When Birmingham City Council issued a Section 114 notice in September, effectively declaring bankruptcy, and handed over control to government-appointed commissioners, it laid bare the deep-seated problems facing many local authorities. Numerous other councils have made similarly worrying announcements, including Nottingham, Thurrock, Croydon, Woking, Somerset, and West Berkshire, ranging from Section 114 notices to admissions of potential ‘financial meltdown’ and serious concerns over their ability to meet their legal duty to balance the books.
All told, the deficit across English councils totals £4bn over the next 18 months. That’s according to the Local Government Association (LGA), which said in a letter to chancellor Jeremy Hunt that council budgets were “under pressure like never before”.
Meanwhile, a recent report by the County Councils Network (CCN), which surveyed 41 county and unitary authorities in England, found that the total projected overspend for CCN member services this year will reach £640m. In addition, the District Councils’ Network (DCN) predicts a total funding shortfall of £550m for district councils in 2023-24, and £610m in 2024-25.
Then there are the statistics from UNISON. Its research, published in its report Councils Under Pressure, shows that 144 councils are at least £10m short of their planned spending requirements, while 15 are as much as £40m adrift. The trade union says that the situation will only get worse. It estimates that the cumulative funding gap for local authorities in England, Scotland and Wales will soar to more than £7bn by 2025-26.
It’s a bleak picture. But why are councils in such a precarious position? Causes stem from a maelstrom of financial factors fuelled by, among other things, spiking inflation, wage rises, high energy costs, huge increases in demand for services such as adult and children’s social care and homelessness support, and central government’s austerity programme. The LGA says that, since 2010, there has been a 27% real-term cut in core spending power. It’s no surprise that councils are scrambling to make ends meet. And announcements in the Autumn Statement that amount to deep cuts to public spending present further challenges for local councils.
“No councils are immune to the risk of running into financial difficulty and others have already warned of being close to also having to issue Section 114 notices themselves,” says a spokesperson for the LGA. “Councils’ ability to mitigate these stark pressures are being continuously hampered by one-year funding settlements, one-off funding pots and uncertainty due to repeated delays to funding reforms.
“The government needs to come up with a long-term plan to manage this crisis which must include greater funding certainty for councils through multi-year settlements and more clarity on financial reform.”
Councillor Elizabeth Dennis is finance spokesperson at the DCN and Leader of North Hertfordshire Council. She says: “I think it’s obvious that, when you look across the entire public sector, there is a cliff-edge we are rapidly approaching in terms of our financial capabilities versus the work that we are expected by central government to deliver.
“The cost of our statutory services, such as waste collection, have increased exponentially in recent years. And we are being expected to meet those costs for our residents with ever decreasing resources from central government.”
The DCN anticipates that councils will make savings amounting to 9% of their budgets, where possible through efficiencies, but potentially leading to workforce cuts and service reductions. Dennis says that any further scaling back of district council services would be disastrous, but councils are facing impossible choices.
“If you think about our role and the expectation on councils and local authorities to reduce pressure on other parts of public services, then things like leisure centres are mostly contracted out and cost us a lot of money. Those are not statutory services. If we stop providing leisure services, then what pressure is that going to put on the NHS?”
She adds: “If we’re in a place where we have to seriously consider whether it’s viable for us to provide leisure centres, whether it’s viable for us to maintain playgrounds and parks and green spaces — because these are not statutory services, these are purely discretionary — then what impact is that going to have on people? Also, our residents don’t pay council tax just to receive statutory services.”
Like the LGA, Dennis wants reform to central government funding, as she explains. “Why are our budgets under a lot of pressure? Because the fees that we set for things like licensing are mandated by central government and actually don’t cover the cost to us of doing a lot of the work that sits behind assessing applications and taking enforcement action.
“If we had genuine devolution that allowed local authorities to be able to assess the appropriate level of fees to cover our costs, and to help build a slight reserve cushion should we need to take a serious and costly action, potentially in Trading Standards or licensing enforcement, then that would help us to go some of the way to managing and maintaining the level of service that will be needed in that area.”
She continues: “So, giving local government the ability to actually charge what is right and what is fair for the level of service that we provide in those regulatory areas would really, really help us. Give us the power and the flexibility to manage our own finances, trust us to actually run the area that we know best. And we will flourish and we will be able to deliver the added value that the government is asking for.”
Impact on Trading Standards
While a statutory obligation which forms part of councils’ public protection responsibilities, Trading Standards is not immune from the current funding crisis, as the LGA acknowledges: “We have long warned of the impact of government funding reductions on councils’ ability to provide local services, including Trading Standards,” says the spokesperson. “It is vital local government is put on a sustainable footing.
