Immediate local government reforms required to prevent millions more living in bankrupt boroughs

With a record number of councils expected to declare bankruptcy this year, over 60 council leaders and chief executives have contributed to a new Local Government Information Unit (LGIU) manifesto that – if implemented – could prevent millions of people from living in bankrupt boroughs in 2024/25.

Today’s report, LGiU@40: For the Future of Local Government, calls for a new covenant between central and local government that agrees: an immediate end to competitive bid funding; a return to multi-year financial settlements and early consultation on budgets.

According to the report, almost all leaders and chief executives consulted felt that the level of challenge they were dealing with right now was unlike anything they had seen in their careers to date. Uncertainty over funding and being prevented from making long-term decisions were their biggest complaints and they urged a return to multi-year financial settlements.

The LGIU’s annual State of Local Government Finance report earlier this year revealed only 14% of senior council figures have confidence in the sustainability of council finances and 7.5% – 12 different councils – said there was a danger that financial constraints could risk their capacity to deliver their statutory duties – the essential services they are legally required to provide.

This new manifesto was informed by interviews with more than 60 chief executives and leaders from councils of all sizes, types and political control across England, Scotland and Australia, as well as new research that compares the British local government system to those in Italy, Germany and Japan.

Compounding the funding crises are concerns around status – that central government treats councils as subordinate entities and exerts excessive central control, constraining local government’s autonomy. The new covenant should commit to a system where successful local autonomy is embedded within, and supported by, continual systems of active cooperation between different levels of government.

In addition to the immediate calls for action, the report proposes several longer-term measures including moving to open devolution, a review of taxation and a single local (or sub-regional) budget for spending on all services.

LGiU@40: For the Future of Local government was launched today at the LGIU’s first annual Local Democracy Research Centre (LDRC) symposium where guest speakers included Professor Patrick Diamond, Dr Madeleine Pill, Professor Liz Richards, Professor Richard Eccleston, Dr Peter Eckersley, Theo Blackwell MBE (Chief Digital Officer, Mayor of London), and Keiran Pedley (Research Director, Public Affairs, Ipsos).

An embargoed copy of the full report is available upon request.

Jonathan Carr-West, Chief Executive, LGIU, said: “Eight councils have now declared bankruptcy leaving nearly 2 million residents facing higher bills for a bare minimum service. LGIU research indicates that 12 more councils could declare bankruptcy in 2024/25 and we are calling on the Government to prevent millions more people from being forced to live in bankrupt boroughs by bringing an immediate end to competitive bid funding and returning to multi-year financial settlements based on an area’s need.

Local government is responsible for care homes, vulnerable children, emergency accommodation, leisure centres, libraries and so much more. Essential services that genuinely change millions of people’s quality of life on a daily basis. Councils are pulling every lever available to stay afloat: raising council tax, raising charges, cutting services, increasing commercial investments, spending finite reserves and selling assets but it is simply not enough. The link between funding and need is completely broken.

As more and more councils warn that they will soon be unable to balance their books, this is clearly a moment of crisis for local government. But it’s also a moment of opportunity. We’re already in the run-up to the next general election; whoever is in government after that election has the opportunity to reset the relationship between central and local government, to finally give councils the tools they need to be the force for change we all need them to be. The chief executives and leaders interviewed for LGIU@40 are sending a clear message. We are at a point of crisis, if we fall over the consequences for the country as a whole are catastrophic, but if we are set free to deliver, the opportunities are endless.”