BBC research finds £5.2bn ‘black hole’ in the budgets of top-tier councils

Research by the BBC's Shared Data Unit has revealed that UK top-tier councils have a collective £5.2bn budget ‘black hole', meaning that the average top tier council faces a £33m predicted deficit by 2025-26 - up from £20m two years ago.

The research surveyed 190 upper-tier authorities and found they expect to be a total of £5.2bn short of balancing the books by April 2026 even after making £2.5bn of planned cuts. It noted the government has not yet made decisions on funding beyond the next financial year.

At least £467m will be stripped from adult care services, and other economies planned include closing leisure centres, raising fees for waste collection and increased parking charges.

Local Government Association (LGA) chair Shaun Davies told the BBC that inflation, the introduction of the National Living Wage, energy costs and increasing demand for services were adding "billions of extra costs just to keep services standing still".

Figures supplied by councils also showed that up to £1.1bn of reserves will be used to balance the books on top of spending cuts.

Meg Hillier, Labour chair of the the Public Accounts Committee, said funding for councils declined by nearly a third between 2010 and 2021, becoming £8.4bn lower in real terms than it had been a decade before.

Ms Hillier said: “These findings should have the dashboard flashing red across the board for the government."

Alex Forsyth, a BBC political correspondent, said of the research results: “The government has made more money available to councils in recent years, but rising prices and the cost of delivering services for which there is growing demand means budgets remain squeezed.

“This research shows the future looks bleak for some authorities who have already cut back on what they offer local communities.”

Tim Oliver, Conservative chair of the County Councils Network, said: “Our own research published in March this year showed that county and rural councils needed to make over £1bn worth of savings to balance budgets in 2023-24, even after four in five reluctantly levying the maximum council tax rise.

“Despite the government increasing funding for councils over recent years, a combination of high inflation and rising demand has left county and unitary authorities facing some of their toughest budgetary decisions to date this year.

“County authorities will do all they can this year to deliver these savings whilst protecting vital frontline services, particularly care services, but there is now little fat to cut after a decade of financial restraint and many councils are facing significant in-year overspends as a result."

Cllr Oliver said inflation was beginning to reduce, but the costs incurred were “embedded into the future”.

Trade union Unison's head of local government Mike Short said town halls were in the "direst of states".

“This is not a sustainable situation," Mr Short said. “Local authorities simply don't have the funds to provide even statutory services.”

Mark Smulian