Councils at risk of going bust as soaring costs blow £2.4bn hole in budgets

Councils will soon be forced to make “disastrous” cuts to essential services including adult social care, road repairs and bin collections as soaring costs push some local authorities towards bankruptcy, a report has warned.

The Local Government Association (LGA) said problems are so acute that some councils may soon go bust, leaving older people without vital support and children facing greater risks of exploitation.

Council budgets are already at breaking point after a decade of austerity that has seen central government funding slashed and local services cut to the bone.

Authorities face a further £2.4bn hit to their budgets this year from huge jumps in energy bills alongside higher wage costs and a rise in prices for a host of essential goods. By 2024-25, the impact will have risen to £3.6bn, the LGA estimates.

Problems are likely to be so bad that some will have to follow in the footsteps of Croydon Council which was last year effectively declared bankrupt.

Cost increases “pose a serious risk to the future financial viability” of some councils, the LGA said.

Councils say that their ability to provide families with safe and secure accommodation and tackle rough sleeping will be “significantly impacted”, while planning applications are taking much longer to process.

Councils have a statutory duty to provide some services such as social care, child protection and waste collection.

However, cuts can be made to the amount of money put into those services. Any disruption to bin collections could bring painful reminders of the chaos of the 1978 Winter of Discontent when rubbish piled up in the streets as Britain was racked by widespread strikes and a stagnant economy.

The country faces a wave of strike action this summer which began with a walkout by railway workers over a real-terms pay cut, an overhaul of conditions, and redundancies.

On Monday barristers represented by the Criminal Bar Association went on strike to protest against years of cuts to legal aid and a huge backlog of cases.

James Jamieson, LGA chairman, said council services were at risk of being cut in the middle of a cost of living crisis.

“Inflation is not going to come down overnight. As our analysis shows, the impact on our local services could be disastrous.

“This will stifle our economic recovery, entrench disadvantage, and undermine government ambitions to level up the country.

“Local government remains the fabric of our country, as has been proved during the hugely challenging few years we have faced as a nation.

“Only with adequate long-term funding – to cover increased cost pressures and invest in local services – and the right powers can councils deliver for our communities, tackle the climate emergency, and level up all parts of the country.”

The LGA is urging ministers to grant councils the resources they need to meet their costs and protect services that are helping communities recover from the pandemic.

It came as Labour called on Boris Johnson’s government to “make a better fist” of dealing with low pay for council binmen and social workers than it has with striking railway workers.

When shadow communities secretary Lisa Nandy said that council workers “need and deserve a pay rise”, she was branded the “Marty McFly of politics” by Michael Gove. “She would take us back to the future of the Eighties of strikes, of inflation, of borrowing,” he said.

Ms Nandy warned of “another crisis” on the horizon after a “week of travel chaos” in the wake of the RMT union strikes.

She said: “The local government cleaners, social workers, the refuse workers who can't afford to feed their families on the wages they are paid.

“They need and deserve a pay rise but he knows that workers and council leaders struggling with record Tory inflation cannot square this circle alone.

“Nobody wants rubbish piling up in the streets, nobody wants older people left in their homes, nobody wants families left to break.”