The rising cost of social care and school transport will cause a £54bn black hole in council funding across England without government help, local authorities have warned.
Councils face a massive shortage over the next five years due to the cost of adult social care, children’s services, and home-to-school transport, a new report from the County Councils Network (CCN) has found.
The analysis found the three areas account for 83% of the total increase in the costs councils are expected to spend on services by 2030.
Annual council tax rises of 3% could reduce the overall deficit to £38bn over the next five years, it found.
However, the CCN, which represents county and unitary councils – 47% of the population – said the government “cannot rely” on 3% rises as councils would still be left to find billions each year.
This would lead to “undeliverable” service reductions, the CCN said.
Council tax has risen each year over the past decade, but due to local authorities having to prioritise funding for services with high demand, they have had to reduce spending on everyday services such as libraries, buses, road maintenance, and youth services.
Many services have to legally be provided by councils so they have no choice but to take money away from other key areas.
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Councils have said they will have “no choice” but to continue to divert even more funding to care services, which could leave them providing not much else in just a few years.
A new survey of council chief executives found 16 local authorities could be at risk of declaring bankruptcy by 2026/27, and six more the following year if they do not receive extra government funding.
More than 16 million residents in England would be impacted by the bankruptcies.
The CCN said councils are facing an “unpalatable” trade off between reducing essential services or insolvency.
However, the group says that could be avoided by the government urgently providing more funding and “deep and fundamental reform” to services, such as children’s social care, adult care services and home-to-school transport for children with special educational needs.
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Barry Lewis, vice-chair of the CCN, said: “Ministers would have no choice but to radically rethink the statutory responsibilities placed upon councils to prevent six in 10 declaring bankruptcy by 2028.
“However, this unpalatable trade-off can be avoided by providing a substantive injection of resources to help shore up services this parliament, then embarking on deep and fundamental reform to address demand and market failures driving costs in children’s services, special educational needs, and adult social care.
“This needs to happen urgently with a plan to be actioned within the next 18 months, otherwise we risk undermining the wide-ranging purpose of local government and derailing the government’s mission-led approach to public-service reform and greater devolution to councils.”
In response to the report, a government spokesperson said: “We will help support people to live an independent, dignified life and give every child the best life chances possible.
“Despite the inheritance left, we will work with local government to fix the foundations and get them back on their feet by doing the basics right, including providing more stability through multi-year funding settlements, ending competitive bidding for pots of money, and reforming the local audit system.
“We will set out more detail at the next Spending Review and Local Government Finance Settlement but stand ready to speak to any council that is experiencing financial difficulties.”