Nearly one in five council chiefs fear they will have to declare bankruptcy next year if they don't have enough cash to keep key services running.
Cash-strapped town halls said the lack of extra funding from Chancellor Jeremy Hunt in last month's Autumn Statement could tip councils into crisis, leaving them unable to balance the books. A survey by the Local Government Association (LGA) found 17% of town hall leaders thought it was very or fairly likely they would have to issue a Section 114 notice, which would freeze all non-essential spending, in 2024/25. Some 7% fear they will be forced to act before the end of the tax year in April.
More than a quarter (29%) expressed concern their local authority wouldn't have enough funding to fulfil its statutory duties in 2023/24, rising to half (50%) for the following year. They include vital services like waste collection, street cleaning and helping homeless people.
The LGA estimates that councils in England face a £4billion funding gap over the next two years just to keep services standing still. Town halls will have to weigh up hiking council tax or inflicting further cuts if the Government doesn't act, they said.
Councils will be able to hike general council tax by 3% and portion earmarked for social care by another 2% without holding a referendum in 2024/25. The majority of households (76%) were hit by the maximum 5% rise in council tax this year.
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LGA Chair Cllr Shaun Davies said: “The lack of funding for local services in the Autumn Statement has left councils facing a growing financial crisis. No council is immune to the risk of running into financial difficulty. As our worrying survey shows, many now face the prospect of being unable to meet their legal duty to set a balanced budget and having Section 114 reports issued.
“Local government is the fabric of our country, with councils providing hundreds of services that our communities rely on every single day. For many people, these services are a lifeline. If councils cannot thrive then our communities cannot thrive." He warned the "easy savings have long since gone" and called for urgent help from the Government.
Meanwhile, a survey by the Conservative-led County Councils Network (CCN), which represents 23 counties and 13 unitary authorities, showed nine in 10 of its member councils said the Autumn Statement left them in a "significantly worse" position. It found 80% of councils are now planning further "painful" reductions in services and 90% suggested they will introduce maximum council tax rises next year.
Nine councils have issued at least one section 114 notice since 2018, with Nottingham City Council the latest authority to declare itself effectively bankrupt.
A Department for Levelling Up, Housing and Communities spokesman said: “We have made an extra £5.1 billion of funding available to local authorities in the last financial year worth an additional 9.4% in cash terms to budgets. Councils are ultimately responsible for the management of their own finances, but we stand ready to talk to any council that is concerned about its financial position.”
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