Inflation could push English councils into bankruptcy, say leaders

theguardian.com:

Council leaders in England have said a multibillion-pound financial crisis caused by rising inflation could make local services unviable and even lead to local authorities going bankrupt, unless the government offers emergency funding.

The cross-party Local Government Association (LGA) said local services that were seemingly secure just three months ago were now at risk of closure or cuts as councils scramble to manage an unforeseen £2.4bn rise in energy and pay costs.

The Tory chair of the LGA, James Jamieson, said the impact on services would be “disastrous” and hamper councils’ efforts to support people through the cost of living crisis at a time when demand for services was rising, especially in areas such as adult and children’s social care, and homelessness.

“Soaring inflation, energy prices and ‘national living wage’ pressures are putting council services at risk. Budgets are having to be reset, with potential cuts to the essential services people rely on, in the middle of a cost of living crisis,” Jamieson said.

The LGA estimates that without adequate long-term funding – in effect a revisiting of the spending review settlement agreed last autumn – the collective increase in inflationary costs faced by English councils this year will be £2.4bn, growing to £3bn in 2023-24 and £3.6bn in 2024-25.

It argues that these pressures, coming on the back of more than a decade of austerity cuts to local authority funding, pose a “serious risk to the future financial viability of some services and councils”.

Jamieson added: “Inflation is not going to come down overnight. As our analysis shows, the impact on our local services could be disastrous. This will stifle our economic recovery and undermine government ambitions to level up