The Birmingham City Council saga is a warning to government ahead of the Autumn Statement
The financial pressures facing Birmingham City Council have thrust local government finance back into the national spotlight.
But we know that funding, cost, and demand pressures are growing for all councils and the evidence of the risk to the financial sustainability of the sector has been there for all to see for some time.
The Section 114 issued by Birmingham was the sixth issued by councils since 2010 – whereas just two were issued in the decade before.
While the circumstances that lead to a Section 114 notice are unique to each local area and the pressures they face, all those that have had to curb spending in this way have faced the same underlying pressures.
The loss of £15 billion in government funding from 2010 to 2020; 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.
These pressures are not unique – they are universal – and they are not bound by council type or political control.
To fix them, we must ensure the national debate around local government funding does not turn into a political mud-slinging exercise nor allow a narrative to fester that it is only ‘failing’ councils that end up in financial difficulty.
Councils in England face a funding gap of almost £3 billion over the next two years, at the very least.
Adding to these financial challenges, more than nine in 10 councils are experiencing staff recruitment and retention difficulties across a diverse range of skills, professions and occupations.
Many are working proactively with each other to share and transform their services to ensure they continue to deliver high quality services to residents.
But none are immune to the risk of running into financial difficulty and others have already warned of being close to also having to issue Section 114 notices themselves.
This year was also the fifth one-year settlement in a row for councils.
The Government has confirmed some funding streams for councils over the next two years. However, significant uncertainties remain in the level of funding they will have in 2024/25 which is hampering financial planning and doing nothing to help secure their financial sustainability.
The Government needs to come up with a long-term plan to manage this crisis which must include greater funding certainty for councils through multi-year settlements and more clarity on financial reform.
We need to simplify council funding, cut out wasteful and unnecessary bidding for resources and give local government the long-term certainty and stability it desperately need.
This will be key to our submission to the Chancellor as he prepares to set out his Autumn Statement on November 22.
However, it not just about investment in public services but also the need for government to spend smarter by devolving existing public spending.
For example, this would enable councils to gear the skills system – further education, adult skills training, support for the unemployed – towards employers’ demands, addressing unemployment and underemployment and closing skills gaps.
This is essential for boosting national growth and productivity.
There is clear and significant evidence that the country gets better value for money when councils have the freedoms and funding to make local decisions. Bringing power and existing resources closer to people is the key to improving lives and building inclusive growth across the country.
With adequate resources and freedoms, it is councils which can provide local solutions to the national challenges we face and ensure all of our communities are able to prosper in the future.
Cllr Shaun Davies is Chair of the Local Government Association, which represents councils across England and Wales.
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