Is your community ready to fill the local authority funding gap?

The financial crisis facing local authorities is worsening. For many, it’s no longer possible to economise simply by trimming services. Instead, they are being forced to make difficult decisions to reduce services, and there’s a real prospect of more to come. 
 
Despite the hardship these cuts are bringing for the individuals and communities affected, there could be a once-in-a-generational opportunity for community-run organisations to be established, step in and take control.  
 
Survey findings reported recently in The Guardian have highlighted the plight of local authorities in England and Wales, stating that one in five believe they are ‘fairly or very likely’ to be insolvent by the end of the year. 

Four local authorities served Section 114 notices last year due to insufficient income to meet their planned funding commitments for 2024-25. As local authorities prepare budgets for 2025-26, it is likely that more Section 114 notices will be served. 

Difficult decisions

As more councils focus on making cuts, it is clear both statutory and discretionary service provision will be affected. An investigation by the BBC in September found more than 180 council-run libraries in the UK have either been closed or handed over to volunteer groups in the past eight years. 

In some local authorities, services delivered by third-sector organisations are likely to be cut when existing contracts lapse, potentially forcing the closure of much-needed services such as food kitchens to support low-income households and employment training for people living in disadvantaged areas.  
 
When it comes to managing public finances, local authorities are still very much in control. There have been a series of court cases brought by campaigners seeking to challenge the closure of libraries but, although some have brought a stay of execution, the courts have been slow to interfere in decisions that local authorities have made based on a lack of resources. 

However, when difficult decisions are being taken and planned cuts are announced, community-run organisations need to be ready to respond. For example, they could be considering what they could do to protect services that are highly prized by the local community. 

In Devon, library services were spun out of local authority ownership altogether. Instead of delivering costly mobile library services in rural areas, the council is focused on establishing a network of community libraries instead. In this case, there could be an opportunity for new or existing community-run organisations to run library services in their local area.  

Asset reviews

Many local authorities are conducting asset reviews and there could be opportunities for community-run organisations to garner the support needed to purchase buildings or other assets that the council might be looking to divest. 

In the Midlands, for example, Witton Lodge Community Association is leading on the refurbishment and re-purposing of the former Erdington Baths, to restore the century-old building and renovate it with a focus on supporting entrepreneurs and developing new and growing businesses in the area, as well as providing a hub for the community. 

In another area of Birmingham, a local community group has stepped in to purchase Moseley Baths, a Victorian building on a key arterial route into the city centre and is exploring opportunities to breathe life back into this valued local amenity.

Important considerations

When looking to establish a new community-run organisation, such as a cooperative or a not-for-profit organisation, there are some important considerations to bear in mind. For example, consideration should be given to what type of legal structure the new organisation should have. 

If the new entity is intending to make a profit or surplus, will this be reinvested into the service or asset? If so, it should have a charitable or asset-locked legal structure. From a governance perspective, it’s important to consider how the new organisation will make decisions and who will be involved. If it is intended that the community will have a say, then an inclusive membership-based structure will be an option. 

Alternatively, if the intention is to appoint a team of people with complementary skillsets, then a more traditional, board-led decision-making structure may be preferred. 

Another key consideration is funding and how the new organisation is intending to raise finance. Depending on what is decided, organisations may be able to take advantage of a structure based on community shares, but specialist advice is needed. 
 
With so much change across local government, there is a once-in-a-generational opportunity for agile, community-run organisations to step in and take control. But to succeed they will need to be ready to respond quickly and seek advice from professional support networks and like-minded organisations that have previous experience in this area. 
 
David Alcock is Partner and Head of Social Business at Anthony Collins Solicitors LLP. 
 anthonycollins.com/
 @ACSLLP | @DavidA_ACS