6 in 10 councils anticipate an unbalanced budget next year

A County Councils Network (CCN) and Society of County Treasurers (SCT) survey asked 38 county and rural councils about their finances ahead of the chancellor’s Spending Review, with six in ten not being confident on balancing their budget next year.

This year, councils saved and cut an unprecedented £1.2 billion to try balance their books in an attempt to keep up with rising public demand and changing government funding decisions. The survey reveals that government compensation for the increase in employer’s National Insurance contributions covered just 40 per cent of the costs of introducing policy, while just three of these 38 councils received any of the government’s £600 million ‘recovery grant’, which was targeted at metropolitan councils.

The survey reveals a £2.2 billion funding gap next year as pressures continue to mount, especially in county and rural areas, which will needed to be filled by additional government funding, council tax raises or service cuts. This comes along an estimated £2.7 billion in special educational needs (SEND) deficits, which are set to hit council budgets next March when a statutory accounting ‘override’ comes to an end.’

CCN warns that the situation could only get worse if the chancellor does not make more funds available, with councils in rural areas potentially facing double the problems, as the government plans to change how funding is allocated to councils and could see hundreds of millions of pounds redistributed towards urban councils.

Rural councils lost over £100 million in dedicated funding last year, and so county and unitary councils are calling for a multi-billion boost in resources to ensure that councils do not lose even more funding with the existing £2.2 billion shortfall and billions in SEND deficits.

Councillor Tim Oliver, chair of the CCN, said: “England’s largest councils head into the Spending and Fair Funding Reviews under considerable pressure and under a great cloud of uncertainty. The chancellor’s decision will make or break the budgets of county and rural unitary councils: in a year where we’re already making unprecedented savings and face a further £2.2 billion shortfall in 2026-27.

“It is almost unthinkable to imagine the situation getting worse, but a real-terms cut in the Spending Review for the Ministry of Housing, Communities and Local Government’s Budget would be just that. For county and rural councils, it could be a double whammy, with any unfair changes to funding distribution leading to further reductions in their income.

“With so much uncertainty as to what the chancellor will do, it is no wonder six in ten county and unitary councils are not confident of setting a balanced budget next year. Funding reductions would undoubtedly make it worse for these authorities and lead to more service cuts and councils applying of exceptional financial support. It is therefore essential county and unitary councils recover a significant increase in funding and long-term financial certainty in the Spending Review and Review of Relative Needs and Resources.”