Havering Town Hall. Credit: LDRS
(Written by Local Democracy Reporter, Sebastian Mann)
There has been some optimism about a new Labour government, but council officials say residents will not see any “quick fixes” as they navigate financial crises.
Authorities are required by law to provide a series of services, including social care, housing, children’s services and, in some cases, education.
Their funding per person has fallen by an average of 26% since 2010, according to the Institute for Fiscal Studies.
In February, Havering Council found itself on the verge of effective bankruptcy as it struggled to reconcile a £32.5million budget gap against its statutory requirements.
It has since accepted a £54m bailout from central government – referred to as a capitalisation direction – and is now looking to cut services.
On top of dimming street lights and closing the Sunday market in Romford, the council has also proposed shuttering four of the borough’s ten libraries to help make ends meet.
Council leader Ray Morgon, who has headed the authority since 2022, said the “whole systems need fundamental reform” and called the current funding formula “out of date”.
He said: “We need something more sustainable because, at the moment, you can see councils are only going to struggle going forward.”
He added that the government needed to be “honest” with the public and tell them they will need to pay more tax in order to “properly fund better services”.
Prime Minister Keir Starmer has acknowledged many councils across the UK face severe financial challenges, but previously said he wouldn’t “turn the spending taps on”.
Jim McMahon, a recently-appointed minister, said the government would produce a draft financial statement in December.
He told a pool of reporters on Tuesday (9th July): “Councils have their financial arrangements for the rest of the year already, and we’re preparing the ground for December. We’re committed to ensuring that councils have the resources they need to provide decent public services to their communities.”
He said councils had been “dealing with very significant budget pressures” and believed “fixing the wider system was really important”.
Cllr Morgon, who runs a minority administration as the leader of Havering Residents Assocation, said: “We don’t expect an immediate change in terms of funding, but the new government will need to seriously have a look into it.
“Otherwise, you’re going to have many, many councils going to the government for additional loans to avoid bankruptcy.
“The numbers are only going to increase. Something’s got to give.”
Havering is not alone in the challenges it faces.
Waltham Forest Council leader Grace Williams warned on Tuesday that “tough decisions” would be taken after it overspent by £18m last year.
She told the cabinet: “We know if we don’t continue to take tough decisions now, then in just a year’s time we will be in a very difficult place with reserves and our ability to function.
“We have no alternative but to continue taking tough decisions.”
Jas Athwal, the leader of Redbridge Council, said pushing for better funding would be one of his top priorities as one of the 231 new Labour MPs.
He told the Local Democracy Reporting Service in the wake of his victory in Ilford South: “The council cannot keep surviving – and not just this council, but all the councils.
“We need to look at how the funding formula works. There are a lot of problems – where do you start?”
Councils cannot go literally bankrupt, and are instead forced to issue section 114 notices saying they will not commit to any new spending.
Birmingham City Council, the largest local authority in the country, collapsed last year after mishandling a historic equal pay claim and a new, £100m IT system. It will need to make £300m in savings and sell off public assets worth a further £750m by 2026.
Local authorities in Nottingham and Woking also declared bankruptcy in 2023, following in the footsteps of Thurrock and Croydon.
Leaders across the UK have warned they will find themselves in the same dire situation within the next five years.
