Politics

One in 10 councils face effective bankruptcy as cost of placing children in care soars

One in 10 councils fear bankruptcy as £693m spending gulf opens up

council bankrupt

Councils face swingeing cuts to services, as they race to balance the books. Image: Unsplash

Councils across the country are “running out of road”, with one in 10 fearing effective bankruptcy over this year, as the rising cost of placing children in care pushes budgets to breaking point.

Rising costs have resulted in an expected £639m overspend, the County Councils Network (CCN) has warned, thanks in large part to spending on children’s services “spiralling out of control”, accounting for almost half of the deficit.

It’s the latest alarm bell raised by councils, as fears of financial ruin for local government grow. Councils also warned this week of the imminent collapse of homelessness services without £100m of emergency funding, while a growing wave of refugee homelessness brings even greater strain.

Much of the shortfall is out of councils’ control, said councillor Barry Lewis, vice chair of the CCN.

“The number of vulnerable children requiring care has risen dramatically post-pandemic, while inflation and a broken provider market in statutory care placements mean councils face no choice but to pay spiralling fees,” said Lewis.

“After a decade of continuous cutbacks, the scale of reductions and use of reserves needed to fill the funding shortfall is simply unsustainable.”

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Unless emergency funding is given for children’s services, the CCN says councils will be forced to cut other services to find the money needed.

Councils go “bankrupt” when they issue a section 114 notice, which indicates they are unable to meet their spending commitments – in other words, that they face a budget shortfall.

By 2025, six in 10 councils expect to be unable to balance the books.

A number of councils are already going bust, including Woking, Croydon and Birmingham, meaning residents face cuts to services.

The government says it makes £60bn available for local government, and that local authorities have seen an increase of £5.1bn in core spending power since 2022/23.

Around £2bn in grant funding for social care has also been provided for 2023/24.

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