One in six councils are not expected to deliver services within budget this year, and more than half of all councils are at risk of financial failure within the next five years, a report from official auditors says.

Half of councils at risk of financial failure within five years, say auditors

As the government pushes ahead with funding cuts of more than a third in local government, the National Audit Office said many single-tier and county councils feared for core services including education and social care.

The government’s official Whitehall spending watchdog also said Eric Pickles’ Department for Communities and Local Government (DCLG) had no way of monitoring the financial sustainability of councils. In keeping with past reports, it found that the councils hardest hit were those most dependent on government grants.

Margaret Hodge, chair of the public accounts committee, which will scrutinise the auditors’ findings, said she found it extraordinary that the DCLG had little idea whether local authorities were at risk of financial failure, and she warned of “potentially disastrous” consequences.

“Worryingly, local authorities with the highest level of deprivation have seen the biggest cuts, potentially putting vulnerable people at risk. It is authorities with high cuts which have seen the biggest spending reductions for social care services,” Hodge said.

“Between 2010-11 and 2014-15, local authorities with a high cut in spending power had reduced their funding for adult and children’s social care by 12.7% and 4.3%. This is compared with authorities that had low cuts which had reduced funding for adult social care by 1.2% but had increased spending on children’s social care by 14.8%.”

The report’s summary says: “Auditors report that 16% of single-tier and county councils (those authorities responsible for social care and education) are not well placed to deliver their 2014-15 budgets. Auditors are also concerned about the longer-term financial sustainability of single-tier and county councils, reporting that 52% of these authorities are not well placed to deliver their medium-term financial strategies.”

The report concludes that the DCLG “does not monitor in a coordinated way the impact of funding reductions on services, and relies on other departments and inspectorates to alert it to individual service failures. In consequence, the department risks becoming aware of serious problems with the financial sustainability of local authorities only after they have occurred.”

Auditors found that the government was on course to reduce funding of local government by 37% between 2010/11 and 2015/16. This funding accounts for a quarter of local authorities’ total income.

Hilary Benn, the shadow communities secretary, said the report revealed the true impact of the decisions David Cameron’s government had made. “It is now clear that an increasing number of councils are facing serious financial pressures, but DCLG ministers are completely out of touch. That’s why the NAO has told them to start finding out what is actually happening in communities up and down the country,” he said.

Source: The Guardian