- By Alex Forsyth
- Political correspondent, BBC News
Image source, Getty Images
Local government leaders have warned that more councils in England are at risk of bankruptcy after the government set out its tax and spending plans last month.
Local authorities say the lack of funding in the autumn statement has left many facing virtual bankruptcy.
Leaders of some of the largest councils – including 26 Conservatives – have written to the government warning of “painful” cuts to frontline services.
The government says it is open to talks with councils regarding financial issues.
Two of the bodies that represent councils in England, the Local Government Association (LGA) and the County Councils Network (CCN), carried out rapid surveys of their members following the Autumn Statement last month.
The “worrying” findings paint a picture of a “growing financial crisis”, according to the LGA, which said almost one in five of its members were at risk of running out of money either this year or next.
Last week, Nottingham City Council became the latest local authority to issue a section 114 notice, meaning a halt to spending on anything not required by law.
Sean Davies, LGA chair, said: “The lack of funding for local services in the Autumn Statement has left councils facing a growing financial crisis.
“No council is immune from the risk of falling into financial difficulty. As our alarming survey shows, many now face the prospect of being unable to meet their statutory duty to set a balanced budget and issue Section 114 reports.
“While councils have worked hard to cut costs, find efficiencies and transform services, the easy savings have long since disappeared. The government needs to act urgently to address the acute financial challenges councils face.”
Councils have been warning about the risky financial picture for some time.
After a period of austerity that saw budgets cut, the government has increased the funding available to councils, including this year and next.
But a combination of inflation and rising demand for services, particularly support for vulnerable adults and children and housing services, has left many councils facing budget shortfalls.
The government increased the Local Housing Allowance in its autumn statement – a welcome move – but there was no additional funding for councils, which will also have to fund increases in the National Living Wage.
CCN said it would cost its members around £230m next year.
Barry Lewis, CCN finance spokesman, said: “The results of our new survey show that the financial position of our councils is significantly worse than it was before the autumn statement.
“The majority of county council network member councils will now have no choice but to increase the planned level of service cuts, reduce investment in growth-generating capital projects, and impose higher council tax increases: all of which impact on our residents.
“For some, even this drastic measure will not be enough, with seven in 10 now no longer confident they will be able to balance their budget next year.”
Thirty-three of the organisation’s council leaders, including 26 Conservatives, have written to Leveling Up’s secretary, Michael Gove, to demand additional funding.
Without this, councils “face the prospect of identifying painful cuts to frontline services” and raising council tax to the maximum permitted, the letter warns.
The government is scheduled to set funding for local councils for next year later this month.
Mr Gove will also give evidence to the House of Commons Settlement Committee about the councils’ financial position at a later date.
In a written statement on Tuesday, Mr Gove said next year’s total financial settlement of £64bn would provide an above-inflation increase in local government funding, as the mid-council sees a real increase in its core spending power.
He also asked councils to “consider how they can use their reserves to maintain services during this and next financial year”.
A Department of Housing and Communities spokesperson said: “We provided an additional £5.1 billion of funding to local authorities in the last financial year with an additional 9.4% cash to budgets.”
“Councils are ultimately responsible for managing their own finances, but we are willing to speak to any council that is concerned about their financial situation.”