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Councils are at a 'financial breaking point', LGA warns

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Local councils will reach a “financial breaking point” unless they receive transitional government support until 2018, the Local Government Association (LGA) has warned. The organisation believes the phasing out of the Revenue Support Grant will place councils in an “impossible position” – so just how bad is the financial situation for local authorities?

The LGA’s warning

While the LGA is concerned with how the government is changing council funding, the crux of its warning is how quickly the changes are being implemented. The association revealed that almost half of the UK’s local authorities – 168, to be precise – will lose “all” their government funding by 2019/20.

Unless transitional support is forthcoming, the LGA believes local services nationwide could be put at risk. Councillor Sharon Taylor, the LGA’s Vice Chair, said the pace of the funding change was “hugely unexpected”. With “services already stretched to the limit,” Ms Taylor explained, councils “will have to find millions of pounds more in savings than they had planned for”.

“For some councils,” Ms Taylor concluded, “this might push them closer to the financial edge.”

How council funding has changed

The Revenue Support Grant – government funding that pays for everyday council services – is being scrapped completely, albeit gradually. The change, which is supposed to be partially offset by increases to council tax, aims to allow local government to keep all of its income from business rates.

However, councils have been hit by the gradual reduction harder than expected. Some, as a result, are struggling to set their budgets for 2016/17, despite there being only weeks to go. Many are deliberating whether to raise council tax bills by almost two per cent, which they hope will help plug the funding gap for services for disabled and elderly people.

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