Local councils in England are at risk of going bankrupt, according to a cross-party committee of MPs, who called on the government to help fill a £4bn funding gap. The Commons’ Levelling Up, Housing and Communities Committee said even well-funded areas were struggling with costs and demand from services including transport for disabled children and temporary homeless support and accommodation. They also urged the government to reform the council tax system, which they said was “outdated”, “regressive” and a disproportionate financial burden for deprived areas.
“The figure is on top of a £64bn funding package for 2024-25, which was announced in December. The committee said the additional money was welcome but that it believed further funding increases were needed”, the report further stated. Chair of the committee, Labour MP Clive Betts, said if the government did not bridge the gap, “well-run councils could face the very real prospect of effectively going bust”. The report said a broader review of local taxation, council funding and how social care is delivered was needed in the long term.
The Local Government Association estimates that councils will face an overall shortfall of £4bn in funding over the next two years. In response, a Department for Levelling Up, Housing and Communities spokesperson said the additional £600m funding support package had been welcomed by councils and would bring the total proposed funding for next year to £64.7bn.
Susan Hinchcliffe, the Labour leader of Bradford City Council, told the committee that nearly 50% of the council’s overall budget was now being spent on care for children, but that still wasn’t enough to handle the current pressures. Greater demand for social care was contributing to the financial strain on councils
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