Councils on Brink of Bankruptcy as Chancellor Prepares to Deliver Spending Review

Strategic Insights -

As England's council leaders wait with bated breath for Rachel Reeves' spending review, concerns are growing about the impact of real-terms cuts to local government budgets. The Communities Secretary and Deputy Prime Minister, Angela Rayner, has been negotiating with Reeves and the Treasury over the review, but the Local Government Association (LGA) warns that councils face a funding gap of £8.4 billion by 2028-29 under current spending plans. The LGA also notes that 29 local authorities are already receiving Exceptional Financial Support (EFS) due to stretched budgets.

Key Takeaways:

  • Councils will face a £8.4 billion funding gap by 2028-29 under current spending plans, according to the LGA.
  • 29 local authorities are already receiving Exceptional Financial Support (EFS) due to stretched budgets.
  • The majority of councils' budgets (67%) goes towards meeting statutory obligations, including adults' and children's social care and SEND provision.
  • The cost of social care services for adults and children has risen significantly, with 1,500 placements for children costing £10,000 or more per week in 2022-23, ten times the cost in 2018-19.
  • Spending on homelessness has increased by 77%, and adult social care has risen by £3.7 billion or 18%.
  • Local councils were forced to make huge cuts under the Conservatives, with budgets being slashed by nearly 50% at one stage.
  • Councillor Louise Gittins, chair of the LGA, warns that without adequate investment, councils risk not being able to deliver crucial services that many depend upon.
  • Labour MPs fear the ramifications of another round of cutbacks to frontline council services, including bankruptcy, failing services for vulnerable children and adults, and unfulfilled services.
  • The LGA notes that councils' budgets are facing a £8.4 billion funding gap by 2028-29 under current spending plans (Source: Local Government Association).
  • 29 local authorities are currently receiving Exceptional Financial Support (EFS) due to stretched budgets (Source: Local Government Association).
  • Adults' and children's social care and SEND provision account for 67% of councils' budgets (Source: Institute for Fiscal Studies).
  • The cost of social care services for adults and children has increased by £10,000 or more per week for 1,500 placements in 2022-23, compared to £1,000 or more per week for 120 placements in 2018-19 (Source: Local Government Association).
  • Spending on homelessness has increased by 77%, and adult social care has risen by £3.7 billion or 18% (Source: Local Government Association).
  • Local councils' budgets were slashed by nearly 50% under the Conservatives (Source: Local Government Association).
  • Councillor Louise Gittins, chair of the LGA, warns of the risks of failing to invest in councils' budgets (Source: Local Government Association).

Sources:

  • Local Government Association (LGA)
  • Institute for Fiscal Studies
  • Local Government Association (LGA) research
  • Councillor Louise Gittins, chair of the LGA
  • Labour MPs (unnamed)