Latest news with #CharteredInstituteofPublicFinanceandAccountancy
The Guardian
30-03-2025
- Business
- The Guardian
Nearly 20 councils in England ‘at risk of insolvency' due to Send costs
Nearly 20 councils have warned publicly that they are at risk of insolvency because of multibillion pound debts caused by years of overspends on special educational needs support, the Guardian can reveal. Overspending on special educational needs and disability (Send) services in England is forecast to grow by nearly £2bn over the next 12 months, a Guardian investigation shows. Councils will see mounting special educational needs and disabilities (Send) deficits rise by 54% on average, with some anticipating accrued debts to increase by millions of pounds every month as they struggle to cope with soaring demand. The deficits – currently totalling £3.4bn – will hit £5.2bn in 12 months' time. At least 18 councils have warned explictly the debts put them at risk of insolvency unless the government intervenes, with council estimates suggesting even more could go bust. 'The deficits are pushing councils all over England to the financial brink. The clock is ticking, and councils are being left in limbo with significant uncertainty over the future of services,' said William Burns, social care policy adviser for the Chartered Institute of Public Finance and Accountancy (Cipfa). Mass defaults on Send deficits would cause chaos and damage other local services, said Cipfa, because councils which declare effective bankruptcy would be forced to drastically rein in spending in all areas, not just local schools. It estimates as many as 75 councils are at risk. The spiralling debts were kept off council books by Tory ministers using an accounting fix called a 'statutory override' but this ends on 31 March 2026, when the debt returns to town hall balance sheets. Ministers must now decide whether to clear the debt, or extend the override until the deficits can be cleared safely. The Send deficit ballooned under the last government, triggered by rapid increases in the cost of meeting education and health care plans (EHCPs) which give children the legal right to school support for conditions such as autism, and speech and language difficulty. In 2015, 240,000 ECHPs were in place in England, more than doubling to 576,000 in 2024, according to Department for Education (DfE) statistics. Insufficient special needs capacity in state schools, and the high costs of Send placements in private specialist schools, have been driving overspends. A government insider said: 'Those [council] forecasts can only have been based on the failing Tory system that we will change. Tackling the chaos that the Tories left in our Send system is a major priority for [the education secretary] Bridget Phillipson, so we can give every child the opportunity to get a brilliant education.' A Guardian investigation shows at least 101 English councils – over two-thirds of the total – spent more than their allocated Send budget during the past year, with 18 councils breaching their annual allocations by over £30m. Nearly nine out of 10 English upper-tier councils – of the 131 which responded in full to the FoI – will have an accumulated deficit on their high needs budgets by the end of next March, with one-in-four (32 out of the 131 who responded in full) now predicting debts of more than £50m and 15 debts of £100m or more. Leeds city council, which covers chancellor Rachel Reeves's Leeds West and Pudsey constituency, has forecast its accumulated Send deficit will soar from £17.5m to £50m by the end of the next financial year, and warned the increase will put it at 'serious financial risk'. Hampshire county council, which has England's largest forecast deficit at £312m, is projecting its debt to rise by £111m over the next year. In its budget reports, the council said that if the override was removed and the debt became a part of the organisation's deficit, 'a section 114 notice would become inevitable'. Middlesbrough, one of England's most deprived authorities, said its forecast Send deficit will rise by more than quarter to £26m over the next 12 months. In council papers last month, it called this 'a critical risk to the council's financial viability, given that it will wipe out the council's general fund reserves.' The average forecast accumulated deficit across the councils covered by the analysis is £40m by the end of March 2026, with 112 forecasting their accumulated high needs deficit will worsen over the next 12 months. A DfE spokesperson said: 'The evidence is clear that the Send system has been on its knees for years – with too many children not having their needs met and parents forced to fight for support. 'It will take time, but as part of our Plan for Change we are thinking differently about what the Send system should look like, to spread opportunity, restore the confidence of families up and down the country and deliver the improvement they are crying out for.'
