SIGOMA Chair highlights OBR warning on continued council finance pressures

Posted on March 13, 2026

Writing in The MJ this week, our Chair, Cllr Sir Stephen Houghton, highlighted that despite welcome progress in the multi‑year settlement, the total funding available to local government is not increasing in line with rising demand.

Last week, the Office for Budget Responsibility (OBR) issued its Spring Forecast. Whilst there was little overall change from the autumn, what was of note was the increased emphasis on the risks facing local authority finances.

Ahead of the forecast, the Local Government Association (LGA) urged the Chancellor to do more to support council finances, stating that local government is at its ‘financially weakest’. This assessment is reflected in the OBR’s forecast, which highlights growing pressures on local authority finances and warns that rising demand for statutory services, including housing and social care, ‘continues to present a significant risk’. 

For SIGOMA authorities, more than two‑thirds of council budgets are now spent on adult and children’s social care, up from less than half in 2011‑12. This compares with around 60 per cent nationally, highlighting the far greater pressure facing councils in the most deprived areas.

Housing is also a key pressure for local authorities, particularly due to issues associated with Housing Revenue Accounts. As the OBR points out, HRA repair and maintenance costs have risen far faster than rental income since 2019‑20, leaving many HRAs effectively loss‑making and forcing councils to sell homes, borrow, or rely on Exceptional Financial Support (EFS) to comply with the requirement to balance HRA finances over the long term.

As a result of these rising pressures, councils are becoming increasingly reliant on emergency and short-term financial solutions. Over the past five years, the number of authorities receiving EFS has increased sharply from just four in 2021-22 to 35 authorities in 2026-27.

The multi-year settlement marked a welcome change of direction in funding for our members, with the recognition of funding based on need and the greater certainty that multi-year settlements provide. However, despite clear warning signs about the long-term sustainability of local government finances, the total funding available to local government is not increasing in line with rising demand. Funding over the multi-year settlement period for 2027-28 and 2028-29 will see increases of just 4 per cent in each of the two years, just half of the increase to overall funding in 2024-25. Although the overall pie is shrinking relative to demand, our members are receiving a larger slice.

This is compounded by the fact that almost three quarters of funding increases in the multi-year settlement are coming from assumed full increases in council tax for all councils in England. Despite the majority of SIGOMA authorities receiving higher than average increases in government funding next year, around three quarters of members plan to raise council tax by the maximum level allowed without triggering a referendum, a similar level to the national average. Continued grant funding increases are essential to support areas with high levels of deprivation as they continue to recover from the devastating impact of austerity, and the continuation and expansion of the Recovery Grant reflects this need.

Our successful campaign for the implementation of full council tax equalisation (fully accounting for how much council tax can be raised locally when allocating grant funding) was a significant step towards a fairer funding system. However, council tax remains a regressive and outdated tax. SIGOMA authorities are at a disadvantage as they raise far less when they increase council tax than more affluent areas. This also puts additional strain on residents who are already struggling with the ongoing cost of living crisis. We therefore fully support the LGA’s call for fundamental reform of this regressive system.

Although well documented, Special Educational Needs and Disabilities (SEND) deficits are another risk identified by the OBR. We strongly welcome the government’s commitment to fund 90 per cent of current deficits. However, uncertainty remains around deficits that will continue to amount between 2026-27 and 2027-28, which the OBR estimates could reach £9bn above current levels. 

It is vital that local authorities receive sufficient funding and support both to manage these continuing pressures and to ensure the government’s long awaited reforms are delivered successfully.

Overall, while the Local Government Finance Settlement represents a welcome step towards fixing local authority finances, the absence of long term financial stability remains a significant concern. Central government must ensure that the overall level of funding keeps pace with demand and cost pressures, so that councils can continue to deliver the vital services on which residents rely.

You can read the full article in The MJ here.