One in ten of England’s biggest councils risk bankruptcy in the next months because of the soaring cost of child protection since the pandemic, the County Councils Network (CCN) has warned.
Many other vital services are threatened, according to the survey by CCN (representing some of the largest local authorities in England) which is calling for emergency funding from the government to deal with the crisis. The outlook is bleaker still with 60% of CCN’s 41 members saying they are unsure if they will be able to balance their books in two years’ time.
The network said county councils and unitary authorities are “running out of road” to avoid insolvency as they grapple with higher costs caused by inflation and more demands on child protection – a service councils have a legal obligation to provide.
CCN said an injection of emergency funding to deal with higher numbers of children being taken into care and the huge bill for children’s homes, otherwise drastic cuts will have to be made to other services.
Simultaneously, councils are struggling to cope with higher costs and soaring demand for their services exacerbated by the cost of living crisis. Local authorities have a legal duty to balance their books but are warning they face an overspend of £639 million this year.
Rising demand for child services and protection accounts for almost half of the projected overspend with higher spending on adult social care, education and highways maintenance also piling pressure on limited resources.
The government said an extra £5.1 billion has already been made available to local authorities for 2022-23 but chancellor Jeremy Hunt is under pressure to stump up more money for councils that have faced a decade of cuts in central government funding.
Vice-chairman of the CCN Barry Lewis, said: “Last year the chancellor stepped in with much-needed additional resources for adult social care.
“We now need the same priority to be given to vulnerable children, providing emergency funding this year and next.”
Birmingham City Council – the biggest local authority in Europe – declared itself effectively bankrupt In September over a £760 million bill following equal pay claims and a flawed IT system, leading to questions over governance and Downing Street appointing commissioners tasked with slashing services to find savings.
Somerset, West Berkshire and Hampshire have all publicly stated they may fail in their legal duty to balance the books with the latter saying it is facing “financial meltdown”. They may follow Birmingham CC – and also Croydon and Thurrock – in issuing a section 114 notice and effective bankruptcy.
The Royal Borough of Windsor and Maidenhead said it is introducing “emergency controls of non-essential spending” while Stoke-on-Trent City Council said it will “not be able to sustain services” without a change in funding. Coventry City Council is facing a “devastating” financial crisis and warned that “local government stands on the precipice of financial disaster”.
Last month the Guardian reported that English councils’ collective deficit stood at £4 billion with even well-run councils facing bankruptcy in the next 18 months..
In August the BBC reported that council leaders expect to be £5.2 billion short of blancing the books by April 2026 – even after making £2.5 billion of planned cuts. Leisure centres have already been closed, care packages reduced and fees for services such as waste collection and parking increased by councils to try and boost funds.