The Crisis in Local Government Finance - ATCM 2025
Richard Gates from Falmouth Town Council and Richard Wilcox from Falmouth BID presenting a promotional video on Falmouth town.
ATCM Place Management Conference 2025: The Crisis in Local Government Finance – Understanding the Challenges.
The financial crisis facing local government in the UK has reached a critical point, as highlighted in the ATCM event, A Crisis in Local Government Finance. With local government investment in the UK ranked among the lowest in the developed world, urgent action is needed to address systemic issues and secure the future of public services.
The Stark Reality of UK Local Government Finance
Ojay MacDonald opened the event with some alarming statistics: the UK’s local government investment is just 0.8% of GDP, compared to the OECD average of 1.4%.
This places the UK at the bottom of the OECD ranking for local government investment, sitting 30th out of 38 countries. In contrast, central government investment is 3% of GDP, still below the 3.6% OECD average.
The financial pressures are compounded by multiple economic shocks, from the 2008 recession to the ongoing effects of war and domestic policy missteps. Rising public debt and market uncertainty further restrict the government’s ability to borrow, exacerbating the crisis.
Where Has the Money Gone?
Heather Jameson, editor of The Municipal Journal, pointed out that 10% of local authorities are now receiving exceptional financial support. This effectively means that councils are being forced to borrow just to cover basic services, a situation she likened to “borrowing on the mortgage to pay the gas bill.”
When councils face extreme financial difficulty, they issue a Section 114 notice, an emergency freeze on spending designed to balance budgets. Unlike other public institutions, local governments cannot run a deficit, nor do they have the power to freely increase council tax, leaving them with few options to recover from financial hardship.
On a more positive note, Jameson acknowledged that there is now wider recognition of the crisis, and the government has become more active in policy discussions since late 2023, particularly regarding growth and reform.
Proposed changes include a separation of powers between social care and local economic development, which could give councils greater control over financial decisions.
Innovative Approaches to Local Revenue Generation
One pressing question was how councils could generate more income. Ideas included:
Tourist taxes (as introduced in Manchester through an Accommodation BID and under consideration in other cities and at national levels)
Parking fees and fines
Littering penalties
While these measures could help, they are not comprehensive solutions to the wider funding crisis. Parking charges can also be very controversial, Cllr Simon Goldman of Chelmsford City Council highlighted.
The Fallout of Funding Cuts
A panel discussion featuring Pooja Agrawal, from Public Practice, Amy Taylor from Blaenau Gwent Council, Shanaaz Carrol from Slough Borough Council and Michelle McPhee from Middlesbrough Council explored the human impact of financial shortfalls. A key concern was the loss of planners at a time of major urban transformation. In Middlesbrough, for example, no new budget has been available for three or four years, and a high turnover in senior leadership.
Some councils are finding creative solutions. Blaenau Gwent Council, for instance, is pioneering a federated model, where resources and decision-making are shared across neighbouring authorities. This allows them to retain local accountability while improving financial resilience.
The Road to Reform
Ojay MacDonald closed the session by outlining ATCM’s advocacy for reforms, including:
Ring-fencing place-based investment for local growth
Streamlining funding programmes to improve coordination
Broadening the business rates tax base to include digital businesses
Reinvesting business rates into local economies via Business Improvement Districts (BIDs)
The crisis in local government finance is not just a challenge—it is an opportunity to rethink and restructure the way public services are funded. Future policies must ensure sustainable investment and empower local authorities to take greater control over their financial futures.
