Cash-strapped councils risk being forced to sell off public assets, hike taxes or be reduced to operating an emergency service due to a looming wave of austerity.
Jeremy Hunt was warned there will be a significant increase in the number of councils “returning the town hall keys” to the government because they are no longer sustainable. The Chancellor's Autumn Statement paved the way for a new austerity drive after the next election, with a major squeeze on public spending.
Non-protected Whitehall departments in England face being slashed by 3.4% a year for five years to fund Mr Hunt's tax cutting plans, the Institute for Fiscal Studies said. Birmingham, Thurrock and Woking councils are among town halls that have already declared themselves effectively bankrupt.
Local government sources told the Observer there was now an “existential threat” to local services - while big council tax increases could be on the cards. Shaun Davies, leader of Telford and Wrekin council and chair of the Local Government Association, said there would be a surge in the number of councils in financial strife.
He said: “Any suggestion of any further cuts on top of the current deficit we face and we’ll see the number of councils set to go bankrupt rise from one in 10 to a significantly higher number. They’ve done the restructures.
"They’ve done the asset sales, they’ve done the staff reduction, they’ve done the service redesign and they’ve done the transformation. They’ve used the reserves already. Once those things are gone, they’re gone."
"My concern is that there is a wave of councils that will effectively return the town hall keys back to the government because there is just no way out of this.”
Lib Dem Treasury spokesperson Sarah Olney: “Local services across the country have been slashed for years. This Conservative government is so far out of touch and the British public deserve better.”