“We know from the various pieces of work we have done in recent years that confirm the value councils and councillors place in the role played by Trading Standards in protecting consumers and ensuring a level playing field for businesses.”
UNISON agrees. Local Government Officer at the trade union, Matt Egan, says: “Councils’ current financial problems expose the damage that has been done to public services through years of Conservative cuts. Essential services can’t run on thin air and more cuts and job losses look inevitable unless the government intervenes with significant extra funding.
“Trading Standards benefits the economy, protects the interests of legitimate businesses, and keeps the public safe. And they are particularly important during a cost-of-living crisis when people are more likely to turn to unscrupulous loan sharks, be tempted by illicit goods and are at greater risk of being ripped off by rogue traders.”
In previous years, UNISON has said that cuts to Trading Standards services are putting the public at the mercy of unscrupulous individuals and businesses, including loan companies, money lenders, scammers, and counterfeiters.
Budget cuts have led to falls in levels of Trading Standards activity across the board, including scheduled inspections, enforcement visits and prosecutions.
The prospect of yet more swingeing cuts from cash-strapped councils is extremely worrying. CTSI Chief Executive John Herriman says: “This is our biggest challenge. I think everybody’s aware, because of local authority budgets and the fact that Trading Standards’ money isn’t ring-fenced in the way that other funding into local government is.”
In 2023, it emerged that Enfield Council was planning to reduce the London borough’s Trading Standards service from four officers to one. As a result, the Trading Standards Manager resigned in protest. It meant that
Enfield Council risked no longer having a functioning Trading Standards service. At the time, CTSI warned that this would endanger the borough’s 330,000 residents and encourage criminal behaviour.
According to Enfield Council, the reduction of the Trading Standards team from four to 1.5 posts was a decision made as part of its budget review which was agreed in March 2023. A spokesperson for Enfield Council told the Journal of Trading Standards that it is “maintaining its Trading Standards team and will continue to protect residents and local businesses by ensuring a fair and safe trading environment”.
The spokesperson added: “However, due to the ongoing budget challenge faced by all councils thanks to austerity, inflation and interest rate rises, we have had to make difficult structural changes to the team. We continue to urge the government to give councils the funding they need to invest in vital frontline services.”
Herriman says that what has happened in Enfield is “dreadful”. He believes that CTSI’s challenge is “to raise awareness of the important role that Trading Standards plays locally, through the branch networks and others, to make sure that people realise that you can’t tackle youth vaping for example unless you have the right level of enforcement activity. That’s about presenting the evidence to both national and local government to highlight the level of risk that is there, and which is increased if services are cut in any way, shape or form.”
Local authorities are between a rock and a hard place, Herriman believes. “That’s why it’s important to campaign on a national level to try and identify where we might get injections of funding, like the £30m that’s going to go into three agencies, including Trading Standards, for vaping and tobacco enforcement. Tobacco enforcement is key because it’s about trying to get new money in. By doing that, we’re highlighting the importance of Trading Standards more generally, and hopefully that protects the services at the local level.
“There’s another dimension here, which is the engagement we’ll be doing over the next several months with local government, the LGA, Welsh LGA, and others, around the manifesto that we’re developing.
“The key theme of that manifesto will be around workforce development, and that’s all about highlighting to local governments the critical role that Trading Standards plays, and the risks that they will be increasing if they decide to make any sort of cuts.”
Herriman says focusing on evidence is key. As such, CTSI is watching very carefully what’s going on in Enfield to identify whether that is causing further problems there or in neighbouring boroughs.
“What happened in Enfield — it’s happening elsewhere as well, but Enfield is probably the most visible example — is that by not having enforcement activity at a community level, in effect it legalises low-level criminality because the criminals can then get away with stuff, and they know they can. And that’s the serious risk here.”
Meanwhile, Dennis at the DCN believes that, moving forward, Trading Standards and the role of licensing and enforcement officers is likely to become more important with some of the legislation currently working its way through central government. But she’s not optimistic that ministers will do anything to help.
“Do I think that this government understands the value of district councils, the role that we play? And do I think that they will support us going forwards in continuing to meet the needs of all local communities? No, because I’ve not seen it historically. I’m not seeing it in the legislation that is coming through. There are amendments that were cross-party to recent legislation that would have given us greater powers to serve our communities in a more meaningful way. And they were rejected by government.”