Thinktank warns of ‘financial crisis’ with more local authority bankruptcies

More than half of England’s councils could go bankrupt within the next five years, are local government thinktank has warned.

Concerningly, the research from the LGIU – an independent, not-for-profit membership organisation and thinktank – says that nearly one in ten (9%) could go bankrupt within this financial year.

Researchers also warned that the findings are likely to affect whichever party wins the General Election taking place on 4th July. Previous analysis from LGIU revealed all parties have underestimated the financial crisis in local government and urgent action is needed to avoid hundreds of councils plunging into effective bankruptcy.

Earlier this year, 19 councils were granted permission to sell local assets worth hundreds of millions of pounds and borrow more to balance the books. Without additional funding or the ability to raise their own funds, councils will plunge further into debt irrespective of who is in Downing Street.

As a result, the thinktank is calling for local authorities to be given the autonomy to shape policy decisions to local circumstances and local needs and be supported by a funding mechanism that means those decisions can be financed effectively and sustainably. They say by doing this, councils can begin to convince people that government and politicians at all levels have the best interests of local communities at heart.

Jonathan Carr-West, Chief Executive, LGIU said the next government will need functioning local authorities to deliver its national mandate, but that none of the parties’ manifestos adequately address the urgent financial crisis in local government.

“Councils are the part of government with the most impact on our daily lives and the places we live. Since 2018, eight councils have already gone bust resulting in residents’ council tax doubling while public services are decimated.

“That is why the LGIU is calling on all parties and candidates in the upcoming 4 July UK general election to commit to saving local government by providing it with sustainable funding.

“The many pressures and challenges facing the next government – from housing to social care to record levels of public distrust – can only be tackled in partnership with a resilient, sustainable local government sector."