Croydon (Parliament Politics Magazine) – Croydon Council’s £136m bailout sparks concerns over normalisation of emergency funding, with LGA warning of systemic failure on local authorities.
Katherine Kerswell’s friends at the Local Government Association released a pre-Budget warning that emergency government bail-out agreements for local authorities are at risk of becoming “normalized” on the same day that she resigned as CEO of Croydon Council after five years, which included additional borrowing totaling an astounding £381 million in capitalization directions.
In 2020, Kerswell’s first temporary position in Croydon was sponsored by the LGA, which also initially paid Elaine Jackson, her assistant CEO.
Thus, the LGA’s now-annual request for a fairer settlement for its members from the federal government came at a favorable moment. After 15 years of Tory-led austerity, the case for decent, equitable funding for local government is undeniable.
But it’s still up for question whether the LGA’s largest supporters and beneficiaries, like Kerswell, can effectively manage the funds they get.
Ahead of Chancellor Rachel Reeves’ second Budget on November 26, the LGA claims to have done “new analysis” (doing an old one might be a bit pointless). They found that “councils across England are at risk of substantial budget overspends in 2025-2026 across adult social care, children’s social care, and homelessness services.” NSS*
In actuality, municipalities around England have overspent on homeless homes by 52% in the three years to 2022. The LGA projects that local governments would overspend on homelessness services by 39% during this fiscal year.
“Councils are at the heart of every national priority from building homes and boosting inclusive growth to caring for children and supporting older and disabled people,”
they said on Friday.
“It is therefore critical that government works with councils to reform key services, such as SEND and adult social care.”
There was a Kerswell-esque suggestion in the LGA’s announcement, in which they spoke of helping councils to “manage and reduce demand for acute services” and “managing demand” is councilspeak for eliminating it and doing so through “the development of strong digital and technology foundations to drive productivity and efficiency”.
The LGA said:
“The country cannot deliver growth, reform public services or improve life chances without fixing local government finances.”
The LGA found that from 2022 to 2025, despite increased levels of budgeted spend, councils overspent annually on average by 5.2% on adult social care; 14.2% on children’s social care; 25.1% on school transport for children with SEND; and 51.9% on homelessness.
“In 2025-2026, planned budgets again show steep rises – 9.0% for adult social care, 10.1% for children’s social care and a staggering 38.8% for homelessness.
There is a clear potential for overspends in line with the previous three years in these services,”
the LGA says. NSS*
“Overspending in these demand-led services means councils are increasingly being forced to rely on emergency measures such as in-year cuts to spend for other services and drawing on depleting reserves to balance their books. This is not financially sustainable.”
Senior council officials, and the recently departed non-improvement improvement panel, have been saying that in Croydon since 2022.
The LGA said that 29 councils (including nearly one in six of all councils with social care duties) needed Exceptional Financial Support agreements this year to borrow, sell assets or increase Council Tax above the 4.99% cap simply to keep essential services running.
“This is a substantial increase on the number last year and a clear warning sign of systemic failure.”
The LGA is requesting in its budget submission that the Chancellor:
- Give councils a large increase in funding to stop widespread financial collapse and give them the authority to implement service change and expansion on a large scale.
- It is commendable that the government has suggested a number of financial reforms for local governments, such as reducing reliance on competitive bidding, moving away from fragmented, ring-fenced subsidies, and guaranteeing multi-year settlements.
- A more straightforward funding system and increased financial predictability are crucial. All councils must, however, have the resources to handle the mounting demands and costs.
“When a system relies on emergency bailouts to function, it is fundamentally broken,”
said Louise Gittens, a councillor from Cheshire who chairs the LGA.
“Councils have the legitimacy, local knowledge and ambition to make that happen. But they need a fair financial foundation to stand on.
If the Government is serious about growth, public service reform and opportunity for all, it must start with councils – because when councils succeed, the country succeeds.”
How would normalising bailouts change council borrowing rules?
Normalising emergency bailouts for councils would effectively change the borrowing rules and fiscal frameworks of original authorities operated under by making exceptional support no longer exceptional but routine.
Presently, councils taking bailouts must get government support to adopt beyond statutory limits, or raise council duty above public caps to maintain essential services amid fiscal distress. However, these exceptions come standard practice, allowing councils to continuously carry budget poverties financed by adopting without immediate balanced budgets, If bailouts come regularized.
This normalisation risks embedding structural weaknesses in original government finance by enabling councils to fund day- to- day functional costs like social care through borrowing, adding long- term debt and interest burdens.
