According to a new report from the Local Government Information Unit, more than half of the country’s senior council figures have warned that their council is likely to go bankrupt within the next parliament unless funding changes.
The State of Local Government Finance report for 2024, surveyed local authority decision-makers (council leaders, chief executives, chief finance officers, and cabinet members for finance) and found that 9% of the respondents said they are likely to declare effective bankruptcy within the next financial year. This figure is representative of 14 unique councils, whilst only 4% of the report respondents were confident that local government funding is sustainable.
Alongside this, only 6% of the respondents stated that they are happy with the way that the government understands the issue that councils face.
As outlined in the report, many councils are scrambling for further funding, with 90% of respondents planning to raise some funds by increasing fees on things such as parking and environmental waste. The same number are planning to raise council tax, whilst 21% stated that they are planning on selling publicly-owned assets.
Of the report’s respondents, more than half ended up drawing on their reserves over the course of the 2023-24 financial year and are planning on using them again.
According to the Local Government Information Unit, there are a number of solutions to the ongoing crisis that would not increase pressure on the taxpayer. One way of doing this would be to share surplus funds between wealthier and more deprived councils, as well as allocating funding from central government to different areas based on need, rather than through a bidding process. Another two solutions were proposed in the LGIU’s Learning from Local Government Finance Across the World report.
Chief Executive of the LGIU, Jonathan Carr-West, commented:
“We have long warned that a lack of funding combined with inflation and rising need for adult and children’s social care, homelessness, and SEND services has pushed councils to the brink.
“This year’s State of Local Government Finance report reveals the desperate, ruinous financial situation councils find themselves in. Cutting services, borrowing more money, and spending reserves year after year is completely unsustainable. Citizens are being failed.
“With over half of councils warning us they are at risk of bankruptcy within the next parliament, it is no longer possible to blame individual governance issues. There clearly is a systemic issue and rather than bunging local government panicked injections of cash, whoever wins the next election will need to reform the entire system, bringing back multi-year settlements based on an area’s need and developing new ways of revenue raising.”
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