LGA: One in four councils “need government bailout”

One in four councils in England are likely to need an emergency government bailout to stop bankruptcy in the next two financial years, a survey by the Local Government Association (LGA) has claimed.

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.

It comes as 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).

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.

As well as funding to sustain “vital services”, the LGA also 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”.

It said that while councils to be 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 does “provide temporary financial relief” it could risk loading “already struggling councils with further debt and costs in the future and/or undermine future capital programmes”.

The survey by the LGA also highlighted a “worsening crisis” with a number of councils near to EFS.

It showed that:

• One in 10 councils have discussed the possibility of requesting EFS.
• 25% are likely to apply for EFS in the next two years without additional government funding.
• 44% of councils with social care responsibilities are likely to apply for EFS in the next two years without additional government funding.

Councils were asked to identify their top five pressures, which included children’s social care (93%), adult social care (90%), SEND services (80%), school transport (65%), and homelessness (64%). For shire districts, homelessness (85%) and waste services (82%) were top concerns.

Two thirds of councils say parks, green spaces will be affected alongside sport services (62%). 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% 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.”