Somerset Council could declare effective bankruptcy this spring without steep council tax rises or "exceptional" support from central government.

The council declared a financial emergency in November 2023 and was only able to set a balanced budget in February 2024 by agreeing to significant savings, job cuts and the sale of both commercial investments and surplus land and property.

The council is already reliant on slimming down its workforce to balance its budget for the 2025/26 financial year – with staff redundancies accounting for £34m out of a total of £47m in planned savings.

But rising costs and demand for services, particularly in children's services and adult social care, have left the council with an expected budget gap of £66m in spite of these savings.

This has prompted council leader Bill Revans to write to the government seeking "exceptional financial support", including a request to raise council tax by more than the five per cent limit which is currently permitted.

If this support is not forthcoming, the council may have little choice but to issue a Section 114 notice, declaring effective bankruptcy and calling in central government commissioners to fix the problem – on the taxpayers' dime.

Council tax bills are calculated on the basis of property values set in 1991, with a Band D property being taken as the average.

However, Somerset has a relatively low council tax base, with a large proportion of its population living in properties below Band D – meaning the actual amount it can raise in council tax is small compared to more affluent areas.

The council has been seeking to save money by reforming its council tax support scheme, with the full council voting through proposals in December 2024 which will save around £4m a year.

Local authorities can only increase council tax by a maximum of 4.99 per cent a year without having to hold a referendum – of which two per cent is ring-fenced for adult social care, leaving 2.99 per cent for other services.

Mr Revans has written to deputy prime minister Angela Rayner MP asking for permission for a council tax increase above this cap, which would bring Somerset more in line with other local authorities in the south west.

He said: "Without additional funding we have had no choice but to ask the government for permission to increase council tax above the five per cent cap.

"This is not a decision taken lightly, but our council tax base is below the average nationally, and the feedback from our residents suggest they would rather pay more than see services cut.

"Last year, the previous government rejected our request for a five per cent increase.

"We warned that without reform this would mean deeper cuts and steeper tax increases in future. Sadly, this is now the reality."

If the cap cannot be raised, the council has asked the government to extend its capitalisation directive – which allows the council to use the proceeds from selling off land, property and other publicly-owned assets to fund day-to-day spending on public services.

The council has been in the process of selling off large amounts of its "non-operational assets" and inherited commercial investments to this end, with officers estimating that these sales would have generated around £50m by Christmas 2025.

Mr Revans said that the government's decision to delay any overhaul of how adult social care is funded until 2028 had left little alternative but to ask for this level of support.

He said: "We have been saying for some time that the funding model for local government is broken.

"The new government has acknowledged this and promised reform and additional funds in key areas like social care by 2028.

"But 2028 is too late. We need urgent financial help now."

To reduce the financial burden on the council, numerous town and parish councils have agreed to take on the running of local services, funded by an increase in their share of the council tax bill (known as a precept).

Unlike Somerset Council, town and parish councils have no cap on how much they can raise their bills by year after year – with significant increases being recently voted through in Bridgwater, Frome and Yeovil.

While other devolution deals are in the pipeline – following the recent agreement with Minehead Town Council – there is a limit to how much money can be saved through the transfer of assets or maintenance responsibility.

If the government does not respond to either of Mr Revans' requests, Somerset Council will have little choice but to declare effective bankruptcy and issue a Section 114 notice.

If this transpires, the government will send in commissioners who will make ruthless decisions about how Somerset's public services are run – with little or no democratic oversight, and with Somerset taxpayers footing the bill for their time.

Mr Revans said his executive and team of officers were doing everything they could to avoid this horrifying prospect.

He said: "We have done everything we can to reduce our costs with a series of unprecedented and heart-breaking decisions since 2023.

"We are determined to take decisions locally, remaining accountable to our residents, rather than calling in expensive commissioners who would take the same actions without local knowledge or accountability.

"We recognise that any increase in council tax will have a significant impact on our residents and have pledged to increase funding to our exceptional hardship fund, in place to provide support for residents on the lowest incomes."

In light of ongoing discussions with MHCLG, the council has revised the time-line for its budget setting.

The budget proposals will be discussed in detail at the corporate and resources scrutiny committee on February 17, followed by an executive meeting two days later (February 19).

The full council will meet in Bridgwater on February 26 to formally set the budget – with a reserve date of March 5 being held in case the council cannot get its proposals over the line.

Gideon Amos, the Liberal Democrat MP for Taunton and Wellington, said that the blame for Somerset's parlous financial state lay at the door of the Conservatives, citing cuts to central government grants and years of council tax freezes in the 2010s.

He said: Saving Somerset means making tough decisions. The Conservatives, locally and nationally, have left Somerset Council taxpayers to foot the bill for their mess, exacerbated by years of reckless financial mismanagement of local authority funding.

"Despite slashing council funding, the Conservative government forced Somerset to shoulder even more financial responsibilities.

"That includes the ever-increasing costs of social care and special educational needs (SEND) that requires proper government funding to support families across our county.

"But this has left councils across the country at breaking point, who now have to make tough decisions.

"We have to see government act if council taxpayers across the country are to be protected from the rising costs of care.

"To help save Somerset, we urgently need the government to implement long-term reform of social care and SEND funding to help put us on a sustainable financial path."