‘Over the last seven years, eight councils have already gone bust resulting in residents’ council tax doubling while public services are decimated.’

The Local Government Information Unit (LGIU), a think-tank aimed at strengthening local democracy, has said that all political parties are underestimating the financial crisis in local government. It warns that half of councils could be forced to declare bankruptcy within the next government’s first term.

In its For the Future of Local Government manifesto, the LGIU calls on the next government to take urgent action to “avoid hundreds of councils plunging into effective bankruptcy.” The manifesto highlights how one in ten councils face running out of money this financial year, and how just 4 percent of local authorities have confidence in the sustainability of the local government financial system.

In 2024 already, 19 councils have been permitted to borrow more and sell local assets to balance their books. The think-tank is urging for councils to be given more freedom on how they spend money to meet their local needs.

 Jonathan Carr-West, chief executive of the LGIU, described national success as having local foundations and the next government needs “functioning local authorities to deliver its national mandate.”

“However, with half of all councils expected to go bankrupt within the next government’s first term, none of the parties’ manifestos adequately address the urgent financial crisis in local government.” 

He added that over the last seven years, eight councils have “already gone bust resulting in residents’ council tax doubling while public services are decimated.”

Support for youth services has been one of the biggest casualties of council funding cuts. In April, economists warned that English local authorities were facing an annual shortfall of £332 million in youth homelessness funding. Research by youth homelessness charity Centrepoint found that London’s Newham Council required as much as £32mn, with Liverpool, Cornwall, Hammersmith and Fulham, and the London boroughs of Ealing and Bexley needing more than £10mn.

Increasing costs to meet obligations under the Homelessness Reduction Act (HRA) were found to be a leading factor behind the shortfall, despite the government investing £2.4 billion to tackle homelessness between 2022 and 2025.

To counter the funding cuts in recent years, the British Association of Social Workers is calling on the next government to commit to £2.6 billion in children’s social care funding. The figure was set out by Care Review chair in his final report to the government as the cost of implementing reforms. The last government however only offered £300mn to pilot recommendations. 

The LGIU’s calls follow similar warnings by the Local Government Association (LGA), which is calling on all political parties to act on a predicted £6.2 billion financial black hole facing town halls across England.

In a white paper published in early June, the LGA calls on whichever party that wins the general election to launch an urgent review into public service reform and deliver far greater certainty that prevents cash-strapped local authorities from making further cuts to essential local services.

The leader of Gateshead Council, Martin Gannon, warned that the existing funding model for councils is “completely broken.”

“There are local authorities across the country of all different political persuasions that are effectively going bankrupt.

“It has been obvious for some time that the current model of funding local government is completely broken. It is dysfunctional and it does not work. And if something new and radical does not happen we will face a situation where the vast majority of local authorities will, within the next parliament, face similar problems,” said Cllr Gannon said.

Gabrielle Pickard-Whitehead is a contributing editor to Left Foot Forward

Comments are closed.