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Five signs of financial stress

10 July 2017

CIPFA is calling on councils to watch for five warning signs of financial stress and to build resilience on all aspects of planning and operations.

Irrespective of any softening of austerity local government financial pressure is mounting, and CIPFA’s snapshot of local authority CFO’s confidence in delivering public services has revealed serious spending pressures – especially in children’s education and social care.

CIPFA’s five key symptoms of financial stress are:
1) A rapid decline in reserves - using reserves to avoid cuts will only provide temporary relief.
2) A failure to plan and deliver savings in service provision - so that councils are not living within their resources.
3) Shortening of medium-term financial planning – a failure to plan ahead could indicate a lack of strategic thinking and an unwillingness to confront tough decisions.
4) Firm objectives missing from savings plan – such as a saving plan with ‘still to be found’ gaps or consisting of targets rather than robust plans; this may also include a tendency for over optimism in timing and scale of savings.
5) Tendency for unplanned overspends – carrying forward undelivered savings into the following year only creates the need for greater cuts in subsequent years.

CIPFA’s Sean Nolan said: “Austerity has battered the sector for close to a decade, while increased demand and cost pressures left some councils at the brink.” He felt that some positive trends towards greater self-sufficiency and local leadership has allowed some areas to flourish, others have struggled to reap the benefits of these reforms.

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