LONDON (Reuters) -Britain plans to increase funding for local government councils by 4 billion pounds to 64 billion pounds ($81 billion) to address inflation-driven pressures, after cities Birmingham and Nottingham effectively declared bankruptcy.
The settlement for 2024-25 marks a 6.5% rise from 2023-24, the government said in a statement on Monday in an attempt to ease the pressures on councils which provide local services before a national election expected next year.
“We recognise they are facing challenges and that is why we have announced a 64 billion-pound funding package to ensure they can continue making a difference, including through our combined efforts to level up,” levelling up minister Michael Gove said.
“Levelling up” refers to a plan to create economic opportunities across the whole country, not just in the wealthy southeast.
A body representing 315 of the 317 councils in England, many of which have said they have long been struggling with the provision of social care and special educational needs, said it still fell short of what is required.
“Today’s settlement does not provide enough funding to meet the severe cost and demand pressures which have left councils of all political colours and types warning of the serious challenges they face to set balanced budgets next year,” said Shaun Davies, chair of the Local Government Association (LGA).
“No council is now immune to the growing risk to their financial sustainability.”
Birmingham, England’s second-largest city, issued a “Section 114 notice” in September, effectively declaring itself in financial distress because of high liabilities relating to historic equal pay claims and forcing the government to eventually intervene in its day-to-day running.
Nottingham followed with the same notice less than three months later, saying there was a significant gap in its budget due to an increased demand for children’s and adults’ social care, rising homelessness and the impact of inflation.
Gove’s department said in response that it was “minded to” intensify the current intervention and appoint commissioners due to what it called were “serious concerns around the authority’s finances and governance”.
The LGA called on the government to come up with a long-term plan to sufficiently fund local services through multi-year settlements.
Jim McMahon, opposition Labour’s policy chief for local government and English devolution, blamed the issue on the governing Conservative Party.
“Local authorities are bearing the brunt of 13 years of Tory economic mismanagement, compounded by spiralling inflation and a stagnating economy,” he said in a statement.
(Reporting by Muvija M, editing by Elizabeth Piper and Nick Macfie)