Nearly 40% of English councils are likely or very likely to require exceptional financial support (EFS) within five years, according to an annual report from the LGIU.
The LGIU's 2026 State of Local Government Finance report — published annually since 2012 — also found that this figure rises to 62% among those reporting significant debt, compared to just 29% of others.
Spiralling costs around temporary accommodation and special educational needs and disabilities (SEND), alongside the looming burden of adult social care, are pushing councils to the brink.
Nine in 10 are raising council tax (92%) and fees and charges (93%), while a third are borrowing. More than half expect service cuts to harm quality of life and increase risks to vulnerable people, with nearly one in five fearing they may be unable to fulfil statutory duties.
Support is strong for multi-year settlements (70%) and the Government's takeover of SEND deficits (80%), but there is limited backing for the Fair Funding Review (36%), Pride in Place (37%) tourist tax (24%), local government reorganisation (13%), and mansion tax (7%).
Councils favour 100% business rates retention (70%), expanded fiscal freedoms (70%) and council tax reform (62%).
The report calls for a Government review into council responsibilities, with the aim of rationalising statutory duties, and a statutory commission to formalise collaboration between local and central government.
Jonathan Carr-West, chief executive, LGIU, said: ‘Local government finance can be made to work better, but to be blunt, the Government must act on what the sector is telling it.
‘The vast majority of respondents to our survey welcome the reintroduction of multi-year financial settlements but are also very clear about the further changes they would like to see, including expanded financial freedoms and council tax reform.’
