Cllr Robert Chapman, cabinet member for finance. Photograph: Hackney Council
Hackney Council may be forced to seek emergency cash from the government in future, its finance chief has warned – after a quarter of local authorities in England said they expected to need bailouts in the next two years.
Cllr Robert Chapman, cabinet member for finance, said the Town Hall has made the case to the government that it is in dire need of long-term funding to tackle social care and homelessness.
While he confirmed the council is not yet seeking a bailout, his forecast for the immediate future was downbeat.
“We do not need to seek an emergency bailout at this point in time, and in any case this would only provide short-term respite by giving us the ability to borrow more.
“However, if the cost of temporary accommodation and social care continues to rise without government intervention, we may need to pursue this option in future,” he said.
The announcement comes as survey data released on Tuesday by the Local Government Association (LGA) revealed 25 per cent of council chiefs said they were “likely to apply” for exceptional financial support (EFS) by 2027.
EFS is a short-term government programme designed to help local authorities avoid bankruptcy by providing capital resources to fund day-to-day spending.
In recent months, Hackney Council has warned the public that its finances were in a difficult state, with a predicted overspend of £36m for 2024/25.
To balance the budget, Chapman said “residents will need to be prepared to see reduced investment in some areas to protect frontline services for Hackney’s most vulnerable residents”.
Hackney’s position reflects the challenges faced by councils across England and Wales.
The LGA noted that local government was looking at a “funding black hole of more than £2 billion next year”.
Social care, special educational needs services, school transport and homelessness have put particular pressure on budgets, it added.
Nineteen councils in England were granted EFS this February.
A pre-election report from the Institute for Fiscal Studies (IFS) in June stated that on the whole, local government funding is set to be nine per cent lower in real terms than at the start of the 2010s.
The period of austerity ushered in by the coalition government in 2010 has seen English councils face “some of the largest cuts seen by any public services over this period”.
Though the post-pandemic era has seen a shift away from those levels of spending reduction, this has only partially reversed the cuts of the previous decade, the report stated.
The IFS also found that council tax bills—one of the main sources of revenue for local authorities—were now, on average, around two per cent higher in real terms than in 2010/11.
This is compared to the real-terms increase of over 60 per cent between 1997/98 and 2010/11.
In dealing with the council’s budget “crisis”, Cllr Chapman implied that the borough must be ready for reduced investment, but that this would be balanced with other measures to avoid a return to austerity.
“We will also transform how we work so that we can make savings while minimising cuts,” he said.
The finance chief said proof of this commitment can be found in the Town Hall’s latest proposals, such as investing in its own temporary accommodation and increasing council tax on empty properties and second homes.
These plans are expected to be laid out in full at next Monday’s cabinet meeting.
An updated medium-term financial plan for Hackney, showing how the borough’s finances will be managed over the next three years, is set for publication in November.
Cllr Louise Gittins, LGA chair, said councils had seen “unprecedented” levels of emergency support in 2024.
She called on the government to act in light of the “precarious” financial positions of many local authorities.
“This is not just about numbers on a spreadsheet. Budget cuts needed to plug growing funding gaps will affect the most vulnerable members of society and the services our communities rely on every day.
“The Autumn Budget must provide councils with the financial stability they need to protect the services our communities rely on every day.”