Black hole in town hall budgets rises to £5bn

A black hole in local authority budgets continues to grow, a BBC investigation reveals, prompting fears some will not be able to provide basic services.

The average council now faces a £33m ($42m) predicted deficit by 2025-26 - a rise of 60% from £20m two years ago.

Unison said the situation meant some councils would not be able to offer the "legal minimum of care" next year.

The government said decisions on the funding beyond the next financial year had not yet been made.

The BBC's Shared Data Unit surveyed 190 upper-tier authorities in the UK to find out the extent of the financial difficulties facing town halls, which provide services from adult social care to bin collections and pothole repairs.

It revealed council chiefs expect to be £5.2bn short of balancing the books by April 2026 even after making £2.5bn of planned cuts.

At least £467m will be stripped from adult care services, which include elderly care homes, respite centres and support services for people with disabilities.

This year, councils are closing leisure centres, reducing care packages and raising fees for services like waste collection and parking in order to break even.

Unison's head of local government Mike Short said town halls were in the "direst of states".

"This is not a sustainable situation," he said.

"Local authorities simply don't have the funds to provide even statutory services."

Councillor Shaun Davies, who chairs the Local Government Association (LGA), said inflation, the introduction of the National Living Wage, energy costs and increasing demand for services were adding "billions of extra costs just to keep services standing still".

Gateshead Leisure Centre was opened in 1981 by Elizabeth II and featured a pool, a soft play and a gym, as well as badminton and basketball courts.

But in November 2022, Gateshead Council recommended closing it, claiming it had no other choice "after government cuts".

The centre, which had more than 480,000 visits a year and served an area with high levels of deprivation, closed in July. A community bid is being put together to raise £40,000 and take over the site - but so far it has raised £5,000.

Mental health worker Layla Barclay, 39, from Bensham, led the campaign to keep it open.

"Everyone is just horrified it's actually come to this," she said. "There is a lot of anger towards the council. We just feel that they didn't come to the community until it was too late."

A pool has existed at the Alexandra Road site since 1941 and Wendy Arkle, 64, remembers first using it in the late 1960s as part of a Brownies swimming gala.

"There is just this huge void now," she said.

Our investigation found on top of cuts, town hall chiefs are expected to use up £1.1bn of reserves to balance the books this year.

Bradford Council said the authority was using reserves at an "unprecedented level" while Leicester City Council said it was going to run out during the next financial year.

Several councils have called for financial support from the government. Among them Slough, Croydon, Thurrock, Kensington and Chelsea, and newly created Cumberland and Westmorland and Furness councils will share around £393m in government funding this year.

Thurrock declared bankruptcy in December 2022 after a series of failed solar farm investments saw the council run up a £500m deficit - one of the largest ever reported for a council of its size.

Slough was also forced to effectively declare bankruptcy after borrowing more than £700m to buy land and properties.

Kensington and Chelsea has been given an agreement in principle to borrow up to £51.8m to help pay the compensation due to the survivors and first responders of the Grenfell Tower tragedy. In a statement, the council said it had "healthy finances" and had frozen council tax this year.

Meanwhile other large councils have indicated being in financial distress.

Birmingham City Council, Europe's largest local authority, halted all non-essential spending in June after announcing it was facing a bill for a £760m unequal pay claim.

The £51m of savings being made at Shropshire amount to a fifth of its overall budget this year - the highest proportion for any council in the UK.

A spokesman for the council said its financial position had been compounded by its "rural nature and sparse population," which it said made it "more expensive to provide services like social care".

Councils are funded through a mix of council tax, business rates, income from services like parking and social housing rent, as well as money from the government known as the Revenue Support Grant.

That funding declined by nearly a third between 2010 and 2021, according to the Public Accounts Committee, which found council income was £8.4bn lower in real terms than it had been a decade before.

Its chair Meg Hillier said the BBC study showed councils were at a "tipping point" where "only so many more savings" could be made.

Ms Hillier, the Labour MP for Hackney South and Shoreditch, said: "These findings should have the dashboard flashing red across the board for the government."

Despite high profile failures, many councils have continued to take risks on commercial investments to increase their income.

A Freedom of Information request by the BBC found Somerset Council had bought more than £136m worth of retail property since the start of the pandemic, including a B&Q in Ayr and a Wickes in Birmingham.

Stories about pressure on council budgets may not seem new. Local authorities were hit hard during the period of austerity.

The government has made more money available to councils in recent years, but rising prices and the cost of delivering services for which there is growing demand means budgets remain squeezed. This research shows the future looks bleak for some authorities who have already cut back on what they offer local communities.

Questions have been raised over investment decisions some councils have made, but beyond that there is a wider call for a rethink of the way local government is funded, to try and break what seems to be a cycle of pressure on the services on which so many people rely.

Neil Crouch, from Harlow in Essex, has motor conversion disorder, severe arthritis and suffers from kidney disease.

Essex County Council, which is set to save £36m this year, cut the 48 hours of weekly funded social care he received down to 42, and removed his eligibility for respite care.

Previously, he was allowed two funded weeks a year at a centre that provides holidays for people with disabilities.

"It's such a shame," said Neil, who is becoming increasingly immobile and relies on carers and his elderly parents for support. "It helps so much to have that respite care.

"My mum and dad are both in the mid-70s now, and it's getting hard for them. It's not an easy process to look for after somebody with a disability."

Neil, who said many others like him are suffering from having their respite eligibility removed, is urging councils to rethink such cuts.

"They have holidays," he said. "Because we are disabled does it mean we're not entitled?"

Essex County Council said, while it could not comment on individual cases, it still offered "significant support" to people needing respite care in the area.

Currently, councils discover how much money they are going to receive from the government one year at a time.

The LGA has repeatedly called on the government to change the way local authorities are funded. It has said multi-year settlements would give councils more clarity to plan effectively.

A plan to allow councils to retain 75% of the business rates they collect instead of the current 50% was paused indefinitely in 2021.

Councillor Tim Oliver, who chairs the County Councils Network, said: "We must remember that while inflation is beginning to reduce, these costs councils have incurred won't just disappear from our budgets overnight - they are now embedded into the future."

A Department of Levelling Up Housing and Communities spokesman said that, as no decision on council funding levels would be taken until the Spending Review next year the predicted deficit figures for 2025-26 were "unsupported".

He said the government had pledged to make £4.7bn available for the adult social care system in England in 2024-25 and confirmed there would be an increase in the Revenue Support Grant councils receive.

The Scottish and Welsh governments said they had increased resources for councils this financial year. The government of Northern Ireland declined to comment.

Additional reporting: Lauren Woodhead, Bhavini Mistry

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