Local authorities across England will continue to face a “perpetual state of financial uncertainty” unless government funding rises significantly, according to a new report from the Institute for Government (IfG).
The politically independent report, Public Services Performance Tracker 2025, funded by the Nuffield Foundation, warns that many councils remain at risk of financial collapse despite recent reforms.
National funding gap with growing demand
It describes local government as being “on its knees” after more than a decade of cuts, rising demand and complex statutory pressures.
The IfG found that even after government increases, council spending power will remain 2.7% below 2010/11 levels in real terms by 2028/29 — and almost 16% lower when accounting for population growth.
One in six upper-tier local authorities relied on emergency funding to balance their books in 2025/26, often selling assets or borrowing to cover in-year pressures.
The report also found:
- Per-person spending on adult and children’s social care rose by 19% between 2009/10 and 2024/25, while spending on all other services fell by more than a third.
- One in four adult social care workers now come from outside the UK and EEA, up from one in twelve in 2020.
- Spending on temporary accommodation has grown 19-fold since 2009/10, with one in 200 households in England now living in temporary accommodation.
- There are roughly 15,000 more children in care than a decade ago, but 2,000 fewer fostering households.
The IfG says these pressures have created a system where councils are forced to prioritise crisis response over prevention, with growing reliance on short-term fixes.
Its recommendations include reforming siloed services, ringfencing preventative funding, and coordinating central government reforms to reduce burdens on frontline staff.
Associate Director Stuart Hoddinott said: “The government is making good progress towards rebalancing local government funding.
“But that can only take them so far. Financial alarm bells are growing louder in many local authorities, and the government is still relying on short-term financial fixes to prevent them from toppling over.”
Bedford Borough “no exception”
Locally, Bedford Borough Council’s Portfolio Holder for Finance, Cllr Marc Frost (Conservative, Wixams), said the findings reflected the pressures facing councils nationwide.
He said: “The Public Services Performance Tracker 2025 confirms the financial pressures councils face nationwide, and Bedford Borough is no exception.
“Over two-thirds of our entire budget now goes on adult social care, children’s services and homelessness support, leaving far less for the local amenities residents value.
“CIPFA and the Institute for Government are clear that years of underfunding and short-term decisions have left councils struggling to meet rising demand. In Bedford, temporary accommodation costs have soared, and more than 870 households are now in need of it.
“Despite this, our administration is taking control. We have launched a Stability Plan and are building a Financial Improvement Programme to rebuild reserves, grow income and restore resilience.
“While this report highlights real challenges, I remain optimistic. Our focus on sound financial management and local growth, supported by the arrival of Universal Studios, will bring new jobs, investment and opportunity.
“Bedford Borough is on the road to recovery. It will take time, but we are fixing the finances and securing a stronger future for our residents.”
Local challenges
The IfG report echoes concerns raised earlier this year by the Chartered Institute of Public Finance and Accountancy (CIPFA), which warned Bedford Borough Council was at “significant risk” of running out of money unless urgent action was taken to rebuild reserves.
CIPFA said the council required “strong political and managerial leadership” and would need to make “politically difficult decisions” to close a projected £33m funding gap by 2029/30.
Read: Report says Bedford Borough Council must take urgent action to avoid bankruptcy
In response, Bedford Borough Council is consulting on £11.5m of savings for 2026/27 as part of its Stability Plan.
Proposals include introducing charges for green waste collections, reviewing library and leisure contracts, reducing grants to voluntary groups, and restructuring internal services.
Read: £11.5m Bedford Borough Council savings plan includes cuts to staff, voluntary service and libraries
The savings plan aims to help the council meet its legal duty to set a balanced budget by February 2026, while protecting statutory services such as social care and housing.
Bedfordians will be able to give their views on the savings plan in a consultation due to be launched on Monday, 20 October.
