Local government leaders are warning that English local authorities will see a rise in town hall bankruptcies in the near future due to the ongoing financial crisis. This will likely result in an increase in council tax bills and further cuts to services.
The bleak prediction, supported by leaders from all political parties in the council, follows closely behind Nottingham city council, which is currently under Labour leadership, announcing a Section 114 notice. This makes them the fourth council in the last year, and the eighth in the last six years, to declare a state of effective insolvency.
According to a survey by the Local Government Association (LGA), around 20% of council leaders anticipate financial difficulties in the next 15 months due to inadequate funding to cover rising costs and increasing demand for services such as child protection, adult social care, and homelessness.
“No local government is exempt from the possibility of experiencing financial troubles. As our concerning survey reveals, numerous councils are now confronted with the potential of not being able to fulfill their legal obligation of creating a balanced budget, resulting in the issuance of Section 114 reports,” stated Shaun Davies, chair of the Local Government Association.
Several local governments are currently devising strategies to make additional budget cuts in light of last month’s autumn statement, which provided no financial relief for city halls despite increasing worries about the predicted £4 billion shortfall in funding for local authorities over the next 24 months.
The Leeds city council revealed its plan to reduce its workforce by 750 employees, shut down care homes and the Pudsey Civic Hall concert venue, and increase parking fees and social care expenses in order to save £58m on Tuesday.
Council leader James Lewis acknowledged that some of the proposals presented today may not be well-received as they will have a difficult effect on individuals’ lives.
The leaders of Conservative-controlled shire councils, including Essex, Hampshire, Kent, and Surrey, as well as backbench Tory MP and Nottinghamshire county council leader Ben Bradley, have signed a letter to levelling up secretary Michael Gove, requesting additional funding.
The letter from the County Councils Network, signed by over 30 authorities, urges for urgent financial support for children’s social care and transportation services to prevent the increasing and significant strains that could potentially lead to insolvency for 70% of its members by 2024-25.
Refusal to give additional financial support would result in the largest councils in England implementing further budget cuts to essential services, while also increasing council tax to the highest allowable amount.
The letter states that this is a scenario that everyone would like to prevent during a typical election year.
According to Jonathan Carr-West, the CEO of the thinktank Local Government Information Unit, 12 councils may face financial collapse in the year 2024-25. Carr-West stated, “Councils are utilizing all possible means to stay financially stable, such as increasing council tax and charges, reducing services, making more commercial investments, depleting limited reserves, and selling assets. However, these efforts are not sufficient.”
On Wednesday, Gove will face questioning from a committee of MPs from different political parties. They are worried about whether the government is effectively managing the increasing financial pressures that are affecting councils. There are concerns that the ongoing financial crisis could have a major impact on local authorities, which have already been weakened by years of budget cuts.
The recent hearings of the Levelling Up, Housing and Communities select committee have revealed that around half of England’s 318 councils may face significant financial struggles next year, according to testimonies from council leaders.
Last month, John Fuller, who is the Tory Leader of South Norfolk district council, informed MPs that the financial challenges faced by councils are due to structural issues. He pointed out that while the costs for social care have increased by 19% and those for children with complex needs have gone up by 23%, the income for councils has only seen a 3% to 5% increase. This simple calculation shows that there will inevitably be a gap in funding.
A representative from the Department for Levelling Up stated that they have provided an additional £5.1 billion in funding to local authorities in the previous fiscal year, which equates to a 9.4% increase in cash terms for their budgets.
Local authorities are ultimately in charge of managing their own financial resources, but we are prepared to discuss any concerns that a council may have regarding its financial status.
Source: theguardian.com
