Four in 10 councils at risk of going bust

FOUR in 10 councils in England are at risk of going bust over the next five years as the local authority funding crisis spirals out of control, data has found.

Surging social care costs mean 40pc of local authorities face financial ruin, accountants Grant Thornton said, which it warned could trigger a significant jump in household council tax bills.

Councils are grappling with a toxic cocktail of long-term government funding cuts and soaring demand for children’s social care and housing.

Since 2021, six councils have issued section 114 notices, meaning they have declared themselves effectively bankrupt, with Birmingham City Council and Nottingham City Council the most recent to file notices.

Philip Woolley, at Grant Thornton

UK, said challenges for councils are escalating fast as they face a £9bn budget black hole.

Last year, one in six councils in England was on the brink of financial failure, defined as having cash reserves at 5pc or less than their total revenue expenditure. This year, it is one in five, Mr Woolley said.

In 2025, it will be 25pc, climbing to 40pc over the next five years, Grant Thornton said. This means residents in nearly 130 local authorities across the country could suffer major cutbacks in services or higher tax bills.

Mr Woolley said: “The first tranche of failures were less well managed councils. Now, it is the well-managed ones that are really under pressure as well. The funding model is broken.”

Residents will also see their services stripped back, Mr Woolley warned.

Councillor Shaun Davies, chairman of the Local Government Association, said that no council in the country was immune to the growing risks.

A government spokesman said: “Councils are ultimately responsible for their own finances, but we remain ready to talk to any concerned about its financial position.

“We recognise they are facing challenges and that is why we have announced a £64bn funding package.”