Local councils could face financial crisis in the next year

Fewer than 20% of local government leaders believe they can deliver continued savings over the next five years without impacting the quality of service delivery, according to PwC’s annual survey of local government leaders.

Leaders also predict a local government financial crisis, with three quarters (74%) of respondents expecting that some councils will get into serious financial crisis in the next year, up from 54% last year.

The Local State We’re In surveyed the views of 81 local authority Chief Executives, Finance Directors and elected Council Leaders across the UK as well polling 2,000 members of the public on their experience of local government performance. PwC found that seven in ten (72%) council respondents have coped well in the face of austerity and the uncertainty of Brexit, while remaining confident of delivering savings next year, without impacting on quality of service delivery.

However a cliff edge remains with a third (33%) of local government leaders expressing fears that they can’t deliver savings and maintain service delivery over the next three years – this figure increases significantly to 81% when considering this over the next five years.

Jonathan House, Local Government and Health Leader, PwC commented: “This year’s survey shows the significant step up in the challenge for local government leadership in securing the future for their councils, as well as ensuring they are financially sustainable. While local councils have done well against an ongoing course of challenges, the cliff edge for some is getting ever closer.

With another Spending Review next year, as well as the UK’s formal exit from the EU, the landscape will become incredibly tough – the resilience they have shown so far will be tested to the max.

Local authorities still perceive themselves as vulnerable to cyber attacks. Last year’s survey showed that just over half (53%) of local authorities across the UK believe they are prepared to deal with a cyber attack and this figure has only risen slightly to 58%. But only 41% are confident that their employees exhibit robust cyber security behaviours at work, highlighting a continuing potential area of vulnerability for councils.

Local government leaders say that new technology presents opportunities which extend beyond just reducing costs with nine in ten respondents expecting that digital will enable them to engage communities in new ways, while 80% expect digital to facilitate improvements to service delivery. However there are challenges to deliver this with just 3 in 10 survey respondents feeling that their council is confidently embracing new technologies like AI and robotics.

There is a particular gap in data and analytics with only half the survey respondents confident in their councils’ capabilities in this area. This highlights the pace of technological change and the complexity of implementation and suggests that the potential of new technologies is not being maximised.

In addition, more needs to be done to shift behaviours to enable people to get the most from the available technology. This includes moving more of the public online: almost two thirds (62%) of the public polled had not interacted with their council digitally in the past month and 20% are not aware of any council services being available digitally. These proportions have hardly changed from last year suggesting that councils face a major challenge if they are to encourage their ‘customers’ to make the digital shift.

There is clearly an appetite for reform with four fifths (81%) of respondents agreeing that integration would have a positive impact on health outcomes. This supports recent PwC research suggesting that the institutional, strategic and cultural differences between the NHS and councils could present barriers to integration.

Jonathan House, Local Government and Health Leader, PwC commented: “The drive from NHS England towards the formation of shadow and full integrated care systems is moving at a pace. This will only achieve its full potential for citizens and patients if local authorities can work closely with health colleagues in the ICS establishment phase – this will help overcome barriers and produce much better outcomes for the population.

With Brexit in sight next year, and more clarity around the transitional agreement, respondents see high impacts on their councils for trade, FDI and funding. Yet only 12% of respondents see their council proactively promoting city-to-city links overseas to find investment and promote trade for their local economies. In addition, 74% are not confident that central government will engage with cities and local government in reshaping regional investment and regeneration funds, beyond Brexit.

The impact of Brexit is also a source of uncertainty for the public: almost half (46%) of the public neither agree nor disagree that their local area will benefit from leaving the EU.

Jonathan House, Local Government and Health Leader, PwC commented: “The findings highlight the need for councils to further embrace technology to fully take advantage of the benefits it can bring to delivering improved outcomes.

Furthermore, while the capability gap for data analytics is closing, more needs to be done to drive insight from the vast amount of data collected, enabling earlier intervention and prevention to deliver better results for citizens.

With Brexit looming, and only 12% of respondents saying their councils are proactively going abroad on a city-to-city basis to find investment and develop trading links now is the time for action. This is particularly important given that 74% are not confident that central government will engage with cities and local government in reshaping regional investment and regeneration funds beyond Brexit.

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