BBC News
24-03-2025
- Business
- BBC News
Experts identify 45 financial risks at Somerset Council
An independent report into Somerset Council's precarious financial position has identified 45 key risks – 32 of which have been given the highest risk include council reserves falling below £30m and delays to the council's restructuring programme. The report by the Chartered Institute of Public Finance and Accountancy (CIPFA) also acknowledged the ongoing pressure from years of frozen council taxes or low increases under predecessor leader of Somerset Council, Bill Revans, said: "The report concurs with our own understanding of the considerable work that lies ahead and the importance of further transformation." Report backdrop The report was commissioned by the government as a condition of the "exceptional financial support" it has given the support includes giving the council permission to raise council tax by 7.49% in the upcoming financial year, and allowing it to sell off buildings to pay for day-to-day November 2023, the council declared a financial emergency, saying it was at risk of going effectively bankrupt unless more than £100m of savings could be found for the 2024/25 financial authority voted through a further £66m package of cuts and savings for its budget for 2025/26, including 555 staff job losses. Experts' verdict CIPFA outlined recommendations to counter the 45 risks it public finance body said further "exceptional financial support" may be needed to balance Somerset Council's budget for 2026/ support would be needed if the Liberal Democrat-led local authority proves "unable to deliver its financial goals" and savings through transformation and devolution of services to town and parish councils, the accountants report called for "rapid mobilisation and a need to increase the pace and co-ordination of the actions that are needed to achieve this".But it also praised the council's "well conceived" and "well led" transformation programme, adding that it "deserves to succeed".However, it pointed out that the programme has led to "poor morale" within the council's workforce and warns that "further steps" are needed to ensure the remaining staff are properly supported.A CIPFA spokesperson said: "The management of debt generally, which is highly distributed across the council, needs a more coordinated approach and should be more closely monitored."Governance in the council generally is satisfactory but capable of improvement in some areas."The adult social care service is being led and managed insightfully, has received significant additional resources, and confronts national rather than local challenges, which are being approached with pragmatic good sense."Children's services remains on its improvement journey."Concern was also raised in the report about the reduction of the council's available reserves. Criticism of councils past Most damningly for the Conservatives, which controlled the county council between 2009 and 2022, the report concludes that "a significant proportion" of the current council's budgetary woes has been caused by the freezing of council tax for six consecutive years from 2010. This "led to funding shortfalls in each future year in perpetuity", the report freezes and low council tax rises were described as "poor decision making".Liberal Democrat-led Somerset Council was formed in April 2023, replacing Somerset County Council and the four district councils of Mendip, Sedgemoor, Somerset West and Taunton, and South reorganisation was based around the One Somerset business case, put forward by Conservative former county council leader David Fothergill and approved by Boris Johnson's government in July 2021. The CIPFA report said it "appears likely that the business case" for creating one authority for Somerset "may have underestimated" how long it would take for the promised financial saving to materialise. Of the originally promised savings of £18.5m, £8.8m has been achieved to date, with the remainder on track to be achieved by the end by April 2026, as part of the council's transformation Fothergill, still a Conservative councillor but now part of the opposition, said the criticisms of the previous council were unfair. He said: "For six years, in the last 10 years, we have not required that additional council tax take. "It is a complete fallacy to say that is the root of the problem. "The root of the problem is the lack of transformation [at the current council] and the lack of transition."He said that when he was in charge, he managed to set balanced budgets for six years, while keeping council tax low or frozen. Mr Fothergill continued: "It's a fallacy to think that council tax should be increased just to increase reserves, when actually we were going through a period of severe austerity and people needed to have relief on their day-to-day expenses."He also disputed the assertion that the timescales for delivering the savings of having one council for Somerset were under-estimated. The councillor said the Lib Dems did not work fast enough when they took control. Mr Revans, the Lib Dem leader of Somerset Council, told BBC Somerset: "We are committed to transparency and so welcome this very detailed report that recognises the significant effort being made to move the council towards sustainability at a time of huge financial pressure across local government."He said the council also "welcomes an acknowledgment of the savings made so far" and of the progress towards sustainable spending for adult social services and children's services.
