Third of councils in poor areas contemplating chapter, survey finds

A 3rd of councils in a few of England’s poorest areas are contemplating declaring efficient chapter this yr or subsequent, it has emerged.

A survey of 47 native authorities within the North, the Midlands and on the South Coast revealed the extreme pressure on funds meant 5 are at the moment within the strategy of deciding whether or not to challenge a piece 114 discover of their incapacity to steadiness their annual finances in 2023-24.  An further 9 councils that are members of the Special Interest Group of Municipal Authorities (Sigoma) mentioned they might need to declare chapter subsequent yr.

Sigoma mentioned this was the primary time many member councils had been contemplating issuing a piece 114 discover, which freezes all non-essential spending.  The rising chance of drastic motion is claimed to be pushed by the depletion of money reserves obtainable to cowl gaps in budgets.

Councils mentioned the commonest trigger of monetary pressures was demand for kids’s social care companies following requests from the Government to deal with these companies as an equal precedence with grownup social care, and allocate further funding. Other vital components cited had been inflation prices and wage rises, with warnings an imminent enhance in the price of borrowing is ready so as to add additional monetary strain.

Sigoma mentioned it understands that not less than 12 different councils throughout the nation are actually contemplating issuing a piece 114 discover in 2023/24.  There have been repeated warnings over the perilous state of native authority budgets, with the Institute for Fiscal Studies just lately reporting that councils serving deprived communities obtain much less funding – largely on account of delays to deliberate reform of formulae that decide Government allocations.

The first S114 discover was issued by Hackney Council in 2000. Northamptonshire County Council adopted go well with in 2018.

However, councils have begun declaring chapter at an unprecedented fee, with part 114 notices just lately issued by Conservative-run councils Thurrock and Woking and Labour-run Croydon and Slough.  Since 2020, 16 councils have obtained distinctive monetary assist from the Department of Levelling Up, Housing and Communities (DLUHC), with seven introduced this yr.

Sir Stephen Houghton, Labour chief of Barnsley Council and Sigoma chair, mentioned: “The Government needs to recognise the significant inflationary pressures that local authorities have had to deal with in the last 12 months. At the same time as inflationary pressure, councils are facing increasing demand for services, particularly in the care sector.

“Pay increases are putting substantial pressure on budgets, and so the government must ensure that local authorities have the additional funding they need to fully fund these pay increases or risk impacting future service delivery.  The funding system is completely broken. Councils have worked miracles for the past 13 years, but there is nothing left.”

Sir Stephen additionally referred to as on the Government to offer readability on the timing of native authorities funding reforms.  

A Government spokesperson mentioned: “Councils are ultimately responsible for the management of their own finances.  However, the Government has been clear that local authorities should not take excessive risk with taxpayers’ money, and we have established the Office for Local Government to improve the accountability for performance across the sector.

“We recognise all councils are facing pressures and, as well as making it a priority to halve inflation, we have introduced a one-off funding guarantee to ensure that every council sees at least a 3% increase in core spending power before any local decisions on council tax rates.  We are also providing around £2 billion in additional grants for social care.

“We also recognise the need for change in children’s social care. Earlier this year the Government published its implementation strategy and consultations for reform, stable homes built on love.  The Government will respond to these consultations by the end of September.”