A winter crisis for councils
Yet more cuts to services seem inevitable. Why? Matthew Partridge reports
There are fears that English councils “will be forced to raise taxes and cut front-line services to avoid effective bankruptcy” due to a lack of funding from central government, say William Wallis and Anna Gross in the Financial Times. The government has announced a £64bn settlement for local authorities in 2024-2025, an annual increase of 6.5% with an additional £1bn in grants for social care, but many councils say this is “bitterly disappointing” given “soaring costs and rising demand for services”, and warn that many will “struggle to deliver a balanced budget next year”.
A dire situation
There are indications that “an unprecedented number of councils are likely to declare themselves bankrupt”, says Donna Ferguson in The Guardian. One survey by the Local Government Association reveals that nearly one in five council leaders believe it is now “fairly or very likely” that their council will go bust in the next 15 months. Last month Nottingham became the ninth council since 2018 to issue a section 114 notice, under which a council signals that it is unable to fulfil its legal duty to balance the books. Birmingham and Woking have also issued section 114 notices this year.
The situation is clearly “dire”, with councils projected to face a £5.2bn shortfall by 2026, says Cameron Smith on Conservative Home. Some of the fault lies with poor leadership, but “councils’ hands are tied by the ever-present grip of Whitehall”, which leaves councils “hamstrung” when it comes to deciding how and where money should be raised. The government should learn the lessons of recent local devolution deals and give more taxation powers to local authorities, providing an incentive for voters to “kick out wasteful councillors and reward the prudent”.
Soaring costs
Many of the struggling councils have overspending and mismanagement at the heart of their problems, says Jennifer Scott for Sky News. Local government secretary Michael Gove has said all the councils to declare effective bankruptcy so far were directly linked with poor leadership. Birmingham, for example, spent £760m settling equal pay claims; Thurrock got into difficulties from investing in solar power. But attempts to increase accountability by reducing central grants in favour of “allowing local authorities to keep more of the council tax and business rates they collected” have made things worse, especially in poorer areas, where councils can struggle to collect even the tax that is due.
“Catastrophic” management decisions and austerity have both played a role, says Robert Colvile in the Sunday Times. But the big factor has been the rising cost of the four core services that councils legally have to provide: adult social care, homeless accommodation, children’s services and school transport. Thanks to the spiralling costs of these – with the cost of children’s social care alone rising by 40% in the last decade – “everything else gets squeezed to make room”. Even if the looming general election leads to additional support, we need to have a serious discussion about “what we are asking – and legally obliging – councils to do”, and how to best run these particular services.