Councils declaring bankruptcy

 

Since 2018 8 council have declared bankruptcy including 4 in the past 15 months which are, Woking, Nottingham, Birmingham and Thurrock.

Almost 1 in 10 councils in England have warned that they will go bankrupt in the next 12 months due to financial trouble.

A survey based on 160 responses from 128 councils out of 317 shows the widespread concerns and struggles. It found that 9 in 10 council plan to raise council tax whilst others will be raising the price of services such as parking and waste disposal.

They expressed their struggles over the costs of children’s services and the soaring homelessness bills as the biggest risk factors for district councils.

 

The problems of Birmingham Council

In late 2023 Birmingham council effectively declared bankruptcy following a £760 million equal pay liability bill.

This led to drastic measures including a 10% increase in council tax.

The equal pay liability was not the leading factor here despite the council highlighting this aspect.

The Birmingham council has also been experiencing a faulty IT system which meant their finances were unavailable and potentially inaccurate for about 7 months.

They paid over £100m to have a badly implemented upgrade which only created IT issues as well as being £100m down.

Due to this they are still waiting for the figures to be audited and verified as their outgoings and incoming payments could not be accurately checked. The figure could be severely overstated and the reactions unnecessary.

Many councillors believe this problem should be corrected before declaring bankruptcy as well as taking drastic measures for its over 1million residents.

 

 

Your Council

Northamptonshire issued a notice in 2018 and was the first local authority to do so in 20 years. Since, Slough, Croydon, Thurrock, Woking, Birmingham and Nottingham have all issued a notice of bankruptcy. Many others have warned that a notice could be in their near future too.

Over the next two years there will be a predicted £4bn gap in funding for councils.

At the start of 2024, the Department for Levelling Up, Housing and Communities added £600m to the annual local government finance settlement. They aimed to support local authorities with social care as well as rural services.

In February, they confirmed that councils would be provided £64.7bn funding for the 2024-25 financial year including the earlier £600m. The rise assumed that all councils would agree to the maximum council tax increase, 5% for unitary and county councils, and 3 per cent for district councils.

Later in February they announced that 19 councils would receive the Exceptional Financial Support framework with 11 receiving funding for previous years including, Birmingham, Bradford, Cheshire East, Croydon, Eastbourne, Havering, Nottingham, Plymouth, Stoke-on-Trent, and Woking.