MPs have warned that the financial crisis facing England’s councils is spiralling out of control, with even well-managed local authorities at risk of bankruptcy. A cross-party committee has urged the government to address a £4bn funding shortfall to prevent severe repercussions on services. The committee also called for a reform of the outdated and regressive council tax system. The government has acknowledged the challenges faced by councils and has pledged an additional £600m in support.
A report by the Commons Levelling Up, Housing and Communities Committee highlighted systemic underfunding of councils, coupled with rising costs and demand for services. The Local Government Association estimates that English councils face a £4bn funding gap over the next two years. Labour MP Clive Betts, chair of the committee, warned that without government intervention, even well-run councils could go bankrupt.
The report also emphasised the increased demand and costs for services such as social care, special educational needs transport, homelessness support and temporary accommodation. It called for a comprehensive review of council funding, local taxation and social care service delivery.
The committee criticised the increasing reliance on council tax to fund services, which disproportionately impacts authorities in deprived areas. It called for a revaluation of properties, a broader reform of the system and the introduction of additional council tax bands.
In response, a spokesperson for the Department for Levelling Up, Housing and Communities stated that they recognise the challenges faced by councils and have recently announced an additional £600m support package, increasing their overall proposed funding for next year to £64.7bn.
