Councils need help to avoid going bankrupt

New research from the Centre for Progressive Policy has found that at least eight in ten English councils need help to avoid going bankrupt.

The analysis estimated that predicted coronavirus-related costs and income losses in 131 out of England’s 151 upper-tier councils this year will exceed both the levels of their available financial reserves and the support so far provided by central government.

The study also claimed that the majority of those councils that are in the so-called 'Red Wall' northern England and Midlands parliamentary seats won by the Conservatives from Labour at the last general election are at risk of going bust because of coronavirus pressures.

The thinktank said authorities in the most deprived areas of England, already hit hardest by a decade of austerity, faced higher pandemic-related costs, and should therefore be prioritised for government support in line with ministerial promises to 'level up' so-called 'left behind' areas of England.

There is widespread agreement among authorities of all political colours that many will be obliged to draw up painful cuts plans in the next 18 months to avoid bankruptcy.

Additionally, many councils are reporting that the £3.2 billion of pandemic emergency funds for English local authorities, provided in two tranches in March and April, has already run out as pandemic spending on adult social care, homelessness and other areas continues to remain high.

Simon Clarke, the minister for local government, said: “We’re giving councils an unprecedented package of support, including £3.2 billion non-ringfenced emergency funding, to tackle the pressures they have told us they’re facing.

“Councils’ core spending power rose by over £2.9 billion this financial year even before additional emergency funding was announced. This is part of a wider package of support from across government for local communities and businesses – totalling over £27 billion including grants, business rate relief and for local transport. We are working on a comprehensive plan to ensure councils’ financial sustainability over the financial year ahead.”