Ministers will announce a 6.5% increase in the funding for local councils in England in a desperate attempt to stop them going bankrupt.
Michael Gove, the communities secretary, will announce the £64bn support package on Monday, less than a fortnight after he was warned that an unprecedented number of councils are likely to declare themselves bankrupt.
The funding, which will provide extra support for social care and housing, is expected to fall far short of the amount councils need and will come in lower than the funding increase councils received in 2023, which was 9.4%, according to the Financial Times, which first reported the news.
Earlier this month, a poll by the Local Government Association revealed that nearly one in five council leaders believe it is now “fairly or very likely” that their council will go bust in the next 15 months.
Last month, Nottingham became the ninth council since 2018 to issue a section 114 notice, under which a council signals that it is unable to fulfil its legal duty to balance the books. Birmingham and Woking have also issued section 114 notices this year.
According to the LGA survey, inflationary costs and soaring demand for child protection, adult social care and homelessness services are pushing councils of all political colours to the brink.
Earlier this month, Gove told the Commons levelling up committee that local councils that had issued section 114 orders had seen “failures of leadership, management and governance and taken unmerited risks”.
However, he admitted that he was “concerned” about the results of the LGA’s poll, telling MPs: “It is certainly the case that local government faces significant funding pressures … It may be the case in the future that there are some local authorities that have been relatively well managed so far that will face particularly acute pressures.”
The LGA has already predicted that councils will exceed their core funding by £2bn this year.
Even the leaders of “blue wall” Conservative-controlled shire councils such as Essex, Hampshire, Kent and Surrey, as well as the backbench Tory MP and Nottinghamshire county council leader Ben Bradley, have put their names to a letter to Gove pleading for extra funding.
“No council is immune to the risk of running into financial difficulty. As our worrying survey shows, many now face the prospect of being unable to meet their legal duty to set a balanced budget and having section 114 reports issued,” said the LGA chair, Shaun Davies.
A government source told the Financial Times: “Councils will understandably always want more resources, but this £64bn funding package provides certainty for councils to deliver vital public services and value for money for taxpayers.”