Devastating impact of cuts ‘could mean councils going bust’

An inquiry by the powerful Commons public accounts committee (PAC) has concluded the scale of the cuts to local authority budgets imposed by the coalition “raises the spectre” of councils effectively going bust over the coming years.

With yet another round of cuts due to be unveiled by the Chancellor, George Osborne, in his post-2015 spending review on June 26, the PAC says urgent work must begin in Whitehall on how to respond to “multiple” councils running out of money altogether.

Committee chairwoman Margaret Hodge warned the Government “does not properly understand” the impact of the cuts on local services, nor on the most vulnerable people in society who depend upon them.

“The more grant-dependent local authorities are suffering the highest reductions in spending power,” she said. “But these are the very councils which serve poorer and more vulnerable communities, whose need for services is the greatest.

“This raises the spectre of the worst-affected councils being unable to meet their statutory obligations. In some cases, local authorities may cease to be viable.”

The report echoes comments in January from York Council leader James Alexander that he fears “more and more councils will go bankrupt” in the coming years, as the spending squeeze continues and the cost of providing adult social care continues to soar.

The report was seized upon by Labour last night, with Shadow Communities Secretary and Leeds MP Hilary Benn warning councils are at “breaking point”.

But Local Government Minister Brandon Lewis said it was right that councils take their fair share of the ongoing spending cuts.

“The council funding settlement is fair to all parts of the country, rural or urban,” he said.