Local Government: Insolvency
The question
To ask the Secretary of State for Housing, Communities and Local Government, with reference to the Local Government Information Unit's report entitled 2025 State of Local Government Finance in England, published in March 2025, what assessment she has made of the potential implications for her policies of forecasts that 6% of councils will face effective bankruptcy in the next financial year.
Answered by Jim McMahon
We have delivered a Settlement that has begun to fix the foundations of local government by providing significant investment and redirecting funding towards the services and places that need it most. The Settlement for 2025-26 makes available over £69 billion for local government, which is a 6.8% cash terms increase in councils’ Core Spending Power on 2024-25.
We are committed to pursuing a comprehensive set of reforms for public services to fix the foundations of local government, in partnership with the sector and on the principle of giving councils early certainty. The government has committed to a multi-year Spending Review later this year, and we will therefore provide a multi-year funding settlement alongside much needed funding reform in 2026-27.
We are however, under no illusion about the fragile state of the sector and the pressures that some councils are facing and recognise the potential for continued instability as we work to fix the foundations of local government. That is why we have a framework in place to support councils in the most difficult financial positions and will continue work on a collaborative basis to help them manage financial challenges.
As always, the department stands ready to speak to any council that has concerns about its finances and we will treat all discussions in confidence, with respect and determination to find a solution together.
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