Councils on the brink

Local authorities are in a no-win situation when it comes to parking –newspapers refer to ‘profits’ but this is the net current expenditure position John Siraut

majority of their income from off-street operations. It is notable that a significant number of locations in the top-ten are tourist destinations. Operating costs average 40p per pound collected, although Milton Keynes at just 22p has one of the lowest costs in the country.

The Shire Districts show another side of council parking; they are almost completely dependent on off-street parking, with some actually losing money on-street parking. This list is dominated by relatively affluent towns predominantly in the South East that can presumably command higher prices. Operating costs for these districts average around 45p per pound collected.

Local authorities are in a no-win situation when it comes to parking. The newspaper headlines regularly refer to council “profits” of £900m from their parking operations. However, this is the net current expenditure position –no account is taken of depreciation of capital assets or if just looking at cash flow, capital expenditures. Equally, rarely is consideration given to the opportunity cost of allocating prime estate in town and city centres to car parking. The reality is that half of that £900m “profit” accrues to the London boroughs and for some smaller councils parking is a financial liability.

With councils having to grapple with climate change, poor air quality and congestion, they are faced with the dilemma of whether to get rid of their car parks and remove on-street parking to address these challenges or retain them to keep the cash flowing during what is perhaps the worst financial crisis many have ever faced.

John Siraut is director of economics at Jacobs. Email: john.siraut@jacobs.com www.jacobs.com

Government figures

Usually at this time of year the Ministry of Housing, Communities and Local Government (MHCLG) publish the final outturn figures for council expenditures and revenues for the preceding financial year. This year, due to the impacts of COVID19, their publication has been delayed and this analysis is based on provisional returns published in October.

Councils warn they are at breaking point

Local authorities warn of insolvency risk without big cuts in local services, writes Mark Moran

Many of England’s largest local authorities fear they could be forced into cuts to services next year to remain solvent. The precarious financial position of some local authorities was highlighted in November when the Croydon Council imposed emergency spending limits. The Labour-run authority issued a Section 114 notice banning all new expenditure, with the exception of statutory services for protecting vulnerable people. A Section 114 letter, written by Croydon’s director of finance Lisa Taylor, stated she was “not confident” the council could make the level of savings required to deliver a balanced budget.

This is a concern shared by many other local authorities. Only one in five of England’s largest councils are confident of preventing insolvency without dramatic reductions to services, says the County Councils Network (CCN), whose membership comprises 25 county councils and 11 county Unitary Authorities.

A survey of the network’s members revealed growing concerns about their finances over the next two years. The respondents said that after years of austerity, there is limited scope to reduce non-care services such as libraries, bus routes, and school transport. This means that the most severe reductions are likely to fall on social care services, despite pressures created by coronavirus.

The survey, which received a 100% response rate, shows that just one in five (22%) are “confident” they can deliver a balanced budget next year without “dramatic” reductions to services. Confidence drops further in 2022-23, with just one local authority confident of setting a balanced budget that year. Over half (56%) said service reductions would impact their efforts to tackle coronavirus, with 60% stating it will lead to a “fundamental reduction” in frontline services.

Councils said that the government has provided emergency funding to cover the majority of additional council expenditure to date as a result of the virus, but they face millions in potential unfunded lost income from Council Tax and business rates. Every council in the survey said that lost Council Tax income would impact on their finances moderately (29%) or severely (71%) next year. The CCN said these losses could run to £800m next year, increasing the 36 councils’ funding gap next year to £2.2bn. So far councils say they have only been able to identify £485m worth of savings, leaving a £1.7bn gap.

Central government has provided several tranches of emergency funding for councils. However, county authorities only received 18% of the pot despite representing 48% of the population of England, and leaders of those councils say they have “very little room for manoeuvre” when they are inevitably faced with additional expenditure demands resulting from the second wave of coronavirus.

Cllr David Williams, chair of the County Councils Network, said: “Over the past decade, councils have done all they can to protect frontline services, transforming their organisations so they are more efficient. But as this survey shows, we are quickly running out of ways to meet the funding shortfall without dramatic reductions that will make visible and damaging changes to highly valued services.

“The financial support provided by government over the past year has been very welcome. But even before the onslaught of a second wave, councils were facing difficult choices and they are now left with little room to manoeuvre over the coming months as they face further escalating costs resulting in an immediate cliff-edge next year.”

How confident are you that your council would be able to deliver a balanced budget in the absence of dramatic service reductions for the following years?

Not at all confident

Not confident Neutral Confident

Very confident

2021-22

17% 29% 32% 22% 0%