Yahoo
17-02-2025
- Business
- Yahoo
George Osborne left Britain a legacy of soaring council tax bills
The majority of local authorities are expected to raise council tax bills by the maximum permitted amount of 5pc in April – with many applying for rights to raise the levy even higher. A 5pc increase alone would send bills for the average Band D home above £2,500 in 21 areas – up from four last year, according to analysis by the TaxPayers' Alliance pressure group. Yet taxpayers increasingly feel like they are getting less and less for their money, with some authorities cutting bin collections to just once a month – a symptom of decline in their fiscal health. If you're looking to appoint blame, Keir Starmer's Government may make for an easy target – but in reality, the issue dates back to cuts spearheaded by George Osborne 10 years ago. Following the Conservative party's victory in the 2010 general election, the former chancellor wasted little time in launching his own assault on public spending – a period of austerity that crippled public spending and investment lasting almost a decade. Just months after the election, Mr Osborne announced that local authority funding would be cut by 27pc over the following four years, along with 'a massive devolution of financial power' that would see councils gain more responsibility over where money was spent, and cuts were made. The former chancellor also made good on a promise he made to give local authorities the ability to freeze council tax for two years, between 2012 and 2013. In exchange for freezing council tax, local authorities would receive additional funding – but in retrospect, this has proved to be a costly error for councils that took the deal. 'On the face of it, it sounds like a very good idea – and I imagine he thought it was a fantastic idea when he delivered his speech promising to lower the cost of living – but there were two huge problems,' says Joanne Pitt, senior policy manager at the Chartered Institute of Public Finance and Accountancy (CIPFA). 'Firstly, council tax is cumulative. If councils raise council tax by 3pc or 5pc each year, their base council tax increases. If you do not increase council tax for two years, and other councils do, you fall behind permanently. It was an incredibly short-termist view, and councils are still paying for it. 'Secondly, freezing council tax across the board is a poor way to allocate limited public sector funds. If you look at who benefits from a reduction in council tax payments, it is not the poorest in society. If your policy objective is to help people in poverty, the figures do not work – it is too little across too broad a patch. People who do not need the support end up benefiting. 'If you combine that with the austerity over the following eight or nine years, it is a hell of a lot to come back from.' Faced with more control over their spending and a significant blow to their budgets, several councils set about plugging the gap by investing some of the remaining money they had, plunging funds into everything from fine art to property, with the hope of beating cash returns and boosting their coffers. The results have been disastrous, to put it mildly. Between 2016 and 2019, local authorities collectively spent £3.1bn on office developments, £2.3bn on retail property including shopping centres, and nearly £1bn on industrial property, according to the National Audit Office (NAO) – which marked a 1400pc increase on the previous three years. The Covid pandemic that immediately followed saw their value plunge, as the post-pandemic shift to homeworking depressed prices of office buildings. Desperate for cash and unable to hold out and ride the ups and downs of their investments, councils sold £1.4bn of assets last year, despite analysts warning it was the worst possible time to do so. After a series of failed investments – predominantly in solar farms – the local authority of Thurrock, Essex, accumulated debts of £1.5bn and was forced to declare bankruptcy in 2022. Its residents will see their council tax payments jump by 8pc from April. Croydon Borough Council, which declared bankruptcy in both 2021 and 2022, has total capital borrowings of almost £2bn. It borrowed £545m over three years to invest in housing and commercial property, including a £200m loan to its own housing development arm Brick By Brick. After posting losses every year, Brick by Brick collapsed in 2022. In December 2023, Nottingham City Council became the latest local authority to declare bankruptcy. One of the council's most notable failings was its decision to launch Robin Hood Energy in 2015, taking on the major energy suppliers in a highly competitive market. At one point, the firm boasted former Labour leader, Jeremy Corbyn, as a customer. Unfortunately, this was not enough for Robin Hood Energy to ever turn a profit, and it collapsed just five years after its inception. Leaked documents estimate a £38m cost to local taxpayers. But while these instances make for effective cautionary tales – and have landed taxpayers in some local authorities with heftier tax bills – they are in the minority, says Ms Pitt, who has 25 years of experience advising local governments. 