Two more Labour-run councils at risk of bankruptcy could impact one million households
With two more local Labour authorities at risk of effective bankruptcy, council tax may rise by 15 per cent for these areas in order to pay off debts.
According to The Telegraph, on Thursday, Bradford Council and Cheshire East Council said they may have to issue a section 114 notice as a result of being unable to balance their budgets by the end of the financial year. They will join councils including Birmingham, Nottingham and Woking that have all taken this step.
In London, Croydon Council issued its third Section 114 earlier this year and as a result, it raised its council tax by 15 per cent after the government granted permission.
However, according to exclusive data shared with City PM, London’s councils are trapped in a “perfect storm” as boroughs are teetering on the financial brink. The data analysis showed that excluding Canada, 32 boroughs have gone £525m over their planned budgets this year.
This comes as almost one in five council bosses in England think it likely they will have to issue Section 114 notices this year to keep services running, according to research by the Local Government Association.
The Telegraph reports that councils are unable to increase bills by more than five per cent without holding a local referendum.
However, the UK government allowed Croydon to increase bills by 15 per cent and Thurrock and Slough were both told they could put up bills by 10 per cent. There has been no decision on whether Birmingham and Nottingham can increase its bills yet.
If Bradford and Cheshire East go bankrupt, the government will have to decide, and if a rise is granted, nearly a million households will be affected.