A National Audit Office (NAO) report reveals critical sustainability issues in local government finances, driven by rising demands on essential services and delays in finance reform. Despite a 4% increase in total funding through the Local Government Finance Settlement to £55.7 billion from 2015-16 to 2023-24, funding per capita actually fell by 1%. This is insufficient to meet growing needs in adult and children’s social care, SEND, and temporary accommodation, with over half of local spending now devoted to these services.

Key findings include:

• Only half of the Education, Health and Care plans meet the 20-week issuance deadline.
• A significant rise in families housed in B&Bs beyond the six-week legal limit, up from 860 in 2018-19 to 3,800.
• A 15% increase in adult social care requests, with only a 2% rise in those receiving help, leading to extended waiting times.

Despite recognising the importance of preventative services, financial pressures have forced a reduction in investment in these areas. However, the government has recently confirmed new funding, including £270 million for the Children’s Social Care Prevention Grant.

Local governments have received several funding boosts, including £880 million for social care and £1 billion for SEND. Despite this, 43% of local authorities risk declaring bankruptcy by March 2026 without further action.

The NAO urges the Ministry of Housing, Communities & Local Government (MHCLG) to spearhead a cross-government strategy to address the complex financial and service delivery challenges facing local governments. This approach involves collaboration among various governmental departments to ensure a unified and strategic resolution to issues of financial instability and inefficiencies in service delivery across local governments.

The NAO emphasises that these challenges, which span across social care, education, and housing, cannot be tackled by any single department alone. A collaborative and comprehensive effort is essential to develop sustainable, long-term solutions that ensure efficiency and value for money. This would involve a strategic overhaul of funding mechanisms and service delivery models, prioritising investments that align with both immediate needs and long-term goals to improve financial health and service quality in local governments.

This initiative is meant to transform the management of local government finances and services into a system focused on long-term sustainability and strategic outcomes, enhancing public well-being and economic stability nationwide.

Gareth Davies, head of the NAO:

"There have been repeated delays to local government finance reform and government can no longer resort to short-term solutions to support local authorities. Action to address this must resolve the systemic weaknesses in local government financial sustainability through a comprehensive, cross-government approach".

For further details, access the full NAO report HERE.