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Four local councils face potential bankruptcy, sparking concerns

One out of ten residents have consulted the government about emergency assistance, as the rising cost of living takes its toll. The sharp increase in English local authorities declaring bankruptcy underscores this dire situation, according to a recent report by the Local Government Association...

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One fourth of local councils face possibility of financial collapse
One fourth of local councils face possibility of financial collapse

Four local councils face potential bankruptcy, sparking concerns

Local Government Struggles Ahead of Autumn Budget

Local government finances in England have shown a modest surplus, but ongoing pressures persist, according to recent reports. Initial estimates indicate that local authorities had a surplus of £4.1 billion in the financial year to June 2025, though this is £1.0 billion smaller than the surplus the previous year [1].

The Local Government Association (LGA), a body representing councils in England and Wales, has warned that the trend of local authorities declaring bankruptcy could continue into 2026 without sufficient government support [6]. In response, the LGA is urging Chancellor Rachael Reeves to provide financial stability to councils in the upcoming Autumn Budget.

The LGA's call for action is based on a survey published at the start of their Annual Conference in Harrogate, attended by more than 1,500 councillors, council leaders, senior officers, and politicians. The survey reveals a worsening crisis in local authorities, with a funding gap of more than £2bn next year [2].

According to the LGA, councils are the backbone of communities, providing essential services such as protecting vulnerable children and families, supporting the elderly, maintaining streets, and building affordable homes [3]. However, the survey findings outline a worsening crisis that could result in cuts to vital public services.

The survey shows that social care for children (93%) and adults (90%) is one of the top pressures faced by councils. School transport is another major concern for 65% of councils, while parks and green spaces, sport services, and homelessness are expected to be affected for 66%, 62%, and 64% of councils, respectively [2].

The LGA's request includes a multi-year settlement and a review into changing the local government funding system. The LGA is advocating for measures to address the funding crisis, emphasizing the need for sustainable and increased funding streams to meet rising demand and cost pressures [4]. While specific LGA proposals for Autumn 2025 are not yet available, the context is consistent with previous LGA positions demanding long-term funding certainty, restoration of prior cuts, and adequate resources in line with cost and demand increases.

Tighter restrictions have been placed on 'buy now, pay later' schemes in related news, which may impact local authorities' financial management strategies. As the Autumn Budget approaches, the LGA will continue to advocate for the financial stability and protection of local services that communities rely on every day.

References: [1] HM Treasury (2025). Local Government Finance Settlement 2025 to 2026. [online] Available at: https://www.gov.uk/government/publications/local-government-finance-settlement-2025-to-2026/local-government-finance-settlement-2025-to-2026

[2] Local Government Association (2025). LGA publishes survey showing a worsening crisis in local authorities. [online] Available at: https://www.local.gov.uk/about/news/lga-publishes-survey-showing-worsening-crisis-local-authorities

[3] Local Government Association (2025). LGA Annual Conference 2025: Councils are the backbone of communities. [online] Available at: https://www.local.gov.uk/about/news/lga-annual-conference-2025-councils-are-backbone-communities

[4] Local Government Association (2025). LGA calls for funding reform in response to latest finance figures. [online] Available at: https://www.local.gov.uk/about/news/lga-calls-funding-reform-response-latest-finance-figures

[5] HM Treasury (2025). Spending Review 2025. [online] Available at: https://www.gov.uk/government/publications/spending-review-2025/spending-review-2025

[6] Local Government Chronicle (2025). LGA warns of local authorities declaring bankruptcy into 2026. [online] Available at: https://www.lga.gov.uk/about/news/lga-warns-of-local-authorities-declaring-bankruptcy-into-2026

  1. The Local Government Association (LGA) is urging Chancellor Rachael Reeves to address the worsening crisis in local authorities, particularly in the areas of housing and social services, during the Autumn Budget, as insufficient funding can potentially impact business operations and general news within the communities.
  2. Political discussions surrounding the Autumn Budget increasingly revolve around the financial stability of local authorities, with the LGA pointing out a projected funding gap of more than £2bn for the next year, which could lead to cuts in essential services like housing and social care.
  3. In response to ongoing pressures on local government finance, the business sector should closely monitor local authority decisions regarding service provision, as the general news landscape may be shaped by potential cuts to essential services such as housing and social care.

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