Local authority financial resilience

This briefing paper summarises concerns around local authority financial resilience, which initially rose in profile in the late 2010s.

The paper provides brief details of the legal accountability structures faced by local authorities, and of the process that they must follow when producing their annual budgets. This includes the role of the head of finance (the ‘section 151 officer’) and the procedure surrounding the issue of ‘section 114 notices’ within local authorities.

The paper provides details of concerns expressed by the local government sector in the late 2010s and the 2020s regarding the future funding of local authorities. These include analysis of falls in central government funding for local authorities; analysis of the ‘funding gap’ provided by the LGA’s ‘Future Funding Outlook’ reports in the 2010s, and then by their ‘Cost Pressures Model’ in the 2020s; and debates concerning whether English local authorities collectively have access to sufficient funding to continue to discharge their functions.

The paper provides some details of higher-profile financial difficulties experienced by individual councils, including Northamptonshire, Croydon, Slough, Thurrock, Woking, Birmingham, Nottingham and Spelthorne.

The paper provides details of the Local Government Association’s peer challenge system, and the monitoring framework for local authorities operated by DLUHC. Lastly, it notes the ‘financial resilience index’ created in 2018 by CIPFA (the Chartered Institute of Public Finance and Accountability).