Report: Third of councils in England’s poor areas now consider BANKRUPTCY

It has been revealed that a third of councils in some of England’s poorest communities are considering declaring effective bankruptcy this year or next.

A poll of 47 local councils in the North, Midlands, and on the South Coast indicated that the extreme financial strain has led to five of them debating whether to send a section 114 notice of their failure to balance their yearly budget in 2023-24.

Another nine councils that are members of the Special Interest Group of Municipal Authorities (Sigoma) have stated that they may be forced to declare bankruptcy next year.

Sigoma said this was the first time many member councils were considering issuing a section 114 notice, which freezes all non-essential spending. 

The growing possibility of drastic action is said to be driven by the depletion of cash reserves available to cover gaps in budgets.

Councils said that the most common source of financial strain was increased demand for children’s social care services as a result of the government’s desire to prioritise these services alongside adult social care and commit additional cash.

Other key concerns highlighted included inflation expenses and pay increases, with warnings that an impending increase in borrowing costs is poised to put extra financial pressure.

A Government spokesperson said: “Councils are ultimately responsible for the management of their own finances.  However, the Government has been clear that local authorities should not take excessive risk with taxpayers’ money, and we have established the Office for Local Government to improve the accountability for performance across the sector.

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