Town Halls on the brink: Social care demand pushes councils towards seeking emergency bailouts
Nearly half of councils providing vital social care say they are likely to seek emergency financial Government bailouts to balance budgets in the next three years, a survey shows.
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Despite recent funding increases and the certainty of three-year settlements, many councils say increasing demand and costs are still expected to jeopardise frontline services.
This will impact on neighbourhood services, see reduced investment in prevention, growing pressure on those who rely most on local support and more communities feeling like they are not seeing an improvement in their local services, the Local Government Association (LGA) said.
The Government is expected to publish the final settlement for councils in 2026-27 on Monday, but many councils say proposals show their finances will be hit by changes to how funding is allocated following a review aimed at directing resources to poorer areas.
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An LGA survey found 34 per cent of all councils have already applied, or are likely to apply, for exceptional financial support (EFS) in at least one of the financial years up to 2028-29.
When considering just upper-tier councils which provide adult and children's social care services, the proportion likely to apply is 47 per cent.
EFS arrangements allow councils to cover day-to-day costs by borrowing or with capital receipts, while some councils have been given permission to increase council tax above the referendum limit of 4.99 per cent.
The LGA insisted the EFS process is not a sustainable way of managing council finances and addressing gaps in funding.
The survey also showed that 69% of all councils said it will be difficult to set a balanced budget, as required by law, in 2026-27.
When financial officers were asked how confident they are that their council will have sufficient funding to fulfil all statutory duties in each of the three financial years, 51 per cent said they were not confident, rising to 66 per cent of social care councils.
Commenting on the findings, LGA chairwoman Louise Gittins said: "This research underlines the reality facing councils.
"Councils are doing everything they can to protect the services people rely on but demand and costs continue to rise faster than funding, leaving many with no choice but to consider emergency financial support.
"Short-term fixes will not address these challenges.
"Councils need sustainable funding and reform so they can focus on prevention, growth and delivering the services communities expect."
The LGA has said that four in five upper-tier councils in England will be pushed into effective bankruptcy by increasing spending on special educational needs and disabilities (Send) without significant reforms to the system.
There are calls for ministers to write off accumulated Send deficits which sit on councils' books under current arrangements.
The Government is expected to publish an education White Paper on an overhaul of the Send system in the coming weeks.
The LGA said 95 per cent of upper-tier councils are carrying Send deficits, while four-fifths report they have to cut services to secure loans to pay the day-to-day costs of covering Send overspends.
A spokesperson for the Ministry of Housing, Communities and Local Government said: "We inherited an outdated and unfair funding system and we're taking action to fix this, making almost £78 billion available for council finances next year.
"We are delivering fairer funding, targeting money where it is needed most through the first multi-year settlement in a decade, giving councils greater certainty to plan and invest for the long term.
"This will help councils deliver the high quality public services local people need."
Unite general secretary Sharon Graham said: "This report must act as a wake up call to government. When councils go bust, it is workers and communities that pay the price.
"Time and again we have seen councils reach for the lever to cut jobs and services. This is austerity by any other name.
"We need real investment in our public services and this must be paid for through a wealth tax and local authority debt relief."
Rachel Harrison, GMB national secretary, said: "Fourteen years of Tory underfunding has had devastating impacts on local government services and workers.
"This year's pay offer must be fully funded for all councils and schools to ensure no more services are cut and jobs lost to plug the funding gaps."