The impact of demographic trends on local government financial reserves: evidence from England

Abstract

ABSTRACT Local government in England has experienced significant financial volatility in recent years due to cuts in central government funding and increased demand for service provision. Using a panel data set of English local governments over the period 2005–2016, this study investigates the impact of demographic factors on the financial reserves held by different types of English local governments. Dissimilar effects are traced on local governments’ saving capability of different grant funding mechanisms and whether local governments are involved in social care provision, and how they provide these services. Findings show that local governments actively act upon financial uncertainty by expanding their reserves through implementing changes in both their income and expenditure structures, including revenue generation through alternative sources such as capital investment. The potential, however, to expand reserves differs significantly between local governments and has reduced due to growing demand for social care services.