“In common with other councils, we are in complex and continuing negotiations with the Government about how they support us.” [John Hart, Leader, Devon County Council]
“One in 10 local authorities are not sure they can balance their budgets in this financial year.” [County Councils Network]
Two months ago, Birmingham City Council was declared effectively bankrupt – which prompted the question as to How many UK councils have gone bankrupt?, as it is not the only UK council that has faced financial difficulty in the last few years. In fact, it is the sixth council to issue an s.114 in the last five years.
And as further comment said at the time, Birmingham’s bankruptcy is only the tip of the iceberg – local authorities across England are at risk:
In July 2023, the Office for Budget Responsibility flagged local borrowing as “at risk”. And the National Audit Office has predicted that more is to come. Due to the cost-of-living crisis, the rising need for social care and the continued impact of the pandemic, there is less money and ever greater need. Our research shows how fragile England’s local government funding system is. Councils do have limited revenue-raising powers to finance current expenses. Despite this, local authorities across the country have long relied on their reserves, selling property assets, one-off grants, high-risk investments and cheap borrowing for “regeneration projects” simply to stay afloat.
The latest news is not encouraging.
As reported yesterday, Leicester city council admits it’s on the edge of bankruptcy and warns it could be forced to make ‘savage’ cuts to services including social care, parks, sports, museums and libraries without extra cash.
And today there is a warning that one in 10 county councils face effective bankruptcy
The County Councils Network, which represents some of England’s largest local authorities, surveyed its members and found one in 10 are not sure they can balance their budgets in this financial year.
The BBC has contacted dozens of councils – at both district and county level and led by all parties – that have previously been reported to be facing financial pressures or have high debt loads. All were confident of balancing their budgets and avoiding a Section 114 notice, which means the council is effectively bankrupt and cannot commit to any new spending other than for essential services required by law. Some councils told the BBC their finances are in good shape – but others said they are facing intense pressure on their budgets and making difficult decisions on spending.
A spokesperson for the Department for Levelling Up, Housing and Communities said: “We continue to monitor pressures on all councils and we stand ready to talk to any council that is concerned about its financial position. Councils are ultimately responsible for the management of their own finances, but the government has been clear that they should not take excessive risk with taxpayers’ money. We have established the Office for Local Government to improve the accountability for performance across the sector.”
In June of this year, there were concerns that Devon County Council could go bust and district councils disappear – meaning there were concerns that a “Huge council shake up is a possibility in Devon”
Devon County Council is in danger of going bust according to County Councillor and Leader of South Hams District Council Cllr Julian Brazil. Should this happen, South Hams District Council, all eight district authorities are likely to disappear and Devon would become a unitary authority such as Plymouth and Torbay.
Despite the council balancing its £630m budget for 2022/23, financial concerns remain. Last summer, the authority faced a £30.5m overspend, with a further £10m risk identified relating to in-year inflationary pressures.
This year, Devon County Council faces a £9.3 million budget overspend, and there were recently angry exchanges at the county council’s cabinet as members discussed its financial position.
Following which, the leader of the council declared that ‘Devon County Council is not going bankrupt’:
You may well have seen the news about Birmingham City Council effectively going bankrupt. I would like to assure you that Devon County Council is not going bankrupt.
As for opposition claims that we are teetering on the brink of bankruptcy, let me explain. In common with almost all top tier councils in the country, we are spending more on children with special needs. Partly that’s because of an increase in need but it’s also because 10 years ago the Government gave us responsibility for young people up to the age of 25 instead of 18. That represents a huge increase in the numbers we look after but we didn’t get the extra money needed to go with it. Again, in common with other councils, we are in complex and continuing negotiations with the Government about how they support us in resolving this and I intend to write more in a future column about spending on education.