'Very few local authorities have actually done that, and those have hit the headlines. But you have over 300 of them, and the vast majority did not do that. Most organisations make sensible, pragmatic investment decisions within a prudent borrowing environment, but there are absolutely some outliers.' It is not just giving councils both Conservative and Labour more freedom to invest the limited cash they have that has seen things go awry for so many local authorities. The austerity pushed on councils by Mr Osborne saw funding cut from vital programmes, such as Sure Start, which invested in early learning and family support programmes. Between 2010 and 2022, funding for Sure Start dropped by over two thirds and over 1,300 centres closed their doors. Community programmes were lifelines for young families, improving health and education standards, and therefore work prospects later in life. Sure Start reduced the likelihood of young people ending up in youth custody by a fifth, according to research from the Institute for Fiscal Studies. The effects of crippling cuts to these schemes – while saving the Government money in the short run – are now being seen, with councils forced to pick up the tab and hike taxes in turn. By cutting spending on local people early on in their lives, councils are forced to pay more when they are older. With the adult social care bill for adults projected to top £17bn by 2030, according to the County Councils Network (CCN), councils that fell behind in the 2010s due to austerity and tax freezes have been overwhelmed. Tax rises appear inevitable. Ms Pitt adds: 'Ten years or so of austerity have taken their toll. Grants that councils received from the Government were reduced, which affected deprived areas more, as they couldn't raise council tax as much and raised their own income. 'You've got massively rising demand for schemes which support schools with special educational needs. More children are surviving that would have been born prematurely, which is fantastic – but that individual will need millions of pounds of help over their lifetime. 'As they go through the system, they become adults, and our funding system does not keep up with that sort of medical technology and the demand. 'Local authorities cannot afford those types of costs, because you've also got huge numbers of adults coming into the system in need of social care. 'If you have a high number of dependent adults and children, you cannot control your costs. You can't just say you've reached your limit.' Instead of taking advantage of historically cheap borrowing rates and building infrastructure and investing in communities so that Britain may reap the rewards of growth and lower taxes for years to come, George Osborne had other ideas. Ambrose Evans-Pritchard put it best, writing in The Telegraph in 2022: '[Austerity] both lowered the growth trajectory of the economy and slowed the organic fall in the debt ratio, and was therefore futile in every respect.' For a country desperate to find its way to healthy economic growth six years on from austerity, rising council tax may be just the tip of the iceberg. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
Telegraph
17-02-2025
- Business
- Telegraph
Why it's George Osborne's fault your council tax is going up
The majority of local authorities are expected to raise council tax bills by the maximum permitted amount of 5pc in April – with many applying for rights to raise the levy even higher. A 5pc increase alone would send bills for the average Band D home above £2,500 in 21 areas – up from four last year, according to analysis by the TaxPayers' Alliance pressure group. Yet taxpayers increasingly feel like they are getting less and less for their money, with some authorities cutting bin collections to just once a month – a symptom of decline in their fiscal health. If you're looking to appoint blame, Keir Starmer's Government may make for an easy target – but in reality, the issue dates back to cuts spearheaded by George Osborne 10 years ago. Following the Conservative party's victory in the 2010 general election, the former chancellor wasted little time in launching his own assault on public spending – a period of austerity that crippled public spending and investment lasting almost a decade. A 27pc funding cut Just months after the election, Mr Osborne announced that local authority funding would be cut by 27pc over the following four years, along with 'a massive devolution of financial power' that would see councils gain more responsibility over where money was spent, and cuts were made. The former chancellor also made good on a promise he made to give local authorities the ability to freeze council tax for two years, between 2012 and 2013. In exchange for freezing council tax, local authorities would receive additional funding – but in retrospect, this has proved to be a costly error for councils that took the deal. 'On the face of it, it sounds like a very good idea – and I imagine he thought it was a fantastic idea when he delivered his speech promising to lower the cost of living – but there were two huge problems,' says Joanne Pitt, senior policy manager at the Chartered Institute of Public Finance and Accountancy (CIPFA). 'Firstly, council tax is cumulative. If councils raise council tax by 3pc or 5pc each year, their base council tax increases. If you do not increase council tax for two years, and other councils do, you fall behind permanently. It was an incredibly short-termist view, and councils are still paying for it. 'Secondly, freezing council tax across the board is a poor way to allocate limited public sector funds. If you look at who benefits from a reduction in council tax payments, it is not the poorest in society. If your policy objective is to help people in poverty, the figures do not work – it is too little across too broad a patch. People who do not need the support end up benefiting. 