UK councils are drowning in a record £122 billion debt mountain, equivalent to £1,700 for every person in the country. The financial crisis has forced struggling local authorities to sell off schools, care homes and sports clubs to stay afloat.
The debt pile grew by seven per cent last year alone, adding £7.8 billion to council borrowing. Research shows councils have sold £2.9 billion worth of public assets over the past two years, excluding social housing sold through Right to Buy.
Asset sales described as "payday loans"
Dr Jonathan Carr-West, chief executive of the Local Government Information Unit, warned that councils are resorting to desperate measures. "As one local government finance officer said to me, 'it's essentially payday loans for local government'," he said.
"We are now seeing the selling off of assets and once they're gone, they're gone. So what was public value is now passing into private hands and that won't come back."
Woking leads debt crisis
Woking Borough Council has the most severe debt burden, with more than £2 billion owed - equivalent to over £20,000 per resident. This is more than double the next highest council, Spelthorne, also in Surrey.
Birmingham City Council carries the largest absolute debt at £3.35 billion despite having effectively declared bankruptcy. Six councils have gone bust in recent years: Birmingham, Croydon, Woking, Nottingham, Thurrock and Slough.
Government responds to crisis
The Labour Government relaxed budgeting rules for a record 29 English councils in February, allowing them to sell assets to cover day-to-day spending. These "capitalisation directions" are normally banned to prevent councils from using one-off sales to fund ongoing costs.
A Ministry of Housing, Communities and Local Government spokesman said: "While councils are responsible for managing their own budgets, we know that the current funding system is broken which is why we are taking decisive action."
The Government has announced £3.4 billion of new grant funding on top of £69 billion already allocated this year, promising further reforms to fix the funding system.
Sources used: "Daily Mail", "BBC Shared Data Unit", "Cornwall Live", "Birmingham Mail", "Local Government Information Unit", "Ministry of Housing, Communities and Local Government"
Note: This article has been edited with the help of Artificial Intelligence.
