Almost one in five council leaders in England fear their local authorities are facing bankruptcy, a new survey has warned.

Echoing the serious issues faced by Kent County Council (KCC) in balancing the books, 17% of political chiefs and top executives in England say key services are now at risk.

KCC must find tens of millions of pounds worth of savings in the coming years as a result of rising costs and falling funding allocated by the government.

Most councils are awaiting how much Whitehall will hand back to town halls in the annual local government finance settlement in early 2024.

A study carried out by the Local Government Association (LGA) revealed officials believe it is "very" or "fairly" likely they will have to issue section 114 notices, which effectively means they have run out of money.

The LGA estimates English councils face a £4 billion funding gap over the next two years just to keep services standing still.

The struggles go across all political colours with councils warning how growing demand and cost pressures are threatening their financial sustainability.

In 2024/25, councils will be able to increase general council tax by 3% without the need for a referendum. Those with social care responsibilities will again be able to increase the adult social care precept by up to a further 2% again.

The LGA contends authorities continue to face “the tough choice about whether to increase council tax bills to bring in desperately-needed funding to provide services when they are acutely aware of the significant burden that could place on some households”.

The LGA survey also reveals:

• Half are not confident they will have enough funding to fulfil their legal duties next year (2024/25).
• Nearly two thirds of council leaders and chief executives said there were no announcements in the Autumn Statement that they thought would help them deal with their council’s financial position.

The body said the circumstances that have led to a Section 114 notice so far had been unique to each local area and the pressures they faced.

"The government urgently needs to act to address the acute financial challenges faced by councils...”

The LGA, the national body representing local authorities, said those that had curbed spending in this way had faced the same underlying pressures – councils’ core spending power falling by 27% in real terms from 2010/11 to 2023/24.

Last month’s Autumn Statement failed to provide the additional funding needed to protect services from further cuts, said the LGA.

KCC deputy leader Cllr Peter Oakford told today’s (Dec 6) scrutiny committee meeting that the government budget announcement had “zero impact”.

Cllr Oakford said the statement “has not helped us at all” and will have to wait until the local government financial settlement “to see what comes out of that”.

Cllr Shaun Davies, LGA chair, said: “No council is immune to the risk of running into financial difficulty.

"As our worrying survey shows, many now face the prospect of being unable to meet their legal duty to set a balanced budget and having Section 114 reports issued.

“Local government is the fabric of our country, with councils providing hundreds of services that our communities rely on every single day. For many people, these services are a lifeline.

“If councils cannot thrive then our communities cannot thrive. If social care services that councils provide cannot cope with demand, then pressure on the NHS will grow further. If council housing teams can’t succeed, then all of our hopes for new homes will not succeed.

“While councils have worked hard to reduce costs, find efficiencies and transform services, the easy savings have long since gone.

"The government urgently needs to act to address the acute financial challenges faced by councils.”

The survey was carried out online on November 23.

By November 30, one third (114) of council chief executives and more than a fifth (71) of council leaders had participated in the survey.