Martin was quoted in an article published on ICAEW Insights titled: One fifth of councils risk financial failure this year.
The section in which Martin was quoted reads as follows:
Martin Wheatcroft FCA, an external adviser on public finances to ICAEW, says it is not just badly run councils – that either speculated and lost or mismanaged funds – that now face the distinct possibility of financial failure: “Many ‘normal’ local authorities are now looking vulnerable too, as they struggle to balance their budgets in the face of rising demand, rising costs and constrained funding.”
In particular, Wheatcroft says adult social care is a significant challenge for many local authorities, as an ageing population sees demand increasing each year as the number of pensioners grows. Meanwhile, the knock-on impact of the minimum wage increase of 9.8% from April will further add to the challenges facing councils in the coming financial year.
“With local authority core funding only going up 6.5% in the coming financial year, local authorities are having to look for further cuts in other already ‘cut to the bone’ public services to try and balance their books,” Wheatcroft adds.
Last month, the Department for Levelling Up, Housing and Communities released a call for views on greater capital flexibilities that would allow councils to either use capital receipts to fund operational expenditure or to treat some operational expenditure as if it were capital, without the requirement to approach the government.
The intention is to encourage local authorities to invest in ways that reduce the cost of service delivery and provide more local levers to manage financial resources. The consultation is open until the end of January.
Under the current rules, councils are restricted from using money received from asset sales or from borrowing to fund operating costs due to capital receipts being considered a ‘one-off‘, while borrowing creates a liability that has to be repaid.
Wheatcroft adds: “The government’s announcement of greater capital flexibilities may help stave off some of the problems for a while but is likely to further weaken local authority balance sheets in doing so.”
To read the full article, click here.