Warning that more local councils will go bankrupt despite £500million bailout
Michael Gove is facing a huge backlash from council leaders after announcing a "short-term" emergency package to help authorities fund social care.
The Communities Secretary said a £500million cash injection would enable councils to provide "crucial social care services for their local communities, particularly children". The Government has also increased the "funding guarantee", which sets out the minimum percentage annual increase in money before local decisions on council tax, from 3% to 4%.
But critics described the announcement as a "sticking plaster" over local councils' huge financial worries and accused the Tories of pushing out a "panicked quick fix to keep the wolf from the door in an election year". Finance bosses at seven councils have declared themselves "effectively bankrupt" by issuing at least one section 114 notice since 2020, with three doing so last year. The notice is a formal declaration a council cannot balance its books.
More than 40 Conservative backbenchers recently signed a letter to the Prime Minister, which was organised by the County Councils Network (CCN), warning that without emergency cash, many councils will be forced to cut crucial frontline services and hike council tax in an election year. They today welcomed the extra funding but said "councils need a long-term sustainable funding settlement".
Labour said councils were stuck in a "Tory doom loop" as they savaged a lack of long-term thinking from the Conservatives. Deputy Leader and Shadow Levelling Up Secretary Angela Rayner said: “Yet another sticking plaster over the gaping financial wound the Tories have inflicted on our communities won’t fix the fundamentals. Local councils are stuck in a Tory doom loop, on the front-line of the Tory cost of living crisis and forced to fork out millions to pay for the crises in housing and social care, and unable to plan for the future.
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“We cannot trust the same party that made this mess to patch it up. Councils of all stripes are on the brink of financial ruin, and it is time this government took responsibility. After a decade of Tory economic mismanagement, compounded by spiralling inflation and a failure to grow our economy, councils, residents and taxpayers are crying out for security and stability that only a Labour government can deliver with our long-term ambition for multi-year funding settlements underpinned by strong accountability."
Lib Dem Communities, Housing and Local Government spokeswoman Helen Morgan said: "This sticking plaster settlement is far too little, far too late. Councils everywhere have been crying out for years about the state of their finances but the Government has repeatedly ignored them.
"It is local communities who are bearing the brunt of this neglect. Much-loved community services have fallen by the wayside because of Conservative Ministers’ underfunding of local authorities. This announcement will do nothing to bring services back or cover up the Government's utter failure to ensure the councils we rely on are properly funded."
Unison head of local government Mike Short said: “Such is the desperate state of most councils’ finances that this cash injection merely staves off the immediate threat of bankruptcy for some. But others could still go under in the coming months. Sadly, ministers have yet to understand councils need proper and sustained funding, not panicked quick fixes to keep the wolf from the door in an election year.
“Under-pressure local authorities will jump at the chance of extra money, but emergency bailouts won't magic away the massive financial shortfall councils face. Nor will they provide the resources needed to get vital public services back on track.”
Conservative MP Ben Bradley, who is leader of Nottinghamshire County Council and chairman of the County All-Party Parliamentary Group, said: "An extra £500m for the sector will be strongly welcomed by my parliamentary colleagues and will help us ensure that the worst-case scenarios in terms of service reductions are avoided and valued frontline services are protected. Councils still face difficult choices this year and next, and that's why councils need a long-term sustainable funding settlement and reform to our statutory responsibilities moving forward."
Tim Oliver, CCN chairman and Conservative leader of Surrey County Council, said the additional funding would "go some way" to easing pressures. "Whilst this extra funding will undoubtedly help us protect valued frontline services, councils, of course, still face difficult decisions when setting their budgets for 2024/25," he said.
Mr Gove said: "By making progress on the Government's plan to halve inflation, grow the economy and reduce debt, we now can provide this extra funding to councils to continue to provide vital services to their communities."
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