West Midlands councils warn of £200m funding gap

Seven local authorities in the West Midlands have warned there is a "real risk of the whole region declaring itself as financially unsustainable”.

The councils say “the new government can help us to avoid this”, in a letter to Deputy Prime Minister Angela Rayner.

They are asking for more money to plug a collective funding gap of more than £200m next year.

The government says it will work closely with councils to reform the funding system.

The BBC has been sent a copy of the letter, which has been signed by the leaders of the metropolitan councils in Birmingham, Coventry, Dudley, Sandwell, Solihull, Walsall and Wolverhampton.

The letter says financial forecasts by the four Labour-led and three Conservative-led councils show “a collective forecast funding gap of £161m for 2025/26”.

“If we include further pressures from latest forecasts, this figure will be well over £200m,” the letter says.

The Local Government Association says councils in England face a funding gap of £6.2bn over the next two years.

It says this is being driven by rising costs and demand pressures to provide adult social care, children's services, and homelessness support.

A survey by the Local Government Information Unit found more than 50% of councils in England were likely to declare effective bankruptcy in the next five years.

In the West Midlands, Birmingham City Council has already done so, and the councils in Coventry and Dudley have said they risk being next.

A section 114 is a report issued by a council's finance officer when they believe the local authority's income will not cover its costs for the next year.

The city council in Birmingham signed off service cuts worth £300m and a 21% rise in council tax over two years after issuing a section 114 notice in 2023.

The letter from the seven West Midlands councils comes ahead of Chancellor Rachel Reeves’s first budget in October.

In a speech this week, Prime Minister Sir Keir Starmer said the budget would be "painful" and warned of “tough” financial decisions.

In the letter, the seven authorities said they “cannot meet all the demands placed upon them, and the current position is unsustainable”.

“We are seeking a constructive relationship with central government where we can work together, and this will need to start with an open and honest conversation about our respective priorities, expectations and challenges,” the letter says.

The councils have requested a meeting with Ms Rayner to discuss “what is expected from local government within the resources available to us”.

The BBC has been told neither Ms Rayner nor her Ministry of Housing, Communities & Local Government has responded to the letter.

The government has promised to reform the system of funding councils but has made no commitment to extra funding since it took office.

An MHCLG spokesperson said: “The government will fix the foundations of local government and work closely with the sector to do so.

“We will get councils back on their feet by doing the basics right, by providing more stability through multi-year funding settlements, ending competitive bidding for pots of money and reforming the local audit system.”