CBE

Read coverage of our letter in The Independent, Yorkshire Post, Evening Standard, LocalGov, and The Telegraph.