Published on 25 October 2024
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Townscapes: Mapping the gaps – the geography of local authority financial distress in England

Local authorities in England are facing severe financial distress, with a projected £9.3 billion deficit by 2026-27. The financial landscape is uneven, with London and the South East projected to have the largest shortfalls, highlighting critical challenges for the UK’s economy and government, write Andy Pike and Jack Shaw.

Local authorities in England face acute financial distress within a broken funding system. Various estimates of their shortfalls between expenditure and income have been produced, but little is known of the geography and institutional and political nature of the financial gaps.

Using data collected from the Medium Term Financial Strategies (MTFS) produced by each of England’s 317 local authorities, this report maps the geography of financial distress and contributes to the wider debate about how to improve their financial sustainability and resilience. The plight of local authorities in providing essential services is a critically important issue for UK economy, society, and polity, and the new Labour government.

The geography of local authority financial distress across England reveals a highly differentiated landscape that defies any convenient or simple shorthand.  While the structural issues with the funding system are common and shared, the sets of challenges facing local authorities are playing out in different, place-specific contexts with different outcomes.

The report finds that, taking 2024-25 as the starting point, the 317 local authorities in England forecast their total deficit as £9.3bn by 2026-27. Almost all of the 317 councils estimate a funding shortfall by 2026-27, with only 14 able to balance their budgets or be in surplus.

Significant regional variations are evident in the local authority financial landscape across England. Councils in London and the South East are the worst affected regions, facing shortfalls of £3.9 billion by 2026-27. Councils in the North of England face deficits of £2.3 billion over the same period.

The scale of the financial challenge facing councils differs according to their local authority type and responsibilities. Large county councils must find £1.7 billion by 2026-27, equivalent to £79 million for each authority. Single-tier metropolitan districts, London boroughs and unitary councils need to find nearly £6.9 billion by 2026-27, equivalent to £52 million for each authority. Smaller district councils have to find over £800 million by 2026-27, equivalent to £5 million per authority but more than double what counties, metropolitan districts, and unitaries require as a proportion of their budgets.

The relationship between financial condition and political control cannot be reduced to simplistic conclusions – with authorities led by all major political parties in difficult financial positions which are untenable in the long-term.

Report: Mapping the gaps: the geography of local authority financial distress in England

Blog: English councils face £9.3 billion deficit by 2026-27


Authors

Prof Andy Pike

Professor Andy Pike

Andy Pike is the Henry Daysh Professor of Regional Development Studies in the Centre for Urban and Regional Development Studies (CURDS), Newcastle University, UK. His research interests, publications and research...

Jack Shaw

Affiliated Researcher

Jack Shaw is an Honorary Senior Research Fellow at the Mile End Institute and an Affiliated Researcher at the Bennett Institute for Public Policy. He works across regional economic policy, devolution...

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