Chaos in the asylum system and Labour’s tax increases are driving local councils to the brink of bankruptcy, the official spending watchdog has warned.
Councils are also struggling to cope with soaring demand for services such as social care, while the funding they receive has failed to keep up with a growing population.
It comes after Deputy Prime Minister Angela Rayner provided emergency funding to 30 local authorities, with Birmingham receiving £180million, Bradford getting £127.1million and Southampton receiving £89.9million. The full list is below.
Pete Marland, a spokesman for the Local Government Association and Labour leader of Milton Keynes council, said: “Without adequate funding, councils will continue to struggle to provide crucial services – with devastating consequences for those who rely on them.”
He was responding to new report by the National Audit Office (NAO) which warned council finances iare “unsustainable”
The watchdog said funding to councils had increased by 4% over the last decade, to £55.7 billion, but funding per person actually fell by 1% while demand for services like social care and help for children with special needs shot up.
Recent government decisions would make the problem worse by increasing wages councils have to pay as well as their taxes, the NAO said. It warned: “The National Living wage increased by 9.8% in April 2024 and will rise again by 6.7% from April 2025.
“Employers will also face increased costs from rises in employers National Insurance Contributions announced in the 2024 Autumn Budget.”
It highlighted warnings that “competition between local authorities and central government to accommodate asylum seekers in hotels, houses or flats in local authority areas was driving up prices.”
The Local Government Association says the National Insurance hike announced by Chancellor Rachel Reeves will cost authorities £1.7billion while the Government has given them an extra £515million to pay for it, leaving a shortfall of £1.2billion.
Gareth Davies, head of the NAO, said: “There have been repeated delays to local government finance reform and Government can no longer resort to short-term solutions to support local authorities.
“Action to address this must resolve the systemic weaknesses in local government financial sustainability through a comprehensive, cross-Government approach.”
Sir Geoffrey Clifton-Brown, chair of the Commons Public Accounts Committee said short-term financial support offered to councils was “a sticking plaster to the underlying pressures facing local authorities”.
He added: “Delays in local audits are further undermining public confidence in local government finances.
A Ministry for Housing, Communities and Local Government spokesperson said: “This Government is under no illusions about the financial issues facing councils. That’s why we’re reforming the funding system and delivering improved public services across the country.
“We’re determined to make progress on the inheritance we’ve been left and are allocating £69 billion to council budgets across England, bringing forward the first multi-year funding settlement in a decade and reforming the local audit system to help drive forward our Plan for Change.”
Councils receiving Exceptional Financial Support from the Government for the 2025-26 financial year:
Barnet £55.7m
Birmingham £180.0m
Bradford £127.1m
Cheshire East £25.3m
Croydon £136.0m
Cumberland £23.439m
Eastbourne £2.0m
Enfield £10.0m
Halton £32.0m
Haringey £37.0m
Havering £88.0m
Medway £18.484m
Newham £51.2m
Nottingham £25.0m
Shropshire £26.9m
Slough £15.709m
Solihull £32.658m
Somerset £63.0m
Southampton £89.9m
Stoke-on-Trent £16.8m
Swindon £14.7m
Thurrock £72.0m
Trafford £9.6m
West Berkshire £3.0m
Windsor & Maidenhead £41.0m
Wirral £7.5m
Woking £74.6m
Worcestershire £33.6m
Worthing £2.0m.
