Council finances are becoming unsustainable and whole system overhaul is required, watchdog warns
From bin collections and parks to social care, it’s estimated local authorities in England provide more than 800 services for residents, touching on many different aspects of our lives all the way from childhood to elderly care.
A National Audit Office report found spending on services increased by £12.8bn – from £60bn to £72.8bn – between 2015-16 and 2023-24, a 21% increase in real terms.
Most of this increased spending – £10.3bn – has gone to adult and children’s social care, which represents councils’ biggest spend, increasing as a share of overall spending from 53% to 58% over the period.
Previous central funding cuts and an increasing population mean that spending power per person has largely stagnated, however, and remains 1% lower per person than in 2015/16, the report said.
This is a measure of the funding available to local authorities from central government grants, council tax and business rates. Though grant funding has increased in recent years, it has not yet made up for pre-2020 government cuts.
Complex needs
The population in England has increased by 5% over the period, accounting for some of this increased pressure, but it’s not the only driver.
In many areas, demand has outpaced population growth, as external events and the complexity of people’s needs has shifted over time.
The rapid increase in costs of temporary accommodation, for example, has been driven by the large increases in people facing homelessness because of inflationary pressures and housing shortages.
At the same time, demand for new adult social care plans has increased by 15%.
As life expectancies have increased, the length of time in people’s lives during which they suffer from health problems has also increased.
“We see that in adult social care that people have multiple conditions and need more and more support and often will be appearing as if they’re frailer at an earlier age. So that’s an important trend,” explained Melanie Williams, president of the Association of Directors of Adult Social Services.
“We’re constantly focusing on most urgent things at the expense of not doing the preventative work,” she added.
“When we’re just focusing on getting people home from hospital, we’re not doing that piece of work to enable them not to go there in the first place.”
Budget cliff edge over SEND spending
Meanwhile, demand for education, health and care (EHC) plans, for children with more complex special educational support needs has more than doubled, increasing by 140% to 576,000.
Budgets for special educational needs and disabilities (SEND) have not kept pace, meaning local authority spending has consistently outstripped government funding, leading to substantial deficits in council budgets.
Most authorities with responsibilities for SEND have overspent their budget as they have been allowed to until March 2026 on a temporary override, but they will need to draw on their own reserves to make these payments in a year.
One in three councils will have deficits that they can’t cover when the override ends.
Cuts to services
In the latest figures for 2023/24, the NAO found £3 in every £5 of services spending by English local authorities went towards social care and education, totalling £42.3bn.
This has left little headroom for other services, many of which have experienced real-terms financial cuts over the same time period, with councils forced to identify other services like libraries, parks and the arts to make savings.
But, Williams warned, cultural and environmental services like these can play a vital role in wellbeing and may actually exacerbate demand for social care.
“For us to be able to safeguard both adults and children – so people that need extra support – we do need that wider bit for councils to do,” said Williams, who also serves as corporate director of adult social care for Nottingham County Council.
“It’s no good me just providing care and support if somebody can’t go out and access a park, or go out and access leisure, or go out and have that wider support in the community.”
Commenting on the report, Cllr Tim Oliver, chairman of the County Councils Network, said: “As we have warned, councils have little choice but to spend more and more on the most demand-intensive services, at the expense of everything else – leaving them providing little more than care services.
“It is market-specific cost pressures, mainly in adult social care, children’s services, and special educational needs, that are driving councils’ costs rather than deprivation. Therefore government must recognise and address these pressures in its fair funding review, otherwise it will push many well-run councils to the brink.”
Fighting fires
The NAO report describes a vicious cycle where councils’ limited budgets have resulted in a focus on reactive care addressing the most urgent needs.
More efficient preventative care that could lower demand in the long term has fallen to the wayside.
In one example cited by the NAO, the Public Health Grant, which funds preventative health services, is expected to fall in real terms by £846m (20.1%) between 2015/16 and 2024/25.
Other areas have seen a switch in funding from prevention to late intervention.
Councils’ funding towards homelessness support services increased by £1.57bn between 2015/16 and 2013/24, while money for preventative and other housing services fell by £0.64bn.
Financing overhaul needed
Since 2018, seven councils have issued section 114 notices, which indicate that a council’s planned spending will breach the Local Government Finance Act when the local authority believes it’s become unable to balance its budget.
And 42 local authorities have received over £5bn of support through the Exceptional Financial Support (EFS) framework since its introduction in 2020.
According to a recent Local Government Association survey referenced in the NAO report, up to 44% of councils believe they’ll have to issue a section 114 notice within the next two years should the UK government cease providing exceptional financial support.
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Looking ahead to upcoming funding settlements, and the government’s planned reforms of local government, the NAO warns that short-term measures to address acute funding shortfalls have not addressed the systemic weaknesses in the funding model, with a whole system overhaul required.
Sir Geoffrey Clifton-Brown, chair of the Committee of Public Accounts, said: “Short-term support is a sticking plaster to the underlying pressures facing local authorities. Delays in local audits are further undermining public confidence in local government finances.
“There needs to be a cross-government approach to local government finance reform, which must deliver effective accountability and value for money for taxpayers.”
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The last blast furnaces left operating in Britain could see their fate sealed within days, after their Chinese owners took the decision to cut off the crucial supply of ingredients keeping them running.
Jingye, the owner of British Steel in Scunthorpe, has, according to union representatives, cancelled future orders for the iron ore, coal and other raw materials needed to keep the furnaces running.
The upshot is that they may have to close next month – even sooner than the earliest date suggested for its closure.
Read more: Thousands of jobs at risk as British Steel consults unions over closure
The fate of the blast furnaces – the last two domestic sources of virgin steel, made from iron ore rather than recycled – is likely to be determined in a matter of days, with the Department for Business and Trade now actively pondering nationalisation.
