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Local Government Information Unit report finds half councils fear ‘going bust’ in next five years

Councils across England face bankruptcy unless a new funding system can be found, a new report has claimed.

A Local Government Information Unit (LGiU) survey shows half the authorities who responded said they were unlikely to be able to balance the books in the next five years.

Cllr Roger Gough
Cllr Roger Gough

Councils face going bust because the level of government funding does not match the cost of delivering the services they are legally obliged to provide.

The LGiU's findings come nine days after Kent County Council passed a balanced budget for 2024-25 but at the expense of service loss and a 5% hike in council tax.

KCC leader Roger Gough spelt out the perilous situation the county finds itself in, particularly with the rising cost of key services such as adult social care.

He told members: “If it continues in the way that it has, we will not be able to sustain our future as a council.”

The LGiU told the Local Democracy Reporting Service last year that even "perfectly well-run" councils like KCC are now on the brink.

Two-thirds of respondents told LGiU said they were cutting services with parks, leisure facilities, arts and culture the top of the list.

The Local Government Association and other representative bodies said the recent government injection of an extra £600m of funding earlier this year to help plug budget gaps was nowhere near enough.

The LGiU received responses from 128 local authorities in England.

The survey found nine in 10 plan to raise council tax and increase fees and charges for things such as parking and environmental waste.

Around one in 10 cutting services for children with special educational needs and disabilities.

UK one pound coins placed on a Council Tax Bill.
UK one pound coins placed on a Council Tax Bill.

The report states: "Confidence in the sustainability of council finances across the sector has cratered from its previous low point of 14% in 2023, down to just 4% of respondents in 2024.

"There are multiple pressing challenges, with over 90% of respondents saying inflation and the cost of living crisis are problems for councils."

Observers say that the government is "highly unlikely" to make any further intervention this side of a general election, widely expected this year.

Authorities, like KCC, will be expected to plug gaps by finding further savings, losing staff, cutting services and dipping into reserves which are already under serious pressure.

The survey is the 11th of its kind carried out by the LGiU.

Local government expert Jonathan Carr-West
Local government expert Jonathan Carr-West

Its chief executive, Jonathan Carr-West, said: "But this year, there is a difference. The balance has tipped. It is no longer possible to ignore or misunderstand the problems local government faces, they are undeniable.

"Up to now, reactions to bankruptcy have rightly scrutinised the individual councils’ finances.

"Poor governance and risky investments have certainly played a part. However, this report, for the first time, demonstrates how widespread councils’ desperate funding situation is. That there is a structural funding issue is now impossible to deny."

One Conservative KCC backbencher said: "We got the budget away this year by the skin of our teeth and everyone knows that next year is going to be incredibly tough, terminal even.

"The government doesn't seem to get it. Some of us reckon that they're just facing a clobbering at the election and have left Labour an absolute nightmare to put right."

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