Among all the exhausting political noise about Lee Anderson or the dismal Rochdale by-election, not enough attention has been paid to the most important domestic story so far this year: the effective bankruptcy of Birmingham council.

A few weeks ago, proposals were published to raise council tax by 21 per cent over the next two years and make £150 million of cuts in 2024-25, including £51 million from children’s services.

These cuts will be targeted at early support, youth programmes to help reduce knife crime and social services for the most at-risk young people. The council is also consulting on big reductions to transport assistance for pupils with education, health and care plans.

A comprehensive disaster

It is a comprehensive disaster in a city with almost 300,000 children.

Birmingham is in an unusually tough spot because of an expensive equal pay dispute, which has been badly mismanaged over several decades, but it is only a matter of degree.

Nearly all councils are struggling financially. Several others - including Nottingham and Woking - have also declared effective bankruptcy, and at least 10 - including Middlesborough and Somerset - have applied to central government for emergency financial support to avoid the same fate.

Dozens of others are slashing funding, selling assets and borrowing more, in an attempt to stay solvent.

We’re in this position because councils have had to bear the brunt of austerity - losing 24 per cent of their core spending power since 2010 - and, at the same time, have statutory responsibility for policy areas like social care and special educational needs and disabilities (SEND), where costs are shooting up well above inflation.

The crunch has been coming for some time and this government are simply going to shunt the problem onto an incoming Labour administration.

The impact on schools

Schools are struggling with their own tight funding settlements - with a big increase in numbers setting a deficit budget this year - and the slow-motion collapse of local government is only going to make that harder.

Core budgets are ring-fenced but councils have already cut away large chunks of educational support for the schools that they still nominally oversee.

The most pressing challenge is around SEND, with the government already forced to allow councils to overspend on their budgets to avoid another wave of bankruptcies.

Almost 40 local authorities are now participating in the Department for Education’s Safety Valve programme, which sees some of the deficit covered in return for agreeing cuts to SEND provision.

Demand suppression

Given authorities are already engaging in blatant demand suppression - which is why 98 per cent of SEND tribunals are being won by parents - this can only lead to more children who should be getting support being rejected.

In some cases, councils are forcing school funding forums to agree to transfers from main school budgets to cover some of the gap.

Very obviously this is not sustainable and will be the biggest headache, alongside teacher recruitment, facing Bridget Phillipson if, as expected, she takes over as education secretary later this year.

Beyond dealing with this immediate crisis, Labour will also need to figure out how to help councils escape from the horrible and destructive spiral they are trapped in.

They have to scrabble around for money to cover the growing costs of acute needs - whether in SEND or wider children’s services - while taking away more money from the services that could prevent acute needs from arising in the first place.

A report last year from The Children’s Society found that, since 2010, spending on early intervention services like Sure Start and family support has been cut by 46 per cent. Whereas the cost of crisis interventions like youth justice, child protection and children in care has risen 47 per cent.

We must save children from misery

The lesson is obvious but cannot be learned, because councils have to fulfil their urgent statutory duties and simply do not have the money to spend on early support. Indeed, in the worst-hit places, like Birmingham, the remaining early intervention programmes are being cut.

Many schools are doing their best to fill the gap - spending more time and money on pastoral support for pupils.

But they do not have the budgets or staff to replace what has been lost. It can be little surprise, in this context, that pupil attendance has got so much worse or that referrals for mental health support are going up inexorably.

We can only hope that a future government takes what is happening more seriously than the current one. If they don’t, the trap will only tighten.

It will save no money in the long run but it will condemn many more children to misery.

Sam Freedman is a senior fellow at the Institute for Government and a former senior policy adviser at the Department for Education

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