The upshot is that even as Britain contends with a trade war across the Atlantic, it is now working against the clock to secure the future of steelmaking at Scunthorpe.
The talks between the government and Jingye broke down last week after the Chinese company, which bought British Steel out of receivership in 2020, rejected a £500m offer of public money to replace the existing furnaces with electric arc furnaces.
The sum is the same one it offered to Tata Steel, which has shut down the other remaining UK blast furnaces in Port Talbot and is planning to build electric furnaces – which have far lower carbon emissions.
These steel workers could soon be out of work
However, the owners argue that the amount is too little to justify extra investment at Scunthorpe, and said last week they were now consulting on the date of shutting both the blast furnaces and the attached steelworks.
Since British Steel is the main provider of steel rails to Network Rail – as well as other construction steels available from only a few sites in the world – the closure would leave the UK more reliant on imports for critical infrastructure sites.
However, since the site belongs to its Chinese owners, a decision to nationalise the site would involve radical steps government officials are wary of taking.
They also fear leaving taxpayers exposed to a potentially loss-making business for the long run.
The dilemma has been heightened by the sharp turn in geopolitical sentiment following Donald Trump’s return to the White House.
The incipient trade war and threatened cut in American support to Europe have sparked fresh calls for countries to act urgently to secure their own supplies of critical materials, especially those used for defence and infrastructure.
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Gareth Stace, head of UK Steel, the industry lobby group, said: “Talks seem to have broken down between government and British Steel.
“My advice to government is: please, Jonathan Reynolds, Business Secretary, get back round that negotiating table, thrash out a deal, and if a deal can’t be found in the next few days, then I fear for the very future of the sector, but also here for Scunthorpe steelworks.”
British Steel declined to comment.
UK
Prince Andrew’s Pitch@Palace branded ‘crude attempt to enrich himself’ as Chinese spy documents set to be released
Prince Andrew’s efforts to make money from his Pitch@Palace project have been branded as a “crude attempt to enrich himself” at the expense of “unsuspecting tech founders”, as new documents may shed more light on what he and his team have been attempting to sell.
Today is the deadline for documents to be released relating to Prince Andrew‘s former senior adviser Dominic Hampshire and his interactions with the alleged Chinese spy Yang Tengbo.
In February, an immigration tribunal heard how the intelligence services had contacted Mr Hampshire about Mr Yang back in 2022. Mr Yang helped set up Pitch@Palace China, a branch of the duke’s scheme to help young entrepreneurs.
The alleged Chinese spy, Yang Tengbo, has links with Prince Andrew
Yang Tengbo. Pic: Pitch@Palace
Judges banned Mr Yang from the UK, saying his association with a senior royal had made Prince Andrew “vulnerable” and posed a threat to national security. Mr Yang challenged that decision at the Special Immigration Appeals Commission (SIAC).
Since that hearing, media organisations have applied for certain documents relating to the case and Mr Hampshire’s support for Mr Yang to be made public. SIAC agreed to release some information of public interest. It is hoped they may include more details on deals that he was trying to do on behalf of Prince Andrew.
So what do we know about potential deals for Pitch@Palace so far?
In February, Sky News confirmed that palace officials had a meeting last summer with tech funding company StartupBootcamp to discuss a potential tie-up between them and Prince Andrew relating to his Pitch@Palace project.
The palace wasn’t involved in the fine details of a deal but wanted guarantees to make sure it wouldn’t impact the Royal Family in the future. Sky News understands from one source that the price being discussed for Pitch was around £750,000 – there are, however, reports that a deal may have stalled.
Photos we found on the Chinese Chamber of Commerce website show an event held in Asia between StartupBootcamp and Innovate Global, believed to be an offshoot of Pitch.
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Who is alleged Chinese spy, Yang Tengbo?
Documents, released in relation to the investigations into Mr Tengbo, have also shown how much the duke has always seen Pitch as a way of potentially making money. One document from 21 August 2021 clearly states “the duke needed money at the time, and saw the relationships with China through Pitch as one possible source of funding”.
But Prince Andrew’s apparent intention to use Pitch to make money has led to concerns about whether he is unfairly using the contacts and information he gained when he was a working royal.
Norman Baker, former MP and author of books on royal finances, believes it is “a crude attempt to enrich himself” and goes against what the tech entrepreneurs thought they were signing up for.
Read more:
Who is Yang Tenbo?
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He told Sky News: “The data given by these business people was given on the basis it was an official operation and not something for Prince Andrew, and so in my view, Prince Andrew had no right legally or morally to take the data which has been collected, a huge amount of data, and sell it…
“And quite clearly if you’re going to sell it off to StartupBootcamp, that is not what people had in mind. The entrepreneurs who joined Pitch@Palace did not do so to enrich Prince Andrew,” he said.
Rich Wilson was one tech entrepreneur who was approached at the start of Pitch@Palace to sign up, but he stepped away when he spotted a clause in the contract saying they’d be entitled to 2% equity in any funding he secured.
He feels Prince Andrew is continuing to use those he made a show of supporting.
He said: “It makes me feel sick. I think it’s terrible – that he is continuing to exploit unsuspecting tech founders in this way. A lot of them, I’m quite grey and old in the tooth now, I saw it coming, but clearly most didn’t. And a lot of them were quite young.
“It’ll be their first venture and you’re learning on the trot, so to speak. So to take advantage of people in such a major way – that’s an awful, sickening thing to do.”
We approached StartupBootcamp who said they had no comment to make, and the Duke of York’s office did not respond.
With reports that a deal may have stalled, it could be a big setback for the duke – especially with questions still about how he’ll continue to pay for his home on the Windsor estate now that the King no longer gives him financial support.
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