Most English councils expect to slash budgets next year, NAO warns

Some 94 per cent of councils told researchers that they expect to cut spending next year to meet legal duties to balance their budgets.

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Meanwhile, just a fifth (20 per cent) of councils said they felt able to return budgets to pre-pandemic levels within the next two years.

More than half (53 per cent) said that they would need to build up their reserves in the next two to three years, but only 16 per cent of these respondents felt confident that they would be able to do this, the report states.

Local authorities are estimated to have been hit with £9.7bn of extra cost pressures relating to the Covid-19 pandemic, between March and December last year, it adds.

Children’s social care services are among those cited as putting “pressure” on local authority budgets, according to the NAO.

“[Some] authorities identified increased numbers of looked-after children,” it states, citing that 2020/21 budgets by councils including Wirral Council and Croydon Council, “contained significant savings targets relating to children’s social care”.

Croydon Council was the only local authority to declare insolvency over the last year, with the government approving a £120m bailout to the council last week.

Five councils - Wirral, Luton, Eastbourne, Bexley and Peterborough - have collectively received £109m in government loans to keep them afloat. 

Nottingham City Council is awaiting approval of a £30m loan while Slough has requested £10m from government in a bid to avoid issuing section 114 insolvency notices.

Meanwhile, Leeds City Council last month passed a budget which will see cuts of £7.1m to children's and families services.

A separate report by the UK Addiction Treatment Group which analyses latest government figures shows a 47 per cent reduction in spending on drug and alcohol services for young people over the last five years.

Figures show that in 2014/15, £16.4m was spent in schools across England on drug, alcohol and volatile substances support, but this figure had been cut to just £8.7m in 2019/20.

James Jamieson, chairman of the Local Government Association, said: “We continue to call on the government to meet – in full – all cost pressures and income losses incurred by councils as a result of the pandemic. Public finances are undoubtedly under huge strain but investment in our local services will be vital for our national economic and social recovery.”