One in four councils in England say they are likely to have to
apply for emergency government bailout agreements to stave off
bankruptcy in the next two financial years (2025/26 and 2026/27),
a stark new survey by the Local Government Association (LGA)
reveals today.
The findings of the survey of council chief executives comes as
more than 1,500 councillors, council leaders, senior officers,
politicians and organisations gather for the start of the LGA's
Annual Conference in Harrogate.
The LGA is calling on the Chancellor to take immediate action in
the Autumn Budget to stabilise council finances and avoid another
hammer blow being delivered to local services.
Alongside adequate government funding to sustain the vital
services that our communities rely on every day, the LGA wants to
work with government to ensure councils receive multi-year
finance settlements and a cross-party review is set up into how
the local government funding system should be reformed.
An unprecedented 18 councils were given Exceptional Financial
Support (EFS) from the Government in February to help meet their
legal duty to balance their books this year (2024/25).
This includes them being given permission to use capital funds
raised through borrowing, or the sale of assets such as land and
buildings, to plug funding gaps in their day-to-day revenue
spending. While this approach can provide temporary financial
relief, there is a risk that EFS could potentially load already
struggling councils with further debt and costs in the future
and/or undermine future capital programmes.
However, with councils in England already facing a funding black
hole of more than £2 billion next year, the LGA survey reveals a
worsening crisis with a growing number of councils being pushed
closer to the financial brink and likely to need EFS. It shows
that:
- Around one in 10 councils this year say they have discussed
the possibility of requesting EFS from the Ministry of Housing,
Communities and Local Government.
- 25 per cent are likely to apply for EFS in 2025/26 and/or
2026/27 without additional government funding.
- 44 per cent of councils with social care responsibilities
said that they are likely to apply for EFS in 2025/26 and/or
2026/27 without additional government funding.
It comes as councils continue to face inflation and wage
pressures alongside rising demand for services. We have
highlighted the particular demand and cost pressure challenges in
children's and adult social care, special educational needs and
disabilities, home-to-school transport and temporary
accommodation.
Councils were asked to identify their top five pressures. Social
care authorities identified children's social care (93 per cent),
adult social care (90 per cent), SEND services (80 per cent),
school transport (65 per cent), and homelessness (64 per cent).
For shire districts, homelessness (85 per cent) and waste
services (82 per cent) were top concerns.
The survey also lays bare the tough decisions facing councils
with many expecting to have to make cutbacks to community
services next year. This could mean reduced hours of operation,
reduced frontline staff numbers, longer waiting times, a reduced
or less frequent level of service provision, and/or increased
fees and charges.
Two thirds of councils say parks, green spaces will be affected
alongside sport services (62 per cent). Almost 8 in 10 councils
say services and support for disabled adults and/or older people
are likely to face cutbacks. Service cutbacks are also likely in
services and support for children, young people and families (63
per cent of relevant councils).
Cllr Louise Gittins, LGA Chair, said:
“Councils are the backbone of communities. Every day they strive
to protect vulnerable children and families, support our older or
disabled loved ones to live independent lives, keep our streets
clean and pothole-free and build affordable homes but this is
becoming increasingly difficult.
“The unprecedented emergency support given to councils this year
reveals the extraordinary funding emergency facing local
government. As our survey shows, many more councils are being
pushed into a precarious financial position.
“This is not just about numbers on a spreadsheet. Budget cuts
needed to plug growing funding gaps will affect the most
vulnerable members of society and the services our communities
rely on every day.
“The Autumn Budget must provide councils with the financial
stability they need to protect the services our communities rely
on every day.”
Notes to editors
- An LGA survey was circulated to all council chief executives
in England between 23 September and 11 October, and 195 councils
(62 per cent) responded.
- Councils have faced a 22.2 per cent real terms cut in core
spending power since 2010/11, spiking inflation in recent years,
unfunded increases in the National Living Wage, and growing
demand for services. LGA analysis shows English councils facing a
£2.3 billion funding gap in 2025/26, rising to £3.9 billion in
2026/27: £6.2 billion over two years.
- Ahead of the Autumn Budget the LGA has written to
Chancellor Rachel Reeves on stabilising council finances and
protecting vital services and warning that any further
local government funding cuts would be “disastrous”. The letter
is also signed by the County Councils Network, the District
Councils Network, London Councils, SIGOMA, Core Cities and Key
Cities.
