England’s local councils are on the verge of financial collapse. Overburdened by mounting service demand, chronic underfunding, and a stiflingly centralised system, without urgent, radical reform, our public services will crumble.
The numbers are stark: some estimate that councils face a combined deficit of £9.6 billion by 2026-27 and only 14 of 317 councils expect to balance their budgets by then. High-profile bankruptcies, including Birmingham City Council, underscore the severity of the crisis. Meanwhile, many councils are selling assets or taking risky financial gambles to stay afloat, with borrowing-to-income ratios in some cases exceeding 80:1.
English councils lack autonomy to raise revenue or implement local solutions. Instead, they are trapped in a reactive cycle, addressing crises only when they become unavoidable — and far costlier. Services like adult social care and temporary accommodation are bearing the brunt of this vicious cycle, leaving councils overstretched and communities underserved.
To save local government, Whitehall must act decisively. Today, Reform think tank published ‘Back from the brink’ which outlines decisive reform to rescue local finances and embed sustainability into the system.
Local services are on the brink of collapse now and cannot wait to reap the benefits of structural reform. This is particularly the case for adult social care which has become an extortionate cost on local councils, with local authorities spending £22.5 billion in 2022-23. High costs place extensive pressure on council budgets, in turn exposing some of England’s most vulnerable to inadequate or absent care.
To address this, Reform urges government to immediately divert £1 billion of health system funding into the social care system. In the Autumn budget, central government announced £600 million of funding for adult social care. Meanwhile, an additional £22.6 billion was announced for the health system.
This disparity in funding has been seen time and time again, exposing the trend of funnelling money towards the acute end of care and ignoring other parts of the system. As such, the report wants to correct this balance by redirecting less than 5% of the additional health funding to council’s responsible for adult social care.
Short-term relief measures, while necessary to cope with immediate need, fail to address the underlying structural issues and keep the system trapped in a cycle of crisis management. Government must move away from the sticking plaster solution of ad-hoc funding and instead undertake radical action to reimagine the system. Long-term thinking is vital to bring local finances onto a sustainable path, not only to prevent crisis but to support quality services that improve lives.
This kind of long-termism is the focus of Reform’s paper, with one recommendation proposing that ‘mature’ combined authorities should be able to retain a specified portion of income tax. Devolving a small percentage of locally-raised income tax revenue would create a reliable long-term funding stream and would empower the regions to make strategic decisions tailored to local need.
Local authorities are at their limit. They are no longer able to afford the services they are mandated to deliver. Radical reform must start now to rescue them from this crisis, and bring them back from the brink.
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