Once vanishingly rare, the prospect English local authorities might go bust now offers no surprise: four councils have in effect gone bankrupt in the past year; others have declared a state of “financial emergency”; a further one in five believe it is “fairly or very likely” they will become insolvent in the next 18 months.
Local government is no stranger to budget cuts – austerity has shrunk town hall spending by approximately 40% over the past 12 years. But there are fears inflationary costs and a decade of funding cuts has hollowed out the capacity of authorities to deal with four long-term existential pressures, from child protection to an ageing society.
Children’s services
Described by an independent national inquiry in 2021 as a “tower of Jenga held together by Sellotape”, England’s council-run children’s departments have for years strained to cope with rising demand for child protection services.
Over the past decade, the number of looked after children in England has risen from 68,000 to 83,800. More recently, Covid, the cost of living crisis, and rising poverty have fuelled increases in referrals for child protection, mental health help and family support.
An explosion in numbers of high-cost privately run children’s home placements has pushed many local authority children’s services to the brink. In 2018, there were just 120 placements costing at least £10,000 a week. By 2023, this had risen to more than 1,500.
The rise of the extreme £500,000 a year care placement pushed up spending on children’s services this year by nearly 14%, with councils becoming increasingly outspoken at what they see as “profiteering” by the care industry.
Years of focusing available resources on child protection interventions has meant the decline of early intervention programmes such as parenting classes and Sure Start, that help steer struggling families away from expensive and traumatic crisis.
A County Councils Network survey in November found children’s services was the biggest area of council overspending. Experts have warned failure to reform the system will result in 100,000 children in care by 2032, with spending up by 50%.
Adult social care
While for years national politicians have dodged tough decisions on how to fund the care costs of growing numbers of vulnerable older people and adults with complex disabilities, councils’ resources have failed to keep pace with rising needs.
Underlying demographic pressure – an increase in the number of people with social care needs living longer and with more complex conditions – continues to hoover up a large slice of council spending, despite high levels of unmet needs.
While demand for social care services has risen in recent years, the costs of delivering care in residential settings and at home have soared, forcing councils to tighten eligibility and create lengthy “waiting lists” for care needs assessments.
Councils also face a workforce crisis, with about 150,000 unfilled social care posts in England, while the failure of local authorities to meet the rising costs of care has led many care providers to quit the market.
Homelessness
Three years ago, England’s housing crisis was only a distant concern for many local authorities outside big cities. Now, the costs of dealing with spiralling homelessness are threatening to push smaller district councils to the wall.
A combination of high house prices, off the scale rents, housing benefit cuts, shortages of social housing, a volatile private rented sector, and the closure of Home Office-run hotels for Afghan refugees has created a perfect storm.
The impact has been rapid and profound. Four years ago, Hastings borough council spent £730,000 supporting 170 people. This year, it expects to spend £5.6m – a third of its total budget – providing emergency housing for 1,000 homeless families, a bill it has warned could force it into insolvency.
Last week, at a Westminster meeting to discuss the crisis, Gloucester City council said its temporary accommodation bill had tripled to more than £1.2m in a year; Crawley said spending had gone up from £260,000 to more than £5m in five years; while Eastbourne said 49p in every pound it spent went on tackling homelessness.
A Guardian analysis in October found 10 councils where more than £1 in every £10 of core spending went on temporary accommodation in 2022-23. “If the crisis in homelessness is not addressed, it could bankrupt very many district and unitary councils within two years, with those in south-east England at particular risk,” said the leader of Chelmsford City council, Stephen Robinson.
Budget pressures remain strong in areas with traditionally high homelessness such as London. Nationally, English councils are spending £1.7bn a year funding emergency accommodation in flats and bed and breakfasts for 104,000 households, including 139,000 children – more than any point in the last 25 years.
Special Educational Needs and home to school transport
The explosion in the number of children receiving Education, Health and Care plans as a result of Special Educational Needs and Disability (Send) reforms introduced nearly a decade ago has pushed many council budgets to breaking point.
The 2014 changes resulted in the number of children eligible for Send more than doubling, from 105,000 to 230,000. Councils are often legally obliged to transport thousands of children to school each day, often over long distances.
Local authorities have warned Send costs are outstripping resources, and while the government has allowed councils to build up ring-fenced deficits in this spending area, the accumulated deficits – estimated at £3.6bn in England – will have to be repaid in 2026.
In the short term, many councils say the costs of providing school transport services are triggering a financial crisis. In November, the County Councils Network said its 37 members were spending £720m a year on transporting 85,000 Send children to school or college, up from £400m five years ago.
Councils say parents are increasingly using individual taxis – rather than minibuses – to transport their children to and from school. A shortage of Send school places meant pupils were having to travel further afield, while fuel prices and lack of competition among transport providers has led costs to rocket in recent months.
