Stretched councils raid reserves to cope with social care, NAO warns

One in 10 councils with social care obligations will have exhausted their reserves within the next three years if the current rate of expenditure continues, according to findings by Whitehall’s spending watchdog.

A report by the National Audit Office found that local authorities in England are routinely raiding their “rainy day funds” to cope with an increase in demand on services.

The NAO said a growing number of these councils were managing to balance their books only by using financial reserves to cover overspends on social care services. It estimates that 10% of single tier and county councils have less than three years’ reserves left if they continue to deploy them at current rates, leaving them vulnerable to unexpected cost pressures and potential insolvency.

“The pattern of growing overspends on services and dwindling reserves exhibited by an increasing number of authorities is not sustainable over the long term,” it said.

The report will alarm Downing Street and follows claims that Surrey – where the chancellor, Philip Hammond, has his seat – is facing a £100m cash crisis. Last month, Tory-run Northamptonshire county council became the first authority in two decades to declare effective bankruptcy. The NAO report suggests that about 15 councils will be at risk of following suit.

Sir Amyas Morse, the head of the NAO, said the government’s approach to continuing problems had been characterised by “one-off and short-term fixes”.

“The weight of responsibility to respond to increased demand and maintain services remains very much on [councils’] shoulders. The government risks sleepwalking into a centralised local authority financial system where the scope for local discretion is being slowly eroded,” he said.

Source: theguardian