The councils whose debt could lead to tax rises, mapped ...Middle East

The UK’s councils are struggling under a mountain of debt with 20 local authorities owing more than £30bn, the latest figures show.

Councils have found themselves under severe financial pressure after a decade of central government funding cuts under the Conservatives, followed by a spike in inflation and an increased demand for services in recent years.

Labour has given permission for local authorities to increase council tax by 4.99 per cent to help cover the financial black hole, but some are asking to go even further.

Windsor and Maidenhead, a borough council led by the Lib Dems, has requested a further 20 per cent increase as part of an application for Exceptional Financial Support from the Government, prompting outrage among locals.

One in four councils in England believe they will need an emergency bailout within the next two financial years to stave off effective bankruptcy, according to a survey carried out by the Local Government Association (LGA) in 2024.

There have already been several high-profile examples of councils having to issue a Section 114 notice meaning a local authority cannot incur any new spending, leading to fierce political debate over allegations of financial mismanagement.

Labour-run Birmingham city council, the largest authority in the country, issued a Section 114 notice in September 2023 and government commissioners remain concerned it will not be able to balance its budget going forward.

Birmingham had more than £3.3bn of borrowing on its books as of 30 September 2024, according to the Ministry of Housing, Local Government and Communities.

Most of this, around £2.8bn is owed to the Public Works Loan Board, the Government’s lending facility which can be used for capital projects.

Birmingham council, which serves a population of 1.16million, wants to increase its council tax by 9.99 per cent as part of its drive to get its finances back on track.

The second-largest debt is owed by Leeds council, also led by Labour, at £2.5bn.

The authority, which serves a population of more than 800,000 people, has proposed a 4.98 per cent council council tax hike and warned that “tough decisions” are needed to balance its budget.

Woking borough council in Surrey, which serves only 104,000 people and has been under Lib Dem control since 2022, has a debt of more than £2.1bn.

‘People are going to stop paying’: inside the town facing a 25% council tax hike

The council recently admitted there have been “significant mistakes” made in the past and apologised to its residents for the failings.

It has been forced to make cuts to services and will sell off assets as well as hiking council tax by 10 per cent.

Other councils which have more than £1bn in debt include Edinburgh, Warrington, Glasgow, Newham, Barking and Dagenham, Aberdeen, Manchester, Enfield, Croydon, Cornwall, Fife, Lancashire, Highland, Barnet, Spelthorne and Southwark.

The Ministry of Housing, Communities and Local Government has been contacted for comment.

In December, Labour’s financial settlement for local government made £69bn available for councils, a real-terms increase of 3.5 per cent from 2024-25. This included a one-off £600m Recovery Grant for those most in need.

Minister of State for Local Government and English Devolution Jim McMahon said at the time: “We know councils are calling out for help which is why we have prioritised this vital increase in funding, but we must stop taxpayers’ money being thrown into a broken system.

“As a former council leader I know too well that councils have suffered from short-term solutions.

“But we will fix this outdated system, turning to our partners in local government, working hand in hand to bring ambitious reform and do the long-term, necessary work to rebuild the foundations, and crucially, trust.”

The Local Government Association has also been contacted for comment.

Cllr Louise Gittins, Chair of the Local Government Association, said in December: “Councils continue to face severe cost and demand pressures and the recently launched Spending Review will be critical to the future of our local services.

“It is good that the Government has committed to providing councils with multi-year settlements as part of that process, but it must include significant and sustained increases in overall funding for councils.

“However, this alone will not address the multiple issues with the way local services are funded and councils stand ready to work with the Government on creating an improved and a more sustainable future funding system that works for all of local government.”

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