The leaders of Kent and Hampshire county councils said even “dramatic cuts” to current services would not be enough to fix the huge holes in their budgets created by soaring inflation and growing pressures on adult social care and children. In a strongly worded joint letter to Sunak, Kent leader Roger Gough and Hampshire leader Rob Hubby said, while acknowledging the difficult national economic conditions, “we cannot sit back and let two great counties sleepwalk to an economic disaster”. Ministers effectively had a choice, the letter said: fund councils properly or change the law to remove the “outdated and inadequate” legal obligation on town halls to provide services such as libraries and home-to-school transport. Both councils faced budget deficits in the coming years “of a scale never seen before”, they said, and unless ministers stepped in with emergency help and a long-term funding plan, they would “likely consider section 114 [effective bankruptcy] announcements in the next year or so.” The letter said: “The problem is simple: the extra money we can raise from council tax and business rates barely covers the usual inflationary pressures we face every year. This leaves significant development, particularly in adult and children’s social care, completely unfunded. “Without a fundamental change to either the way these two services are funded, or to our legislative obligations, all senior local government will soon go over the edge.” Although bankruptcy will not result in councils stopping essential services, issuing a section 114 notice formally obliges them to make drastic cuts to services, cut jobs and announce asset sales such as social residences, development facilities and office buildings. The letter reflects alarm across the industry about the long-term viability of local government, which has been battered by a decade of austerity cuts, followed by the pandemic and now rampant inflation. Several councils have announced they will have to unexpectedly cut services this year to balance the books. The Conservative-run Network of County Councils said at the weekend that only one in five of its members were confident they would avoid having to issue a section 114 notice this year. To prevent bankruptcy, they cut welfare services as well as bus subsidies, waste services and street lighting. Reports in The Times on Monday said ministers were considering removing the cap limiting annual council tax rises to 2.99% plus 1% for social care in Thursday’s Budget. But there is little confidence in the sector that this will provide a fair or sustainable response to the financial pressures facing town halls. Archie Bland and Nimo Omer take you to the top stories and what they mean, free every weekday morning Privacy Notice: Newsletters may contain information about charities, online advertising and content sponsored by external parties. For more information, see our Privacy Policy. We use Google reCaptcha to protect our website and Google’s Privacy Policy and Terms of Service apply. A handful of councils have gone bankrupt in recent years – Northamptonshire, Croydon and Slough – while several others have needed state bailouts to stay afloat – most recently Thurrock – due to financial chaos stemming from commercial investment aimed at tackling the effects of the years funding cuts. Others have avoided bankruptcy only through dramatic cuts to services, while local government sector surveys suggest many councils will only manage to balance the books this year by drawing on their already depleted financial reserves – leaving them brutally exposed in the coming years. A spokesman for the Department for Lifts, Housing and Communities said: “We understand that councils are concerned about the impact of inflation and we are working with them to understand how this will affect their budgets. This year, we have made an extra £3.7 billion available to councils to ensure they have the resources to deliver vital services.”
