Dozens of councils to learn whether they'll have to declare bankruptcy in weeks
Dozens more councils will learn within weeks whether they’ll have to follow Nottingham and Birmingham in declaring bankruptcy, as Tory cuts and inflation put public services under threat.
Councils have declared bankruptcy 12 times since 2018, following the Tories’ savage cuts to local government funding. This month will see the government set out its proposed councils funding plan for next year, which MPs will vote through before Christmas.
But Chancellor Jeremy Hunt announced no new money for local government in last week’s Autumn Statement, making it unlikely the settlement will be enough to fill the £4 billion black hole Britain’s local authorities are facing. And industry sources fear councils will be “dropping like flies” in February, when councils are set to vote on annual budgets based on the settlement.
Mike Short, head of local government at trade union Unison said: "Council finances are in a dire state. The government has starved local authorities of cash, and costs, especially social care, are skyrocketing. Ministers must step in with a funding lifeline, or more local authorities will go under, and key services disappear for good."
It comes after Nottingham City Council this week issued a ‘section 114’ notice, admitting it won’t be able to balance the books in the next year. As a result of the notice, all new spending - with the exception of protecting vulnerable people and statutory services - must stop immediately.
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Jeremy Hunt announced no new money for local government funding in the Autumn Statement (UK PARLIAMENT/AFP via Getty Imag)The council blamed its dire financial situation on issues that will affect councils across the country - inflation, rising homelessness and increased demand for social care. It’s the second local authority to fail this year, following Birmingham’s declaration in October.
Unions fear as many as 1 in 10 councils across the country are on the brink of issuing section 114 notices in the coming months. They include Leicester City Council, who face a budget shortfall of £34.1 million this year - and have written to Levelling Up Secretary Michael Gove to ask for urgent financial assistance.
Hampshire and Kent councils, both Tory run, are both on the brink of issuing S114 notices. And Derbyshire announced a £46 million black hole in this year’s budget in September.
But despite stopping all ‘non-essential spending’, they announced this week they still had a shortfall of £33 million, and councillors are not confident of filling that by March.
“The easy savings have long since gone,” Cllr Pete Marland, Chair of the Local Government Association’s resources board warned. "Councils are being faced with tough decisions about cutting valued services, increasing council tax and fees and charges during a cost-of-living crisis. “
Nottinghamshire County Council is currently consulting on how to plug a gap of about £60 million over the next three financial years. One proposal on the table is withdrawing cheaper tram fares for disabled and elderly residents.
And on Friday Brighton and Hove City Council’s Labour leader Bella Sankey said the authority has a £31 million budget gap to meet for next year after the government's autumn statement fell "disastrously short" on meeting inflation costs and rising demand for services.
She said: “There was absolutely nothing in the autumn statement to provide relief for this council or local authorities who have faced a decade of heartless central government austerity, or any real-world financial help for struggling families.
"Demand for our services is increasing, especially in key areas like adult social care, children with special educational needs and disabilities (SEND) and homelessness, which is putting pressure on other services."
Jim McMahon, Labour’s Shadow Minister for Local Government and English Devolution said:“Nottingham City Council have been clear that this week’s announcement will not affect frontline services such as the running of schools, social care or bin collection.
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"After thirteen years of Tory economic mismanagement, compounded by spiralling inflation and a failure to grow our economy, Nottingham City Council is just the latest example of a local authority that is bearing the brunt of the Tories’ failure. Councils of all stripes are facing financial difficulty and there is one common denominator in all this financial ruin - the Conservative government.
“Labour will support local councils where this Government has failed. We will move towards longer term, integrated funding settlements, and give towns and cities the tools they need to develop credible long-term growth plans. Labour will create more local jobs, put more money in people’s pockets and develop thriving local economies.
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