'If you combine that with the austerity over the following eight or nine years, it is a hell of a lot to come back from.' Abuse of funding power Faced with more control over their spending and a significant blow to their budgets, several councils set about plugging the gap by investing some of the remaining money they had, plunging funds into everything from fine art to property, with the hope of beating cash returns and boosting their coffers. The results have been disastrous, to put it mildly. Between 2016 and 2019, local authorities collectively spent £3.1bn on office developments, £2.3bn on retail property including shopping centres, and nearly £1bn on industrial property, according to the National Audit Office (NAO) – which marked a 1400pc increase on the previous three years. The Covid pandemic that immediately followed saw their value plunge, as the post-pandemic shift to homeworking depressed prices of office buildings. Desperate for cash and unable to hold out and ride the ups and downs of their investments, councils sold £1.4bn of assets last year, despite analysts warning it was the worst possible time to do so. After a series of failed investments – predominantly in solar farms – the local authority of Thurrock, Essex, accumulated debts of £1.5bn and was forced to declare bankruptcy in 2022. Its residents will see their council tax payments jump by 8pc from April. Croydon Borough Council, which declared bankruptcy in both 2021 and 2022, has total capital borrowings of almost £2bn. It borrowed £545m over three years to invest in housing and commercial property, including a £200m loan to its own housing development arm Brick By Brick. After posting losses every year, Brick by Brick collapsed in 2022. In December 2023, Nottingham City Council became the latest local authority to declare bankruptcy. One of the council's most notable failings was its decision to launch Robin Hood Energy in 2015, taking on the major energy suppliers in a highly competitive market. At one point, the firm boasted former Labour leader, Jeremy Corbyn, as a customer. Unfortunately, this was not enough for Robin Hood Energy to ever turn a profit, and it collapsed just five years after its inception. Leaked documents estimate a £38m cost to local taxpayers. But while these instances make for effective cautionary tales – and have landed taxpayers in some local authorities with heftier tax bills – they are in the minority, says Ms Pitt, who has 25 years of experience advising local governments. 'Very few local authorities have actually done that, and those have hit the headlines. But you have over 300 of them, and the vast majority did not do that. Most organisations make sensible, pragmatic investment decisions within a prudent borrowing environment, but there are absolutely some outliers.' Unprepared for huge social care costs It is not just giving councils both Conservative and Labour more freedom to invest the limited cash they have that has seen things go awry for so many local authorities. The austerity pushed on councils by Mr Osborne saw funding cut from vital programmes, such as Sure Start, which invested in early learning and family support programmes. Between 2010 and 2022, funding for Sure Start dropped by over two thirds and over 1,300 centres closed their doors. Community programmes were lifelines for young families, improving health and education standards, and therefore work prospects later in life. Sure Start reduced the likelihood of young people ending up in youth custody by a fifth, according to research from the Institute for Fiscal Studies. The effects of crippling cuts to these schemes – while saving the Government money in the short run – are now being seen, with councils forced to pick up the tab and hike taxes in turn. By cutting spending on local people early on in their lives, councils are forced to pay more when they are older. With the adult social care bill for adults projected to top £17bn by 2030, according to the County Councils Network (CCN), councils that fell behind in the 2010s due to austerity and tax freezes have been overwhelmed. Tax rises appear inevitable. Ms Pitt adds: 'Ten years or so of austerity have taken their toll. Grants that councils received from the Government were reduced, which affected deprived areas more, as they couldn't raise council tax as much and raised their own income. 'You've got massively rising demand for schemes which support schools with special educational needs. More children are surviving that would have been born prematurely, which is fantastic – but that individual will need millions of pounds of help over their lifetime. 'As they go through the system, they become adults, and our funding system does not keep up with that sort of medical technology and the demand. 'Local authorities cannot afford those types of costs, because you've also got huge numbers of adults coming into the system in need of social care. 'If you have a high number of dependent adults and children, you cannot control your costs. You can't just say you've reached your limit.' Instead of taking advantage of historically cheap borrowing rates and building infrastructure and investing in communities so that Britain may reap the rewards of growth and lower taxes for years to come, George Osborne had other ideas. Ambrose Evans-Pritchard put it best, writing in The Telegraph in 2022: '[Austerity] both lowered the growth trajectory of the economy and slowed the organic fall in the debt ratio, and was therefore futile in every respect.' For a country desperate to find its way to healthy economic growth six years on from austerity, rising council tax may be just the tip of the iceberg.
