Councils urge chancellor to take ‘immediate action’ as one in four councils risk needing bailouts

One in four councils expect to require government bailouts in the next two financial years if no additional funding is provided, a survey by the Local Government Association (LGA) has revealed.

The LGA’s survey of 195 council chief executives found that one in 10 of them had reported having a conversation with Ministry of Housing, Communities and Local Government (MHCLG) to discuss the possibility of requesting exceptional financial support (EFS) during the current financial year.

By 2027/28, the proportion of councils anticipating that they will need EFS rises to 32%. 

In the survey, councils were asked to identify their top five financial pressures. 

For district councils, 85% identified homelessness and temporary accommodation (TA) as the biggest financial concern, followed by waste disposal and planning and development. 

Single-tier councils, which are responsible for delivering all local government services in their areas, identified children’s social care (93%), adult social care (90%), services for special educational needs and disabilities (80%), school transport (65%), and homelessness (64%) as their biggest pressures. 

The LGA is calling on the chancellor Rachel Reeves to take immediate action in the Autumn Budget to stabilise council finances and “avoid another hammer blow being delivered to local services”.

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In addition, almost half (47%) of the 195 councils said it was very or fairly likely that housing services would be negatively impacted by the savings that need to be made in their budgets for the 2025/26 financial year.

One of the LGA’s asks of the government ahead of the Autumn Budget is that they provide long-term, stable funding and set earlier, multi-year rent settlements for councils.

The organisation also called on the government to raise the Local Housing Allowance (LHA) rate to help to fund temporary accommodation. Currently, the Local Housing Allowance (LHA) covers 90% of rent costs, based on 2011 levels for people in receipt of benefits who are living in TA.

The LGA’s report also urged the government to support increased housing supply by scrapping Right to Buy or full financial compensation to rebuild new homes to replace those purchased under the policy.

Councillor Louise Gittins, LGA chair, said: “The unprecedented emergency support given to councils this year reveals the extraordinary funding emergency facing local government. As our survey shows, many more councils are being pushed into a precarious financial position.”

Gittins added: “This is not just about numbers on a spreadsheet. Budget cuts needed to plug growing funding gaps will affect the most vulnerable members of society and the services our communities rely on every day.

“The Autumn Budget must provide councils with the financial stability they need to protect the services our communities rely on every day.”