One in three councils overspending

Image caption Northamptonshire County Council overspent by £43m

Northamptonshire County Council has said it is in financial trouble and is banning all new spending, raising questions about the financial health of local authorities across England.

Analysis by the BBC England Data Unit has found that around one in every three local authorities spent more on services in 2016-17 than they expected to.

How did Northamptonshire get into trouble and could it happen anywhere else?

Why is Northamptonshire County Council in trouble?

According to statistics from the Ministry of Housing, Communities and Local Government, the authority spent £43m more in 2016-17 than it had budgeted for.

At the start of the financial year Northamptonshire County Council said it would spend £706m on providing services such as education, social care, public health, street lighting and running rubbish tips.

Yet the authority ended up spending £749m on these services, which is 6.1% more than in its budget.

Across England of those councils that overspent, the average overspend in 2016-17 was 3.1%.

Away from day to day spending Northamptonshire council says it currently has £608m in outstanding loan debts and £194m in Private-Finance Initiative liabilities.

The means the council’s combined debts of £802m are greater than its planned budget spend of £706m.

Over the past five financial years the council saw on average a 35% overspend on children’s social care and an average of seven per cent overspend on adult social care services.

It has also had the largest increase in spend on agency workers for social workers anywhere in the UK.

Northamptonshire County Council says it has faced “unprecedented demand for local services for a number of years, coupled with reducing levels of funding from central government”.

“The reliance on agency staff in social care is an issue faced by many local authorities across the country,” a spokesman said.

He said heavy investment in children’s services came following an “inadequate” Ofsted rating in 2013 and that spending on agency staff had dropped after recruiting more social workers.

Are other councils in financial trouble?

Northamptonshire is the first council in nearly two decades to issue a section 114 notice, which effectively stops all new expenditure. Only statutory services for safeguarding vulnerable people are exempt. The last one was Hackney in 2000.

The body that speaks for local councils, the Local Government Association (LGA) says money for local councils “is running out fast” and that local authorities face a funding gap of £5.8bn over the next two years.

Government figures show there were 113 councils in England that spent more than their net current expenditure budgets in 2016-17.

This does not mean all these councils are in financial trouble, but with one in every three councils spending more than was in their budgets, means many local authorities have clearly struggled.

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According to the Chartered Institute of Public Finance and Accountancy (Cipfa), councils are allowed to dip into their reserves to prop up their spending and can run a deficit if they have the means to fund it.

“However it is illegal for planned expenditure in the current or a future year to exceed budgeted resources and available reserves,” Cipfa says. “In such cases the chief finance officer must statutorily enforce an expenditure freeze and the council respond and adjust its plans for the year in question.”

What are the main pressures on council budgets?

From the rising numbers of children going to school to a fall in the amount of money councils receive from central government, demands on local authorities are rising, whilst resources are being stretched.

The biggest pressure on council budgets is social care, which involves looking after vulnerable children and a growing older adult population.

Five years ago councils in England were spending slightly less than they had provided for in their social care budgets.

But in 2016-17 local authorities spent £1.1bn more on social care than was in their budgets.

Image copyright BBC News

What does the government say?

The Ministry of Housing, Communities and Local Government says that over the next four years councils across England will get real terms increases in their budgets.

As the department plans to spend £200bn as part of a four year financial settlement.

And when asked in the House of Commons whether he knew of any other councils in financial difficulty, the local government minister Rishi Sunak said: “It would be inappropriate to give a running commentary on every conversation I have with local councils, but the department keeps in constant contact with councils and we keep the situation in constant review”.

An independent inspector has been appointed to look at the financial situation of Northamptonshire County Council, which is expected to report back by 16 March 2018.

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