One in five local authorities is at risk of going bust in 2024
A fifth of local authorities in England are facing bankruptcy in the next 12 months due to a lack of funding for essential services.
As Nottingham City Council became the fourth authority in a year to declare itself effectively bankrupt, the Local Government Association (LGA) warned one in five council leaders are predicting they will have to issue a Section 114 notice this year or next.
Councils say they are facing a £4 billion funding gap just to keep services standing still. They blame funding not keeping pace with inflation and surging demand for child protection, adult social care and homelessness services.
Almost a third of council funding is being spent on children’s social care, analysis from the Special Interest Group of Municipal Authorities recently revealed, with thousands more vulnerable children referred to local authorities following the pandemic.
Councils in deprived areas have been hit the hardest, with authorities in the top 15 poorest areas more than doubling spending on children’s services as a proportion of overall budgets.
Money spent on children’s services has gone from 15 per cent of these councils’ spending in 2011/12 to 31 per cent currently.
Half of council leaders surveyed by the LGA are not confident they will have enough funding for statutory services next year.
Leeds City Council has just announced it will cut 750 jobs, close care homes, a civic hall, and raise parking charges and fees for social care, in an attempt to save £58 million.
Seven out of ten county councils also face bankruptcy in 2024-25 and will have to cut frontline services and raise council tax to the maximum.
Cllr Shaun Davies, chair of the LGA, said: “The lack of funding for local services in the Autumn Statement has left councils facing a growing financial crisis.
“No council is immune to the risk of running into financial difficulty and many now face the prospect of being unable to meet their legal duty to set a balanced budget.
“Councils provide hundreds of services that our communities rely on every single day. For many people, these services are a lifeline.
“While councils have worked hard to reduce costs, find efficiencies and transform services, the easy savings have long since gone. The Government urgently needs to act to address the acute financial challenges faced by councils.”
A Department for Levelling Up spokesperson said: “We have made an extra £5.1 billion of funding available to local authorities in the last financial year worth an additional 9.4 per cent in cash terms to budgets.
“Councils are ultimately responsible for the management of their own finances, but we stand ready to talk to any council that is concerned about its financial position.”
In its response to the Autumn Statement, BASW said: "“It’s disheartening that we can only expect the government to announce the minimum required to support those on the lowest incomes, instead of the bold, ambitious policies that are needed to lift people out of poverty for good.
“This was also another missed opportunity for the government to address the funding crisis in social care. BASW has repeatedly warned that we need long-term funding, rather than short bursts of money, to allow local authorities and services to plan ahead."
Image: Peter Tarleton