Many councils enforcing rental regulations face ‘effective bankruptcy’

A survey of local authorities in some of the poorest areas of the country - bodies which enforce many private rental sector regulations - suggests many are considering declaring “effective bankruptcy”.

This follows the news that Birmingham council, the largest local authority in Europe, is already effectively bankrupt.

A survey of 47 local authorities in the Midlands, the North of England and on the South Coast revealed a severe strain on finances - particularly acute in 26 of the councils.

The survey was conducted by the Special Interest Group of Municipal Authorities (Sigoma) which says that some member councils were considering issuing a section 114 notice, which freezes all non-essential spending.

Councils said the most common cause of financial pressures was demand for children's social care services following requests from the government to treat those services as an equal priority with adult social care, and allocate additional funding. Other significant factors cited were inflation costs and wage rises, with warnings an imminent increase in the cost of borrowing is set to add further financial pressure.

S114 notices have been used only rarely in the past - by Hackney council in London 2000 and Northamptonshire County Council in 2018, but more recently by Thurrock, Woking, Croydon and Slough authorities.

The news of possible bankruptcy comes just as Trading Standards in many local councils are being expected to beef up their enforcement. 

Sigoma chairperson Sir Stephen Houghton, Labour leader of Barnsley council, says: "The government needs to recognise the significant inflationary pressures that local authorities have had to deal with in the last 12 months.

"At the same time as inflationary pressure, councils are facing increasing demand for services, particularly in the care sector. Pay increases are putting substantial pressure on budgets, and so the government must ensure that local authorities have the additional funding they need to fully fund these pay increases or risk impacting future service delivery.

"The funding system is completely broken. Councils have worked miracles for the past 13 years, but there is nothing left."