Local Government Association of council chief executives finds one in four councils in England may need to apply for emergency government bailout agreements to avoid bankruptcy in the next two financial years, 2025/26 and 2026/27
One in four councils say they may need to apply for an emergency government bailout in the near future, a new survey has revealed.
The Local Government Association (LGA) recently ran a survey of council chief executives which found a quarter of all councils in England are likely to have to apply for emergency government bailout agreements to stave off bankruptcy in the next two financial years (2025/26 and 2026/27).
As a result, the LGA is calling on the chancellor to take immediate action in the Autumn Budget — due to be delivered on October 30 — to stabilise council finances and avoid cuts to services.
Alongside this, the association also wants to work with government to ensure councils receive multi-year finance settlements and that a cross-party review is set up into how the local government funding system should be reformed.
An unprecedented 18 councils were given Exceptional Financial Support from the government in February to help meet their legal duty to balance their books this year (2024/25).
This includes councils being given permission to use capital funds raised through borrowing, or the sale of assets such as land and buildings, to plug funding gaps in their day-to-day revenue spending.
While this approach can provide temporary financial relief, there is a risk that this additional support could potentially worsen issues by adding further debt and costs in the future and/or undermine future capital programmes.
However, with councils in England already facing a funding issue of more than £2bn next year, the LGA survey reveals a worsening crisis.
Around one in ten councils this year say they have discussed the possibility of requesting Exceptional Financial Support (EFS) from the Ministry of Housing, Communities and Local Government.
25 per cent are likely to apply for EFS in 2025/26 and/or 2026/27 without additional government funding.
44 per cent of councils with social care responsibilities said that they are likely to apply for EFS in 2025/26 and/or 2026/27 without additional government funding.
Councils also continue to face inflation and wage pressures alongside rising demand for services. They were asked to identify their top pressure conerns, with social care issue such as children's social care, adult social care, SEND services, school transport, homelessness, and waste services ranking highest.
The survey also revealed that many authorities are expecting to have to make cutbacks to community services next year. Which could mean reduced hours of operation, reduced frontline staff, longer waiting times, a reduced or less frequent level of service provision, and/or increased fees and charges.
Two thirds of councils say parks, green spaces, and sport services will be affected.
Almost eight in ten councils say services and support for disabled adults and/or older people are likely to face cutbacks.
Service cutbacks are also likely in services and support for children, young people and families.
LGA chairman, Louise Gittins, said: “Councils are the backbone of communities. Every day they strive to protect vulnerable children and families, support our older or disabled loved ones to live independent lives, keep our streets clean and pothole-free and build affordable homes but this is becoming increasingly difficult.
“The unprecedented emergency support given to councils this year reveals the extraordinary funding emergency facing local government. As our survey shows, many more councils are being pushed into a precarious financial position.
“This is not just about numbers on a spreadsheet. Budget cuts needed to plug growing funding gaps will affect the most vulnerable members of society and the services our communities rely on every day.
“The Autumn Budget must provide councils with the financial stability they need to protect the services our communities rely on every day.”
