SIGOMA warns government of financial failure risk
Posted on September 27, 2024
Urgent action needed to ensure local authorities can meet their budgets
Dear Deputy Prime Minister,
As you know, local authorities across England are facing significant financial challenges, with many now at breaking point and in need of decisive action from government.
As SIGOMA, our members include many of the metropolitan and unitary authorities outside London, from the Southern Ports, the East Midlands, West Midlands, North West, North East and Yorkshire & Humber. Our 48 SIGOMA councils are home to 14 million people and represent around 25% of council funding nationally.
Between 2010 and 2024, local authorities in England have seen their funding fall by 18.1% in real terms. More deprived areas have experienced even more significant cuts – with our members experiencing a 23.3% real-term cut, and the 10% most deprived local authority members receiving a real-term cut of 26.6%.
Our latest survey has revealed the extent of these cuts – with just 3% of SIGOMA councils now confident they can meet their Budgets next year – a significant drop from nearly a quarter in 2024. It also reveals how the medium reserves figure for each council has now fallen even further from £6.3m to £5.5 million over the last year.
Due to a lack of funding, more and more councils are now concerned key services will fall under satisfactory delivery standards – with over 70% of councils thinking children’s social services will now fall below delivery standards. Over 65% of respondents said the same for adult services and 60% for delivering housing services.
This fall in confidence is further being exasperated by the ongoing uncertainty over local government funding reforms. Without clarity, over three-quarters of councils have now said they will be deferring projects, while almost a third will be offering reduced activities to reduce costs.
Currently, there is a fundamental mismatch between what local authorities are expected to do and the resources they have to do it. This is pushing local authorities closer to Section 114s and resulting in significant cuts to local services.
Councils are rapidly running out of useable reserves to fund significant overspends. Without clarity, over three-quarters of our councils have said they will be deferring projects, while almost a third will be offering reduced activities to reduce costs. There is a desperation for council tax equalisation in the local government finance settlement and the need for longer-term certainty to enable councils to plan better. Without this, more and more councils are at risk of falling into S114 territory.
Below, we have set out several key recommendations which we would welcome the opportunity to discuss with you in further detail. We believe these provide a key starting point to give councils the confidence and financial ability to invest in key services:
- A 7% increase in Core Spending Power in the 2025/26 Local Government Finance Settlement to address the immediate funding gap.
- A commitment through the Spending Review to increase Core Spending Power in line with inflation each year.
- A guarantee that all new responsibilities of local authorities are sufficiently funded and do not pass the cost from central government to local government (and the local taxpayer).
We look forward to hearing from your team and the opportunity to arrange a meeting to discuss this growing national issue in more detail.
Yours Sincerely
Cllr Sir Stephen Houghton CBE
Read coverage of our letter in The Independent, ITV News, Evening Standard and Insider Media.