Tory-run Hampshire council says it faces ‘financial meltdown’

One of the UK’s largest Conservative-run councils has warned it faces “financial meltdown” and has called on ministers to fix the “broken” local government funding system to avoid it and many other authorities plunging into effective bankruptcy.

Hampshire county council said without a major overhaul of council finances in England – which it admitted was unlikely to come in time to prevent further cuts – it would be forced to push ahead with drastic reductions to local services over the next 18 months.

The council has to find £132m by April 2025 to fill a widening budget gap but has warned itcannot rely on operational cuts and council tax rises alone to balance the books without ditching “safe” levels of core service.

A paper to a meeting of the council’s cabinet next week states “these are not problems we can fix on our own and that the government must intervene if we and the whole of the local government sector are to avoid financial meltdown”.

Hampshire hit the headlines last year after publishing a joint letter with Kent county council to Rishi Sunak warning that failure to properly fund local government in England would see the two councils “sleepwalk into financial disaster”.

The situation has not improved since for either council. Kent’s auditors said last month it may have to issue a section 114 statement of effective bankruptcy. The wider picture is equally dismal: Birmingham city council declared effective bankruptcy last month and many others have said this is a realistic prospect for them too.

Hampshire says that having already drained its reserves to meet budget gaps it would be forced introduce “bare minimum” levels of service by April 2025 to avoid bankruptcy. This would mean focusing solely on services it is legally obliged to provide, such as social care, while dispensing with “discretionary” services such as community transport and museums.

A paper to be considered by the council’s cabinet next week, warns that 2025-26 “represents the crunch point for the county council’s budget; either the government steps in with additional funding or legislates to reduce the range of statutory responsibilities that we are required to undertake”.

The leader of Hampshire county council, Cllr Rob Humby, said: “For a long time now, we’ve been very clear about the huge budget pressures facing the county council by April 2025, and like many local authorities nationally, our budgets are stretched to breaking point.”

He added: “We know that council tax increases alone are not enough to plug the gap, and with no sign of government stepping in to provide a short-term budget lifeline or long-term sustainable funding solution to councils like Hampshire, we must take action now and plan to meet the budget shortfall ourselves.”