Local authorities in England are set to receive an emergency bailout from Rishi Sunak’s government following warnings that many councils are close to bankruptcy.
A ministerial statement due to be made this afternoon will confirm upper tier councils will be handed an additional £500m for children’s and adult social care.
Communities secretary Michael Gove is also expected to announce lower tier districts will receive a funding boost of approximately £30 to £40m.
A senior council source said an 11th hour change to local finance settlement was unusual – but could stave off the immediate threat of bankruptcy faced in many areas.
The move comes after a group of 40 Tory MPs – including Priti Patel and Robert Jenrick – put Mr Sunak under pressure to boost the £64bn funding settlement for on-the-brink councils ahead of this year’s general election.
Dozens of backbenchers signed a letter to the PM warning that without emergency cash, many councils will be forced to cut crucial frontline services and hike council tax as voters go to the polls.
The group – which also included leading ‘One Nation’ Tory moderate Damian Green – say they were “exceptionally concerned” about the crisis in local government and were “disappointed” it had not be addressed at chancellor Jeremy Hunt’s autumn statement.
Sunak and his communities secretary Michael Gove under pressure from Tory MPs
Ben Bradley, the Tory MP for Mansfield and leader of Nottinghamshire County Council, had urged Mr Sunak and Mr Gove to provide extra cash. “There’s no point cutting national taxes just to see everybody’s council tax go up by the maximum,” he said.
Mr Hunt could consider using some of the fiscal headroom – which predictions have put as high as £10bn – to cave to their demands for more council cash as he prepares for his 6 March Budget.
While welcoming the extra cash, council chiefs believe that the new, last-minute extra £500m will only prevent a financial crisis in the short term.
Finance bosses at seven councils have issued at least one section 114 notice – effectively declaring themselves bankrupt – since 2020, with three doing so last year.
In December Nottingham City Council became the latest to issue a section 114 notice, saying it was set to overspend by £23m in 2023-24.
But almost one in five council leaders think it is likely that they will need to issue a section 114 notice this year, according to a survey by the Local Government Association (LGA).
The emergency notices are an acknowledgment that the local authority cannot balance its books as required by law and lead to a freeze on non-essential spending on services.
Mr Gove’s Department of Levelling Up, Housing and Communities said the £64bn pledged was a real-terms increase of 6.5 per cent for councils on average.
However, the total spending power available to councils includes council tax increases, meaning residents pay more for everyday services.
District council leaders also held an emergency meeting in Westminster on Tuesday to urge the government to rethink the settlement due to the rising costs of tacking homelessness.
A group of local authorities said Mr Gove’s funding settlement disproportionately benefits richer areas and fail to take into account a range of growing demand pressures.
Sigoma – which represents 47 urban councils in some of the most deprived areas in England – said it was set before the full emergence of severe problems such as workforce pressures and spiralling costs in a “broken” children’s social care market.
