More than half of councils have warned they will go under during the next parliamentary term in a new report.
The Local Government Information Unit (LGIU) has found that 51% of senior officials across the UK think their councils will go bankrupt in the next five years unless major reform is introduced.
High inflation, combined with central government funding cuts, have created major challenges for councils up and down the country – but it looks like the full repercussions will not be felt until the next parliament is in place.
The exact date of the next general election is yet to be confirmed, but Labour’s Keir Starmer and incumbent PM, the Conservatives’ Rishi Sunak, are expected to battle it out – and it sounds like local government fears could become a major obstacle.
The LGIU report also suggested that even those who stay in the black will face some bumps in the road.
It said: “For councils that manage to balance the books, there are concerns that some services they provide may fall below legal standards, which will continue unabated without costly legal challenges.”
The anonymous survey received 160 replies from senior council officials working at 128 councils.
Nine per cent said they would declare effective bankruptcy in the next financial year (April 2024 to April 2025).
Just 4% of nationwide councils feel confident in the current local government finance system – and a mere 6% are happy with Downing Street’s current approach to it.
Nine in 10 councils are looking at hiking fees on parking and environmental waste or raising council tax to cope with looming bankruptcy, while one in 10 will cut SEND services – Special Educational Needs and Disability – as well as children’s care services.
A fifth want to sell their publicly-owned assets, while more than half are relying on their financial reserves to stay afloat.
Chief executive of the LGIU, Jonathan Carr-West, said: “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.”
He said it was clear they were in a “desperate, ruinous financial situation”, with councils surviving just by borrowing greater sums of money.
He added: “Citizens are being failed.”
He claimed this report showed the extent of the problem – and that it is clearly a “systemic issue”.
“Whoever wins the next election will need to reform the entire system, bringing back multi-year settlements based on an area’s need and development new ways of revenue raising,” Carr-West said.
The LGIU suggested the government should not look to the taxpayer to resolve this crisis, but instead share surplus funds between wealthier and more deprived councils.
It also called for Westminster funding to be allocated to each council based on need rather than bidding.