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Living on the edge: UK councils and financial failure

Local Government Association (LGA) chairman and Conservative peer Lord Porter recently caused alarm by suggesting that 12 to 14 UK councils could be nearing financial collapse. What is the current situation, and how close is the edge?

Counting the cost

The BBC has reported that Chancellor George Osborne is planning cuts amounting to around 25-40% of current council budgets. The LGA says that these reductions could leave local authorities £20bn worse off.

In response to criticism of shrinking council purses, the government has been quick to point out that local authorities have a reserve of £22bn that could absorb austerity shocks.

Safeguarding services

While righting the economy painlessly is a pleasant idea, council reserves are not the untouched bounty that Westminster suggests. A 2015 CIPFA (Chartered Institute of Public Finance and Accountancy) study found that 94% of council cash is already earmarked for future projects.

Several local authority representatives have raised concerns that community wellbeing is being affected by austerity: Cambridgeshire county council leader Steve Count says his council would be short of funds even if every local public library were to be closed.

Fighting for survival

The government hopes that cuts will force councils to be more innovative and efficient. While only time will tell if this is truly possible on a national scale, it does seem that several steps could be taken to safeguard services.

The Grant Thornton UK/Localis 'Making Devolution Work' report found that 95% of Local Enterprise Partnerships feel economic gains could be made through further devolution. George Osborne’s suggestion that local authorities may gain control of £26bn of business rates is also good news for struggling councils.

Improving payment systems to track cash flows and monitor debt could help to ease council budgets, as could switching to ethical Enforcement Agents like Dukes Bailiffs. Although recovering unpaid monies will not rectify the current situation overnight, sensitive debt collection may give local authorities enough breathing space to cope with further cuts.

If you work for a local authority and are concerned about future cash flows, contact Dukes Bailiffs to discuss how our services could reduce pressure on your budget.

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