February 2025
Following the publication of the final Local Government Financial Settlement I am writing to share my views on the judgements you will be making as you and your councils finalise your preparations for budget setting council meetings this month.
This also draws on a number of conversations that I and senior CIPFA colleagues have been having with individual CFOs, the various treasurer groups and societies and officials at MHCLG. It is clear that we all have significant concerns about the financial position that many councils are in.
It is absolutely right that Councils develop financial plans which extend beyond the immediate financial year and consider whether they will be able to maintain financial sustainability in both the coming months and particularly into the medium to long term.
While this week’s settlement provides additional financial support, it does not address the uncertainties around future funding and reform. The volume and complexity of those reforms is significant and includes a Spending Review, the promise of a multiyear settlement, funding model reform and business rates modernisation, all over laid with plans for significant structural reorganisation of the sector and further devolution. Reforms from several other Whitehall departments who own policy responsibility for many services delivered by local councils will also be significant for your planning.
You will be drawing on your professional judgments about both the short and medium term and including your reasoning and conclusions with regards to these judgements in your discussions and communications with all stakeholders. You will be factoring all published information into these judgements, particularly the government’s statements about planned reforms. It is appropriate to plan your budgets and medium-term plans in a way that factors in the promised reforms being pursued.
It is of course difficult to anticipate the outcome from the wide range of reforms that are being developed, and the fiscal landscape that will play into future government decisions continues to be volatile. It is also appropriate that this uncertainty is considered when exercising your judgement.
In this unsettled and unpredictable operating and financial landscape, the pragmatic steps many CFOs have been taking to maintain immediate financial balance are professional and reasonable in the current situation. It is understandable that you will be particularly focussed on the short term, even whilst recognising the significant concerns and uncertainties impacting the medium term and beyond.
During these periods of uncertainty, the Section 25 Statement becomes an even more critical report for a CFO, providing an opportunity to set out an assessment of future risks and uncertainties, raise concerns and provide context to assumptions made in the assessment of a council’s outlook. It will be important that risks and assumptions are tracked and revisited as more information becomes available.
CIPFA has provided Advice on the section 25 Statement and would expect many s25 statements to contain strongly worded caveats, especially around SEND deficits and the use and impact of EFS.
Recognising the challenges around budget setting, CIPFA has previously written to CFOs and made it clear that councils should explore all available avenues when considering their ongoing financial resilience. This explicitly includes discussions with MHCLG.
We reiterate our position that CFOs must take these discussions into account when deciding whether a Section 114 may be necessary. This does not change the statutory responsibilities of a Section 151 officer under the current legislation, but it is intended to allow CFOs an opportunity to find alternatives and apply appropriate pragmatism when discharging their professional and statutory responsibilities within the current context of significant uncertainty and anticipated change.
We continue to offer bespoke support to councils and I or a member of the CIPFA team is available to talk to any CFO (ceo@cipfa.org). Additional advice on areas such as the annual Governance statement, Statement of responsibilities and reserves is available on our website.
Finally, I want to be clear that I share the major concerns about the continued reliance on Exceptional Financial Support (EFS). It does not represent a sound or sustainable approach to managing public money in the long term. I have made that clear and I will continue to voice my concern that such short-term measures can only act as a temporary fix while longer term solutions are found.
CIPFA will continue to highlight the changes and reforms needed to allow the sector to improve its financial sustainability and remain hopeful that the reforms being worked on now will be the start of that journey.
Yours sincerely
Owen Mapley, Chief Executive