(Bloomberg) — A quarter of England’s council estates are likely to need emergency bailout from Britain’s central government in the coming years to avoid bankruptcy, a survey of council leaders shows that the parlous state of local government finances exposes.
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Finance Minister Rachel Reeves should take action in her budget next week to prevent a new wave of councils from going bankrupt after many have run into trouble in recent years, the Local Government Association, which carried out the research, said in a statement on Tuesday declaration.
A funding gap of more than £2 billion ($2.6 billion) next year will prompt a slew of local authorities to ask ministers for “exceptional financial support” next year, the LGA said. Colloquially known in the industry as a bailout, this allows municipalities to use asset sales and money raised through loans for capital projects to plug the gap in day-to-day expenditure.
The warning adds to pressure on public finances at a time when Labour’s Reeves is already trying to fill a £22 billion black hole in the country’s finances that she claims was left by her Conservative predecessor, while raising more money to fund to pump the struggling public opinion. services against next week’s budget.
Council budgets have come under severe pressure in recent years due to high inflation, a surge in demand for social care services and a decline in government funding since 2010. Three councils – Birmingham, Nottingham and Woking – issued section 114 notices declaring bankruptcy last year, while a further 16 agreed bailouts by 2024/2025.
About 1 in 10 councils have already discussed applying for the emergency measure, while 25% said they are likely to apply in the 2025-26 or 2026-27 tax year if central government funding is not forthcoming, the LGA said . questionnaire. Around 44% of councils with social care responsibilities said they were likely to apply for the support.
“Many more councils are finding themselves in a precarious financial position,” says LGA chair Louise Gittins. “The autumn budget must provide councils with the financial stability they need to protect the services our communities depend on every day.”
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