Somerset County Council Enters Bankruptcy Danger Zone
From The Times today
“Three Conservative-run counties have been added to the list of those showing signs of financial stress because of funding cuts.
Somerset, Norfolk and Lancashire county councils are exhibiting some of the warning signs demonstrated by Northamptonshire county council before it declared itself effectively bankrupt last month, according to the Bureau of Investigative Journalism.
The three join the Tory-run Surrey county council, which is facing a £100 million shortfall, as the counties in the deepest financial crises. The National Audit Office has found that one in ten councils could run out of money in the next three years. County councils have been hit hard by cuts to local government funding since 2010 and social care costs are rising.
Somerset, Norfolk and Lancashire’s usable reserves — effectively rainy day funds — have all fallen substantially in recent years, the bureau’s research found. Somerset’s usable reserves have fallen by 60 per cent in the past five years, Norfolk’s have halved and Lancashire’s have fallen by 48 per cent.
All three show further signs of financial difficulty. In Somerset the council overspent on child and adult social services in each of the past three years and its budget this year projects a £14.6 million overspend on children’s services, the largest in the country. Last month it announced plans to close two thirds of its children’s centres.
A spokesman for Somerset said that the findings “overstate the position and don’t take account of our considerable contingency funds or the plans we have in place to make savings”. A Norfolk spokesman said the research was “scaremongering” and that the council had recently “set a balanced budget for 2018-19”. Angie Ridgwell, Lancashire’s chief executive, said: “There may be sufficient funds within the transitional reserve to support the identified budget gap in 2018-19 and 2019-20. However, further savings will need to be made.”
Labour has urged Philip Hammond, the chancellor, to give councils an extra £2 billion by 2020 to fund children’s services. John McDonnell, the shadow chancellor, said this could be paid for by reversing cuts to a levy on banks. He will say in a speech today that cuts to town halls have stretched services to “breaking point”.”
The council funding mechanism is broken.