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LGA - Section 114 fear for almost 1 in 5 council leaders and chief executives after cashless Autumn Statement

Almost one in five council leaders and chief executives in England surveyed by the Local Government Association think it is very or fairly likely that their chief finance officer will need to issue a Section 114 notice this year or next due to a lack of funding to keep key services running.

The LGA estimates that councils in England face a £4 billion funding gap over the next two years just to keep services standing still but last month’s Autumn Statement failed to provide the additional funding needed to protect services from further cuts. 

This is despite councils of all political colours and types warning that growing demand and cost pressures are threatening their financial sustainability.

In 2024/25, councils will be able to increase general council tax by 3 per cent without the need for a referendum. Those with social care responsibilities will again be able to increase the adult social care precept by up to a further 2 per cent again.

This means that councils continue to face the tough choice about whether to increase council tax bills to bring in desperately-needed funding to provide services when they are acutely aware of the significant burden that could place on some households.

The LGA survey – of council leaders and chief executives - also reveals:

  • Half are not confident they will have enough funding to fulfil their legal duties next year (2024/25). This includes the delivery of statutory services.
  • Nearly two thirds of council leaders and chief executives said there were no announcements in the Autumn Statement that they thought would help them deal with their council’s financial position.

The LGA said the circumstances that have led to a Section 114 notice so far have been unique to each local area and the pressures they face.

However, all those that have had to curb spending in this way have faced the same underlying pressures - councils’ core spending power falling by 27 per cent in real terms from 2010/11 to 2023/24, the impact of the pandemic, rising demand for services, in particular statutory services like social care and homelessness support, and the extra costs to provide them.

The LGA said the Government urgently needs to use the forthcoming provisional Local Government Finance Settlement to provide councils with sufficient resources to set balanced budgets next year without having to make drastic cuts to services.

Cllr Shaun Davies, LGA Chair, said:

“The lack of funding for local services in the Autumn Statement has left councils facing a growing financial crisis.

“No council is immune to the risk of running into financial difficulty. As our worrying survey shows, many now face the prospect of being unable to meet their legal duty to set a balanced budget and having Section 114 reports issued.

“Local government is the fabric of our country, with councils providing hundreds of services that our communities rely on every single day. For many people, these services are a lifeline.

“If councils cannot thrive then our communities cannot thrive. If social care services that councils provide cannot cope with demand, then pressure on the NHS will grow further. If council housing teams can’t succeed, then all of our hopes for new homes will not succeed.

“While councils have worked hard to reduce costs, find efficiencies and transform services, the easy savings have long since gone. The Government urgently needs to act to address the acute financial challenges faced by councils.”

Notes to editors

1. An online survey was sent to all chief executives and leaders in England on 23 November 2023. By 30 November, one third (114) of council chief executives and over a fifth (71) of council leaders had participated in the survey. To help ensure that the findings were representative of all councils, their responses were weighted by their role and council type. 

The results are available on request.

2. A section 114(3) report is issued by a council’s statutory chief finance officer (section 151 officer) when it appears to them that the council’s expenditure will exceed the resources it has available in a financial year. Following the issuing of the report all new agreements that incur expenditure are stopped for a period of up to 21 days in which time the full council must meet and respond to the report. The chief finance officer can approve new agreements in this period but only if it prevents the situation from getting worse, improves the situation, or prevents the situation from recurring. Following the 21-day period the chief finance officer can issue subsequent s114 reports if they feel the council is not on a path to addressing its financial issues.

3. The LGA’s Autumn Statement 2023 On-the-day briefing summarised the key announcements for councils.

Original article link: https://www.local.gov.uk/about/news/section-114-fear-almost-1-5-council-leaders-and-chief-executives-after-cashless-autumn

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