Broken Bradford: All councils will be 'bankrupt' within three years on current path, experts warn

Should the council issue the notice, all non-essential spending would be legally prohibited effectively curtailing any community service the council is not obliged to provide, such as adult and social care, bin collection and highway maintenance.

The Government says last month’s annual settlement for councils “ensured they can continue making a difference”, but the Local Government Association said it was not nearly enough for councils to keep up with demand, something it called “unthinkable".

Coun Stephen Houghton is the chairman of Sigoma, a group which represents 48 urban councils in the north, midlands and South coast of England, responsible for about a quarter of total council spending.

He believes the entire financial model for local Government is broken, and that the viability of the whole sector is at imminent risk.

He said: “Following a decade of cuts, there is not close to being enough money in the system.”

Bradford is at the sharp end of the financial pain, because of its exceptionally high demand for children’s social care.

But, should a Section 114 notice be issued, it would symbolically become the first council to declare bankruptcy where a major political or financial error has not been made by the authority.

In the instances of bankruptcy so far seen, for example in Thurrock, Birmingham and Nottingham, failed political projects or high-profile legal cases have led to financial collapse.

But senior local government figures have said the “perfect storm” of ever-increasing demand and costs, coupled with near-empty reserves and dramatically reduced income from the Government mean bankruptcy is an arithmetic inevitability unless radical change is enacted imminently.

Susan Hinchcliffe, the leader of Bradford Council, said: “We are very much not alone in this. It’s something I'm frequently talking to the Local Government Association (LGA) about, and everybody is very concerned about what is going to happen to councils in the next one, two and three years.

“I was speaking to the leader of the LGA Economy and Resources Board (Coun Peter Marland, the leader of Milton Keynes Council) who said every council is going to go bust in the next three years, it's just a matter of when.

“The Government has said you have to use all your reserves. Well, our children's social care has used all our reserves rapidly in the last two years and we have no more reserves to use. That's why we're in this position.

“We're not a council that has ever made financially reckless decisions, we've been very prudent financially. This is just the rate of demand that we're having to deal with in the youngest city in the UK with more children than anywhere else and high rates of child poverty.”

Last month, an LGA survey of council leaders showed one in five believe bankruptcy was very or fairly likely in this financial year or next.

It also found half were not confident they will have enough funding to fulfil their legal duties next year (2024/25). This includes the delivery of statutory services.

It said: “Councils of all political colours and types [are] warning that growing demand and cost pressures are threatening their financial sustainability.”

The chairman of the LGA, Coun Shaun Davies, who is also the leader of Telford and Wrekin Council, said: “As our worrying survey shows, many now face the prospect of being unable to meet their legal duty to set a balanced budget and having Section 114 reports issued.

“Local government is the fabric of our country, with councils providing hundreds of services that our communities rely on every single day. For many people, these services are a lifeline.

“If councils cannot thrive then our communities cannot thrive. If social care services that councils provide cannot cope with demand, then pressure on the NHS will grow further.

“If council housing teams can’t succeed, then all of our hopes for new homes will not succeed.

“While councils have worked hard to reduce costs, find efficiencies and transform services, the easy savings have long since gone. The Government urgently needs to act to address the acute financial challenges faced by councils.”

Sigoma’s chairman, Coun Stephen Houghton, who is the leader of Barnsley Council, told the Yorkshire Post: “The current finance model for local government is broken. Following a decade of cuts, there is not close to being enough money in the system.

“The distribution of funding has been moved considerably away from need, meaning that places like Bradford have lost out significantly.

“Major reforms are urgently required - the financial viability of the whole sector is at risk. We need to get back to needs-based grant distribution which includes taking away business rates retention as soon as possible. In the longer-term we should move to a system based on an independent assessment of needs, away from political interference by government ministers.

A spokesman for the Department for Levelling Up, Housing and Communities said: “Councils are ultimately responsible for their own finances, but we remain ready to talk to any concerned about its financial position.

“We recognise they are facing challenges and that is why we have announced a £64 billion funding package to ensure they can continue making a difference, alongside our combined efforts to level up.”

Coun Marland, the chairman of the LGA Economy and Resources Board, told the Yorkshire Post: “If nothing changes given the pressures on local government, the huge increases in demand and rising cost of services such as safeguarding children and homelessness, we will start to see even well run councils issuing Section 114 Notices.

“There will come a point that, barring a handful of local authorities, the money will simply run out for everyone and the facts are many councils are on that precipice.”