Government Announces Extra £600 Million for Struggling Councils

Michael Gove speaks on the second day of the Scottish Conservative party conference at the Scottish Event Campus (SEC) in Glasgow, Scotland, on April 29, 2023. (Andrew Milligan/PA Media)

Local authorities in England will receive a £600 million support package, which comes as councils across the country experience staggering debt.

Levelling Up Secretary Michael Gove said that the financial boost will help councils deliver key services.

Many local authorities in the country have been struggling financially, accumulating debt and cutting services available to residents.

A number of councils in England have announced their effective bankruptcy since 2021. In England, a total sum of £102 billion worth of debt has been reported across all of its 317 councils.

Emergency extra funding could put off the immediate threat of some councils issuing section 114 notices, which most recently has been the case for the Birmingham City Council.

The support package will see £500 million added to the Social Care Grant to enable councils in providing social care services, which has been a key concerned raised by local authorities.

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Analysis by the County Councils Network has, last year, revealed that social care was among the sectors, where councils were required to spend more than expected.

This includes provision of care for children and adults, where an acute rise in costs resulted in millions of overspend.

“We have listened to councils across England about the pressures they’re facing and have always stood ready to help those in need,” said Mr. Gove.

Minister for Local Government Simon Hoare said, “The funding offers something for all of our hard-working councils, with additional funding for social care as well as help for rural authorities to deliver essential services.”

The remaining £100 million in the announced funding boost will be spent on increasing  the rural services delivery grant and raising the funding guarantee.

All councils will receive an increase in spending power of at least 4 percent, the announcement said. This will be implemented before any local choices on council tax.

“The Government’s manifesto commits to continuing to protect local taxpayers from excessive council tax increases,” the statement added.

In an attempt to cut costs and raise funding, some councils turn to increasing council tax.

On Jan. 13, Woking Council Leader Ann-Marie Barker announced an increase of council tax of up to 10 percent from April, as well as changes in service.

The move was necessary to ensure the council can set a balanced budget, Ms. Barker explained.

Comprehensive Solutions

Concerned at the measures many councils have to take to avoid going bust, including raising council tax, dozens of MPs have written to Prime Minister Rishi Sunak earlier this month.

A letter signed by MPs, including those from Mr. Sunak’s own party, called for extra funding for councils in England.

Leading figures in the industry have welcomed the extra spending, announced by Mr. Gove, but warned about the need for “more comprehensive solutions.”

These will “still be needed to fully address the ongoing financial pressures, including homelessness,” said Councillor Sam Chapman-Allen.

Councillor Tim Oliver, chairman of the County Councils, called for a comprehensive reform programme and a long-term financial settlement.

The measures will enable councils to meet the demand form growing elderly populations and other residents requiring social care, Mr. Oliver added.

Last year, the Local Government Association (LGA) reported that almost one in five local government leaders believed their council was likely to effectively go bankrupt.

Responding to the government’s announcement, the LGA chair Shaun Davies said it will continue to work with ministers to pursue long-term funding settlement and legislative changes where needed.

In the previous years, many councils faced financial collapse, which has been brought on by inflationary pressures, an increased demand for services, under-funding, and unsuccessful investment in commercial ventures.

The newly set out funding builds on the £64 billion package, included in the local government finance settlement for next year.