Councils set for £64bn funding boost as ministers fear MORE could be about to go bust – with local residents facing huge tax rises including 10% increase in Birmingham

• The rise is equivalent to an extra £190.57 for the average band D property

English councils are to get an above-inflation £64billion funding boost as ministers try to prevent more local authorities going bust and hiking taxes.

Michael Gove is set to announce a 6.5 per cent increase in funding for councils in England, according to reports, amid growing fears about the number of local authorities facing effective bankruptcy.

The Financial Times said that the Communities Secretary would provide increased government assistance for English local councils, with a provisional package for 2024/25 worth around £64 billion.

Council leaders across the country are grappling with major shortfalls in their finances, with Labour-run Birmingham City Council and Nottingham City Council among those with administrations from all main parties declaring themselves essentially bankrupt in recent months. 

It has raised fears that millions of households could face double-digit council tax rate increases.  Households in Birmingham are already facing a 10 per cent increase on their council tax bills as part of efforts to save £300million over two years.

Birmingham City Council (pictured) issued a section 114 notice in September as it faces the challenge of a £760million equal pay bill and an £80million overspend on an IT project

The commissioners helping the council out of its financial problems will report directly to Levelling Up Secretary Michael Gove

Labour-run Bradford City and Cheshire East councils last week become the latest to give notice they risk filing Section 114 notices – effectively going bankrupt – without financial help.

In previous cases where councils have filed S114 notices, they have been allowed to increase council tax about the rate of inflation.

In April Croydon Council increased council tax by 15 per cent, adding £235 to the average annual bill and taking it past £2,000. 

Bradford, in West Yorkshire, warned it needs ‘exceptional financial support’ to stay afloat with a predicted overspend of  £73million in the current financial year and £103.6million in 2024-25. It blames government funding cuts and spending on child social care.

Cheshire East, which includes Crewe, Macclesfield and affluent areas like Knutsford, blamed Rishi Sunak’s decision to axe the northern leg of the HS2 rail line.

The reported funding increase is above the latest October inflation rate of 4.6 per cent, but it may still disappoint some under-pressure town halls. 

The spate of crises facing local authorities has prompted concern about the provision of public services for communities, with the new funding perhaps unlikely to address all the pressures.

Metro mayors from West Yorkshire, Greater Manchester, Liverpool and elsewhere have called on Mr Gove to provide extra finances for struggling councils.

Budgets came under pressure in the years of Conservative-imposed austerity after the financial crash, with the pandemic and inflation compounding the woes facing councils.

The rise, equivalent to an extra £190.57 for the average band D property, would be ‘par for the course’ at authorities which had declared themselves effectively bankrupt, a local government expert said today.

The Labour-run authority issued a section 114 notice in September as it faces the challenge of a £760million equal pay bill and an £80million overspend on an IT project. 

The notice, issued under the Local Government Finance Act 1988, means it cannot commit to any new spending.

The council is facing a £87.4million overspend for 2023/24 and a budget gap of around £300million by 2025/26. 

The council will now apply for government permission to raise the tax by more than the 5 per cent ‘referendum limit’ – the amount they can raise the levy without consulting residents.

Max Caller, expert and lead of the government-appointed commissioners at the council, told the BBC: ‘Most [councils issuing 114 notices] were allowed to increase council tax by around 10 per cent.’ 

Councillor John Cotton, head of the council, told a meeting on Tuesday: ‘The council is currently in a position where it is unable to set a lawfully balanced budget.’

Last month Labour-run Nottingham effectively declared itself bankrupt, while Woking in Surrey and Thurrock in Essex have issued section 114 notices this year over economic problems created under Tory administrations.

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