HALF the councils in the country could go bust in the next five years, and  this week’s budget from chancellor Jeremy Hunt did little to address the issue.

Dr Jonathan Carr-West, chief executive of the Local Government Information Unit, said Mr Hunt’s headline announcements on devolution for the North East, Buckinghamshire, Warwickshire and Surrey would be welcome in those areas.

But, he said, the chancellor didn’t address funding issues in local government, where central government cash has dwindled by billions of pounds across the country in the last 14 years. 

Many councils around the country warn they may have to issue a Section 114 Notice, which effectively means they are bankrupt and can no longer provide the services their residents expect.

A number of councils have already done it, including the most high-profile case of Birmingham.

Devon councils have managed to avoid declaring Section 114 status this year, but most have warned of tough times ahead.

Dr Carr-West said the unit’s latest research found half of councils believe they could face bankruptcy during the next parliament. Council taxpayers are paying higher rates for fewer services, while leisure centres, special needs education and adult social care funding all face deep cuts.

He went on: “Now is the time for productive debate on the possible solutions to the local government funding crisis. Instead, the spending reductions required by this budget will increase all these pressures.

“The chancellor recognised market failures in children’s residential care and SEND support but councils will not feel that this is enough to counteract the cost increases they have faced in those areas. Similarly many in local government will note that the chancellor’s emphasis on public sector productivity is not reciprocated by removing some of the onerous funding hoops that councils have to jump through.

“We need a proper debate about how we fund local services and we need to reform council finances. This scattergun pattern of largesse granted or withheld will no longer suffice.”