UK (Parliament Politics Magazine) – Councils in England and Wales warn finances are at breaking point as rising costs, loan dependence, and delayed funding push councils toward bankruptcy.
As reported by The Guardian, local authorities across England and Wales warn their finances are at “breaking point,” with further bankruptcies likely amid uncertainty over this month’s government funding.
Council leaders warn that revisions to annual funding could force deep cuts, leaving many authorities unable to balance budgets and deliver essential services.
Amid a funding crisis, 29 councils, including Croydon, Thurrock, and Birmingham, have relied on special government loans to meet financial obligations.
What did Andrew Jamieson say about council funding?
According to Andrew Jamieson, deputy leader for finance at Norfolk County Council, the number of local councils unable to fulfill their statutory obligations is expected to rise once the government releases its new funding settlement this month.
He stated,
“We are often accused of crying wolf, but local authorities are reaching breaking point now. The money’s not there. There are bound to be some more councils that cannot meet their obligations.”
Mr Jamieson, a Conservative member of Norfolk County Council, said revisions to the funding formula could leave councils with high levels of demand in a worse financial position.
He explained that while efficiencies could reduce a £62m budget shortfall, his council still faces a £6m gap that may require service cuts or raising council tax from 3% to the 4.99% cap.
According to him, councils face higher social deprivation, while 26% of Norfolk’s population is over 65 and relies on local authority support.
Mr Jamieson added, “
When the government says local councils are receiving funding increases worth more than 1% after inflation, we need to remember that includes the income from a maximum 4.99% rise in council tax.”
He continued,
“The way local government is funded is not sustainable. Since 2012, we have made savings of £652m and making those savings gets harder each year.”
Norfolk council tax income has risen from 42% of total revenue four years ago to today, reflecting sharp hikes under both Tory and Labour governments.
What did the UK government say about local council funding challenges?
A spokesperson for the Local Government Association, which represents councils across England and Wales, said,
“Cost and demand pressures are unrelenting, particularly in key demand-led services such as children’s social care, adult social care, homelessness and home-to-school transport for children with special educational needs (Send).”
They added,
“Councils need a significant increase in overall funding to stem the emerging risk of system-wide financial failure and to ensure that councils can meet demand for the vital services needed by their communities.”
A spokesperson for the Ministry of Housing, Communities and Local Government stated,
“Local leaders set their own council tax levels with increases limited to 5% without support from a local referendum, and we’ll continue to give taxpayers the final say on increases.”
As part of its summer spending review, the government agreed on a three-year funding plan for councils, though the allocation formula remains unpublished.
The government confirmed that the results of its “Fair Funding Review 2.0,” expected on 17 December, will support councils in managing areas with high social need.
What did Joanne Pitt say about local councils’ rising debt and government loans?
Joanne Pitt, senior policy adviser at Cipfa, said local authority borrowing has reached £1,500 per person and is expected to rise further in the coming months.
According to her, most of the 29 councils receiving exceptional government loans were extending them to remain financially stable.
Ms Pitt added,
“Local authorities are not in a position to pay back loans, and that is even more the case for the 30 receiving exceptional support.”
What did council leaders say about spiralling costs and funding cuts?
John Merry, the deputy mayor of Salford and head of the Key Cities group of councils, which includes Southampton and Sunderland, said,
“Our survey of city leaders from across the country has shown that councils are dealing with impossible choices in the face of spiralling costs for social care and temporary housing, among other vital services.”
The Labour councillor warned that 60% of councils plan to sell assets next year to cover budget deficits.
He added,
“These are not decisions that any politician wants to make and offer a stark indicator of the impact of over a decade of chronic public sector underfunding.”
Mike Cox, finance head at Bournemouth, Christchurch, and Poole council, said local authorities face major funding cuts just weeks before budgets are approved.
He continued,
“Uncertainty from central government is making a difficult situation worse. Councils are left to choose between raising taxes, selling assets, and cutting essential services. We need clarity and a fair funding settlement now. The fair funding review appears to be anything but fair.”
What did Labour insiders say about funding changes and council support?
Labour insiders claimed the funding changes were a response to former Prime Minister Rishi Sunak’s rule changes, which favoured wealthier Conservative counties and districts.
They said the party launched a recovery fund to restore balance in council finances, which would be made permanent under the Fair Funding 2.0 plan, with allocations set to prevent councils from facing insolvency in 2026-27.
Labour councils warn that, despite extra funding for deprived areas, many face difficult decisions ahead of setting their 2026-27 budgets.
Hartlepool Borough Council announced plans to freeze council tax but still faces a £9m shortfall, with £3m arising from the tax freeze.
Next week, Cornwall Council is expected to release its 2026-27 budget, with councillors signing off on the initial draft.
The budget, expected Tuesday, will show the council cut £40m–£70m to manage rising costs, mainly from children’s special needs and elderly care, after £50m in savings last year.
According to the London Councils, London boroughs are struggling with a £1bn shortfall this year, with a total budget gap of £4.7bn from 2025-26 to 2028-29.
How many councils are in England and Wales?
In England, there are 317 principal councils. These include a mix of two-tier (county and district) systems and single-tier (unitary) authorities. This number comprises 21 county councils, 164 district councils, 32 London boroughs, 36 metropolitan boroughs, 62 unitary authorities, and 2 special authorities.
In Wales, the system is fully unified, with 22 principal councils. All 22 are unitary authorities, meaning each one is responsible for providing all local government services in its area.