“Spiralling levels” of council debt will be paid off by local governments by selling off schools, care homes, and sports clubs, the BBC has found. Hundreds of buildings, including a boxing gym and equestrian centre, are among the assets that struggling councils will be selling to reduce their debt which totals £122 billion.
“Public value” will continue to be eroded, chief executive of the Local Government Information Unit (LGIU), Dr Jonathan Carr-West, said, unless governments can find a long-term solution for council debt. The government said that it is aware that the funding system for councils is “broken,” saying that it is pushing ahead with reforms to tackle this.
Councils can borrow money from either banks or the government to fund improvements in their area. These include building new schools, maintaining roads, and providing sheltered housing. They can also borrow money to make investments with a goal of generating an income for the council.
Since 2010, shopping centres, office parks, and solar farms, have been paid for in this way, as has the funding of large housing developments. Much of it was done via an arm of the Treasury, the Public Works Loans Board (PWLB). Until 2022, interest rates on this borrowing was quite low. But in 2024, the Public Accounts Committee warned that debt levels were becoming “unsustainable” despite curbs on borrowing for commercial aims being brought in 2021.
The BBC Shared Data Unit found that the combined debts grew by 7% last year, with the combined £122 billion worth of debt being equivalent to £1,700 per resident of the UK.
Local councils are typically not allowed to sell assets to cover day-to-day services. But the councils with financial trouble are now being given powers to do so from the government. “Capitalisation directions,” as it is known, also allows councils to take out short-term loans to cover day-to-day services.
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