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Councils across Britain are facing a £4.3bn “black hole” in their finances next year, the country’s biggest union has said, much larger than previous estimates.
Unison in a report on Monday warned of a “serious risk of the widespread collapse of local government” in England, Scotland and Wales after obtaining data collated from town hall financial strategies and under transparency laws.
The figures show the collective local authority budget shortfall of £4.3bn in the 2025-26 financial year will rise cumulatively to more than £8.5bn the year after, unless the government provides emergency relief.
Prime Minister Sir Keir Starmer has blamed the previous Conservative government for leaving a £22bn “black hole” in the public finances, which chancellor Rachel Reeves is set to tackle in a “painful” Budget on October 30. But the figure does not include shortfalls in funding for councils.
Data shared with the Financial Times by Unison, which has more than 1.3mn members, forecasts a funding gap of £3.4bn next year for councils in England alone.
This is £1.1bn higher than the shortfall estimated in June by the Local Government Association, the representative body, using modelling assumptions.
Unison said in its report that the implications for local authorities across the country were dire. Overall councils already lost nearly 10 per cent of core funding in real terms between 2010 and this year, according to the Institute for Fiscal Studies think-tank.
Huge further savings will be required in order for councils to fulfil a legal duty to balance budgets at a time of rising demand and costs for essential services such as adult and children’s social care.
“Councils are teetering on the brink of financial disaster,” Unison general secretary Christina McAnea said. “After 14 years of ruthless austerity, the very fabric of local society is under threat.”
The crisis in local government finance has been long in the making, brought about initially by cuts in funding from Westminster imposed in the aftermath of the 2008-09 financial crisis.
These have been exacerbated by the failure of successive governments to reform funding for adult social care, a core responsibility for larger councils that is steadily crowding out other services.
Soaring homelessness, caused partly by chronic nationwide shortages of social housing, is also taking smaller district councils to the brink.
Eight councils have been forced to issue section 114 notices since 2018, declaring de facto bankruptcy, as a result mostly of poor investment and other decisions. But the LGA has warned for months that more will follow as a result of the squeeze on funding, and across the board local authorities are having to make increasingly painful savings.
Between 2010 and 2023, at least 1,243 council-run youth centres and more than 1,168 council-run children’s centres were closed, according to Unison’s report. There were also 1,376 fewer council-run libraries and a drop of 1,629 public toilets over the same period.
Unison gave many further examples of cuts to come, including Shropshire council axing up to 540 jobs, and Derbyshire council proposing the closure of 11 elderly care homes.
Hampshire county council, which has a funding gap of £132mn against a revenue budget of £1.2bn, the largest by size in the country, according to the data, has proposed ending all support services for the homeless next March.
“Local authorities were clobbered by the previous government, whose harsh financial settlements left councils with no option but to sell off the family silver, auction off green spaces, close key community facilities and let thousands of workers go,” said McAnea. “There’s an unquestionable need to turn the page on the destructive cuts of the past and prioritise investment in services and staff.”
The government has pledged to replace annual funding settlements with longer-term funding to allow councils to plan better. But it has yet to commit to any increases in the amount of money central government will provide.
A government spokesperson said: “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.”