Local government leaders have issued a warning that one in ten county councils in England is on the brink of effective bankruptcy, jeopardizing essential services. This alarming revelation

comes in the wake of Birmingham City Council's dire financial situation, which prompted drastic spending cuts earlier this year.

The County Councils Network conducted a survey, revealing that more local authorities fear they may follow Birmingham's lead unless they receive emergency funding from the government. They are urgently seeking support to avert financial collapse.

The government contends that it has already allocated an extra £5.1 billion to local authorities for the 2022/23 fiscal year and is willing to engage with any council expressing concerns about their financial status.

While Birmingham City Council, under Labour leadership, grapples with a £760 million bill due to equal pay claims and budget overruns on an IT project, the County Councils Network emphasizes that other, typically well-managed county councils could face a similar fate.

In addition to immediate financial relief, county councils are advocating for longer-term budget settlements to allow for better financial planning. Rising inflation has driven up costs, and many councils are witnessing a surge in demand for services such as adult social care, education, and highways.

County councils are forecasting an overspend of £639 million in the 2023/24 fiscal year, averaging £16 million per council. The escalating demand for children's services, including care placements for vulnerable children and foster care, is a significant contributor to this projected overspending.

The County Councils Network, representing some of England's largest local authorities, surveyed its members and discovered that one in ten are uncertain whether they can balance their budgets this year. The BBC reached out to numerous councils, both at the district and county levels, and led by various political parties, that have previously faced financial challenges or high debt levels.

While some councils expressed confidence in their financial stability, others reported intense pressure on their budgets, leading them to make tough decisions on spending. For instance, the Royal Borough of Windsor and Maidenhead is implementing "emergency controls of non-essential spending," while Hampshire County Council has indicated that its budget is "stretched to breaking point."

Local governments are sounding the alarm, with Stoke-on-Trent City Council warning that without substantial funding changes, it will be unable to sustain services. Coventry City Council described its financial crisis as "devastating," suggesting that local government is teetering on the edge of financial disaster.

Barry Lewis, vice-chairman of the County Councils Network, stressed the need for immediate action, emphasizing that other well-managed councils are running out of options to prevent insolvency unless they receive additional resources. The County Councils Network represents nearly 27 million people in England and has identified over £2 billion in "challenging" spending cuts over the next three years.

However, a legal obligation to provide essential services, including care for adults and children, has left little room to further reduce costs, particularly when demand and associated costs are on the rise.

This survey of 41 council members revealed that one in ten is uncertain about balancing their books this year, a figure expected to rise to six in ten within two years. The growing consensus in the sector is that the local government funding system is no longer sustainable.

Earlier this month, the Local Government Association wrote to Chancellor Jeremy Hunt, highlighting a £4 billion funding shortfall over the next two years. The District Councils Network, which represents hundreds of smaller authorities, warns that cherished local services, including those supporting vulnerable populations, may vanish due to the growing financial crisis.

Jonathan Carr-West, chief executive of the Local Government Information Unit think tank, underlines the precarious state of council finances, with even well-managed councils edging closer to financial instability. He suggests a need for robust governance and decision-making alongside heightened resilience to cope with potential errors.

In response, a spokesperson for the Department for Levelling Up, Housing, and Communities reassures that the government continues to monitor pressures on all councils and stands ready to engage with councils concerned about their financial positions. While councils are responsible for managing their finances, the government emphasizes that they should avoid excessive risk with taxpayers' money and has established the Office for Local Government to enhance accountability in the sector. Photo by Elliott Brown from Birmingham, United Kingdom, Wikimedia commons.