Local governments across England, Scotland and Wales face a £4.3 billion ($5.6 billion) hole in their finances in the coming year, according to a new report. That could force cuts to jobs and vital services, such as rubbish collection.
In a paper Monday, Unison, the United Kingdom’s largest trade union, warned that, without additional emergency funding to plug the projected shortfall in the 2025-26 financial year, “there is a serious risk of the widespread collapse of local government.”
The funding gap facing local councils is projected to balloon to £8.5 billion ($11.1 billion) the following year, according to the report, which is based on publicly available financial statements and some councils’ own estimates of their funding shortfalls provided to Unison.
The report comes as the UK’s recently elected Labour government prepares to unveil plans for local government funding in its first budget next month, after revealing a £22 billion ($29 billion) “black hole” in the nation’s finances in July.
Unison said many local government authorities could be forced to sell land and buildings, as well as cut back on services, such as rubbish collection, libraries and public toilets to fulfil a legal duty to balance their books.
In a speech last month, UK Prime Minister Keir Starmer warned that the budget “is going to be painful,” hinting at tax rises. “We’re going to have to take tough decisions,” he said.
Many of Britain’s local governments have faced chronic funding shortfalls over the past decade, partly as a result of deep cuts to funds from the central government in the 2010s.
After accounting for inflation, English councils have lost 9 percent in “core funding” — made up of funds from the central government and local taxes — between 2010 and this year, according to the Institute for Fiscal Studies (IFS). That amounts to a cut of 18 percent per resident as populations have grown.
Birmingham, the biggest British city after London, effectively declared itself bankrupt a year ago, halting all spending except on essential services.
In March, the city’s council approved “one of the biggest local government cuts packages in history,” according to Unison, “including plans to scrap up to 600 jobs, slash social care and children’s services funding, and reduce waste collections.”
Unison noted that since 2018, eight councils have issued so-called section 114 notices, meaning they are effectively bankrupt.
“Councils are teetering on the brink of financial disaster,” Unison general secretary Christina McAnea said in a statement. “Countless essential services and very many vital jobs are at risk, with terrible consequences for communities across Britain… After 14 years of ruthless austerity, the very fabric of local society is under threat.”
Between 2010 and 2023, councils closed some 1,243 youth centers and 1,168 children’s centers — community centers that provide free classes and services to young people and families. The number of public toilets dropped by 1,629 over the same period, and the number of council-run libraries fell by 1,376, according to Unison.
Giving examples of further cuts to come, Unison said Shropshire Council in the West Midlands region of England plans to slashup to 540 jobs.
Derbyshire County Council in the East Midlands has proposed closing up to 11 elderly care homes, while Hampshire County Council in the southeast of England has proposed withdrawing all spending on support for the homeless from March next year, Unison added.
In a statement Monday, a UK government spokesperson said the government would “fix the foundations of local government.”
“We will get councils back on their feet by getting the basics right — providing more stability through multi-year funding settlements, ending competitive bidding for pots of money and reforming the local audit system,” the spokesperson added.
IFS associate director David Phillips, who leads research on local government finance at the institute, cautioned that the way councils calculate future funding requirements and hence gaps was “opaque” and likely to differ across authorities.
