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Councils to receive £500m emergency bailout to avert cash crisis

Councils are set to receive an emergency bailout from the Government following recent warnings of further bankruptcies (Dominic Lipinski/PA)
Councils are set to receive an emergency bailout from the Government following recent warnings of further bankruptcies (Dominic Lipinski/PA)

Councils are set to receive an emergency bailout from the Government following recent warnings of further bankruptcies.

The PA news agency understands a ministerial statement due to be made this afternoon will confirm upper tier councils will be handed an additional £500 million for children’s and adult social care in 2024/25.

Communities Secretary Michael Gove is also expected to announce lower tier districts will receive a funding boost of approximately £30-£40 million.

A senior council source said a change to local finance settlement at this late stage is unusual, but added the extra funding will stave of the immediate threat of many councils issuing section 114 notices, declaring effective bankruptcy.

Michael Gove speech
Communities Secretary Michael Gove is set to announce a funding boost for councils (Jordan Pettitt/PA)

The move comes after Rishi Sunak came under pressure from Tory MPs to boost the funding settlement for on-the-brink councils.

More than 40 Conservative backbenchers signed a letter to the Prime Minister, which was organised by the County Councils Network, warning that without emergency cash, many councils will be forced to cut crucial frontline services and hike council tax in an election year.

District council leaders also held an emergency meeting in Westminster on Tuesday to urge the Government to rethink the settlement due to the rising costs of tacking homelessness.

However, councils believe the level of new funding will only prevent a financial crisis in the short term, PA understands.

The local government finance settlement for next year included a £64 billion funding package.

The Department of Levelling Up, Housing and Communities said this was a real terms increase of 6.5% for councils on average.

However, the total spending power available to councils includes council tax increases, meaning residents pay more for everyday services.

The funding would “ensure (councils) can continue making a difference alongside our combined efforts to level up,” the department said.

Finance bosses at seven councils have issued at least one section 114 notice since 2020, with three doing so last year.

The notices are an acknowledgment that the local authority cannot balance its books as required by law and lead to a freeze on non-essential spending on services.

Responding to the expected announcement, Cathie Williams, joint chief executive of the Association of Directors of Adult Social Services, said the extra funding was “much needed” and would be welcomed by people who receive and provide support.

But she added the scale of the pressures on budgets means more needs to be done to enable independence at home, support unpaid carers and address workforce shortages.
 
Ms Williams said: “We need to move from treating the symptoms to addressing the cause of the challenges we see in adult social care, like long waiting times and people missing out on care altogether.

“We look forward to working with Government to develop a long-term, fully funded plan for adult social care that focuses on enabling people to live as healthily as possible, for as long as possible.”