Local authority leaders say they are having to drain their financial reserves to keep services afloat and avoid effective bankruptcy.
A survey of the mid-tier group of English city councils, which includes Southampton, Hull, Sunderland and Norwich, found that many that had previously avoided financial difficulties during periods of austerity were close to running out of funds.
Of the 24 councils, 60% said they were using financial reserves to fill funding gaps, matching the proportion who said they were “redesigning” services to cap costs after a period of high inflation.
John Merry, the deputy mayor of Salford council, said local authority finances were running dry after increases in the cost of providing services such as adult social care. “Councils have used reserves in the past, but now it is a crisis,” he said. “We are all trying to stay on the right side of solvency.”
Merry said two in five councils polled said they were prioritising plans to sell off council assets and reduce nonstatutory services. One in five identified redundancies and salary reductions as a priority.
“While we have become a more optimistic group since the general election, the realities we face remain stark,” he said. “Difficult decisions still need to be taken simply to deliver regular services. It gives me no pleasure to see so many colleagues considering the sale of assets and redundancies, and relying on dwindling financial reserves, among other measures, to stay financially afloat.”
The survey follows a report backed by 100 councils calling for an emergency injection of £644m from the government to stabilise their housing accounts and prevent investment in new homes being delayed or cancelled. The local authorities said the financial model for council housing finances was broken, with a £2.2bn hole in councils’ dedicated budgets expected by 2028.
Merry, chair of the Key Cities group of 24 mid-tier councils, said many of his members would be forced to cut planning department budgets, further harming the prospects of the Labour government’s housebuilding scheme. “We stand ready to support the planning reforms, but the danger is that we won’t have the planning officers in place to process the applications,” he said.
In Salford, libraries were being housed in leisure centres to increase footfall and save costs, he said, giving this as an example of the way services were being redesigned in some areas.
However, the biggest budget shortfalls occurred in the social care and housing departments after a dramatic rise in the cost of providing services, he said.
The top three financial pressures facing leaders in the next 12 months were identified as adult social care (cited by 33.3% of respondents), children’s social care (26.7%) and homelessness (26.7%).
Millie Earl, leader of Bournemouth Christchurch and Poole (BCP) council, another of the Key Cities group, said her greatest financial challenge was the rise in spending on children with special educational needs and disability services.
Legislation that makes local councils responsible for buying the services without the funds to match was pushing many towns and cities towards bankruptcy, she said. “Like many local authorities, a change in legislation, and a financial solution from government is essential to our ability to continue delivering local services,” she added.
