Responding to COVID-19: insight, support and guidance

Local context: support notes for the Financial Resilience Index

CIPFA has always emphasised the need for a local narrative to accompany the figures in the Resilience Index. The table below shows our rationale for the indicators and is intended to support explanation and understanding of the index.

We are aware that due to COVID–19, additional questions may be raised about the timeliness and relevance of the data. We have sought to address these questions alongside the indicators.

The timing of the index follows the release of MHCLG statistics (i.e., Revenue Outturn 2019-20 on 21st January 2020). These statistics were originally expected in November 2020. 

We are aware that the pandemic has fundamentally altered the Local Authority funding landscape in 2020-2021. In this context, we would emphasise that the Resilience Index provides a pre-COVID picture of resilience at the end of March 2020. 

Indicator Detail Impact   Additional Supportive Note
Reserves sustainability measure How long an authority’s reserves will last if they continue drawing them down at the same rate The longer an authority’s reserves will last, the less risk
  • Without reserves, councils have no ability to weather financial storms. 
  • It is the responsibility of the S151 officer to utilise good financial management and decide what is an appropriate level of reserves. 
Level of reserves
Earmarked + unallocated
Lower levels of reserves imply higher risk
  • It is the responsibility of the S151 officer to utilise good financial management and decide what is an appropriate level of reserves. 
  • Good financial management can be achieved with relatively low reserves, while high reserves do not always indicate good financial management.
  • Two COVID payments paid at the end of March 2020 may have an impact on this indicator if the local authority recorded them as reserves. 
Change in reserves
Percentage change in reserves over the past three years
Negative changes imply higher risk
  • This indicator shows the degree of change in reserve levels as an average over the last three years.
  • An increasing use of reserves over this period indicates a higher risk to financial sustainability.
  • The indicator should be viewed with the MTFP, total reserves, planned use of reserves, and the level of reserves which the authority determines to be an appropriate minimum.
  • We wouldn't suggest inter-authority comparison, as each will have differing reserves policy, reserves levels and planned use.
Gross external debt
Level of gross external debt The higher the gross debt level, the higher the risk
  • The Prudential Code is clear that local authorities should borrow within their means. Minimum revenue provision ensures that there is suitable debt cover.
  • Substantial debt must be monitored, and effective risk management must be evident.  
Social care ratio Amount of expenditure on demand-led services – this determines the level of flexibility in the budget

More flexibility, less risk

The higher the ratio, the higher the risk

  • Relevant for those with responsibility for social care, therefore not relevant for districts. 
  • There are areas of demand where councils have limited control. Demand for social care is increasing. Social care is a statutory obligation, therefore it is difficult to reduce this spend.
  • Demographic growth will show a trend towards increased expenditure. 
    Post-COVID, there is expected to be a rise in demand for social care for both adults and children 
Fees and charges Total fees and charges as a proportion of service expenditure

The higher the ratio the lower the risk (income)

A greater amount of fees/charges will make councils more resilient as they have more control over budgets

  • You have greater control over your own ability to put charges up or down, giving more control over budget. 
  • Local authorities have the ability to raise income through certain fees and charges.
    Fees and charges across different sources may reduce risk.
  • CIPFA is aware of the alternative argument that councils with low fees and charges have greater scope to generate more income, but this approach was supported by the working group.
  • CIPFA is aware that during the pandemic (after the period covered by this data) this has not proven to be true as grants have underpinned income losses.
Council tax Council tax requirement/net revenue expenditure
Higher the ratio the lower the risk (income)
  • Council Tax is a stable form of income. 
  • Collection rates and hardship schemes have resulted in minimal impact across the board.
  • Awareness of the pressures from COVID and the requirement for Government support.
Business rates Percentage growth in business rates above the baseline
The higher the ratio the higher the risk
  • Local authorities have been able to maintain growth in business rates.
  • There is an issue that in a reset, those with greater income above the baseline will face a greater negative impact. This makes them more vulnerable.
  • Business rates changes have been delayed along with the fair funding review.
Children's social care Ofsted judgement on overall services The lower the rating, the higher the risk
  • Possible correlation between the ruling and large requirement to invest spend.
  • Many authorities with adverse children's social care judgements have increased spending to improve services. The increase in spending may lead to greater problems in delivering a balanced budget or in maintaining adequate reserves.
Auditors VFM assessment Auditors VFM assessment Lower assessment, the higher the risk
  • Value for money judgement based on the national code of audit practice.
  • As no complete data record from PSAA was held for 2019-20 regarding VFM audit outcomes, CIPFA has collected this data from individual council records (where available).
  • Where the record reads N/A this indicates that the information was not available at the time.


All calculations are based on the latest available annual data unless otherwise stated.

Reserves measures exclude public health and schools reserves. These reserves are ring-fenced and cannot be used to support expenditure in other areas.

CIPFA will continue to discuss opportunities for improving the RO form data collection.

If there are any inaccuracies in the auditors VFM assessment, please contact our data team on with evidence and we will update our records.