At least 26 councils at risk of effective bankruptcy

Based on the results of a survey of 47 local authorities from the Special Interest Group of Municipal Authorities (Sigoma), it found five are currently in the process of deciding whether to issue a section 114 notice – effectively signalling an insolvency.  

Meanwhile, a further nine councils said they might have to declare bankruptcy next year – with Sigoma saying at least another 12 were considering such a notice in 2023/24. It follows a string of collapses in the past two years, including Slough, Croydon, Thurrock and Woking.  

The threat of this number growing has been driven by the dwindling of cash reserves usually held over to plug gaps in budgets, with councils saying the most common cause of these pressures was due to an increase in demand for children’s social care services.  

Sigoma chairman Sir Stephen Houghton, and leader of Barnsley Council, said: “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.”