23-01-2025
Upper-tier councils allocate an overwhelming 78% of their net revenue expenditure (NRE) to social care, reveals the fifth edition of the Chartered Institute of Public Finance and Accountancy’s (CIPFA) and Infoshare+ Financial Resilience Index 2024.
The Index assesses the financial health of English local authorities. It highlights councils' positions on a range of measures associated with financial risk. The 2024 data underscores the growing strain on councils as they manage surging demand for services while grappling with declining reserves.
Key findings from the Financial Resilience Index 2024 include:
- Rising social care expenditure: Demand for social care continues to increase, with upper-tier councils spending an average of 78% of their NRE on social care services for both adults and children.
- Declining reserves: Across England, local authorities experience a decline in reserves, with some councils using these funds to address ongoing cost pressures, while others dip into earmarked reserves set aside for specific purposes.
- Business rates reform risks: The index also highlights concerns about the government's proposed changes to the business rates retention system. The potential reset of the baseline for business rates funding could significantly impact councils' funding, depending on the final structure.
Additionally, data gathered from statutory returns reveals rising pressures in areas beyond social care, such as homelessness. Non-metropolitan councils and London boroughs see significant expenditure increases. The government's recent commitment to boosting funding for affordable housing may offer vital support to address these challenges.
Despite these financial pressures, local authorities continue to deliver essential services. However, CIPFA stresses that urgent structural reforms are needed to ensure the long-term sustainability of public services.
CIPFA Senior Policy Manager, Joanne Pitt, said:
“The Financial Resilience Index is an essential tool for highlighting financial risk, but it is only part of the picture. For councils to truly recover and thrive, we need to address the root causes of their financial strain, such as inadequate funding mechanisms. Without significant reform, many local authorities will continue to face severe financial challenges.
“While the government’s recent budget increase for frontline services provides short-term relief, the long-term funding reforms, set to take effect from 2026/27, are essential. These reforms are critical to strengthening councils' financial resilience for the future.”
Notes to editor
Read the full Financial Resilience Index 2024 briefing.
The CIPFA/Infoshare+ financial resilience index is an analytical tool that provides a high-level comparative picture of English authorities’ financial position based on a range of measures associated with financial risk. There is no single overall indicator of financial risk, so the index instead highlights areas where scrutiny can provide added assurance.
The Chartered Institute of Public Finance and Accountancy (CIPFA) is a global leader in public financial management, dedicated to improving public services and governance through innovative research and practical solutions.
Infoshare+ is a UK-based public sector partner offering innovative and responsible software and data solutions. The company’s team of experienced public sector experts are trusted by hundreds of organisations across local and central government, as well health and the emergency services. Infoshare+ focuses on empowering customers with software that enhances decision-making and helps them.
For media inquiries, please contact: press@cipfa.org.