Watchdog says local councils will struggle to balance budget

LOCAL government faces a funding crisis and many authorities could be forced to make substantial cuts to core services, according to a report released today by the National Audit Office (NAO).

The NAO estimates that local authorities are planning to reduce spending by £4.6bn by April 2013 but councils still need to identify about half of the further savings to be made before March 2015. The report suggests that high-cost services, such as adult and children’s social care, may need to be cut to meet targets.

“The scope is diminishing for absorbing cost pressures through reducing other, lower cost services given that spending on these services has already been reduced,” the report says.

Margaret Hodge MP, chair of the public accounts committee, said: “I am alarmed to hear that 12 per cent are now at risk of being unable to balance their books in the future, according to local auditors, with potentially disastrous consequences.”

“As the cuts kick in, the department needs to make clear what it will do if multiple authorities fail financially.

But the CBI business group said council cuts are part of necessary deficit reduction: “Councils need to adapt to their new financial reality and be smarter about forging long-term partnerships with service providers.”