The enormous financial pressure facing our local councils has been laid bare by new figures revealing debt levels across Kent have rocketed by more than £164 million in the space of a year.
And while some have managed to reduce their deficit, the amount owed by unitary, district and borough authorities has risen to an eye-watering £2.3 billion. That’s up 7.58% in just 12 months.
It has prompted one expert to say the situation should be “worrying us a lot”.
However, much of the debt is a consequence of borrowing – primarily from an arm of the Treasury – to invest in key infrastructure or facilities which, the authorities hope, will deliver dividends in the long-term. Collectively, they have splashed out on everything from new homes to shopping centres, entertainment complexes and even fleets of dustbin lorries.
Two of our councils, however, carry no debt at all – showing a sharp contrast between Kent’s authorities. It also raises big questions over the impending reorganisation of local councils, which will unite some with huge debts with those whose cautious financial management has meant they remain in the black. More on that, shortly.
The figures have been produced by the BBC Shared Data Unit.
It surveyed the debt levels of every council in the country, revealing that across the UK authorities had added £7.8bn to their growing deficits in the space of a year.
Analysis of data from the Ministry of Housing, Communities and Local Government (MHCLG) shows UK councils owe a combined £122.2bn to lenders – equivalent to £1,791 per resident, as of April 2025.
That is up 7% from a total of £114.5bn – £1,677 per resident – a year ago.
Yet two areas in Kent exceed that ‘per head’ debt level.
Medway Council – a unitary which, like Kent County Council, has far more fiscal responsibility than district and borough councils – is carrying a concerning £612.2m debt burden. It is one of just 30 nationwide which has been granted “exceptional financial support” by the government to borrow more money to avoid effective bankruptcy.
Its total debts have increased by £118.4m (35.99%) over the 12 months. It means its per head debt level for its population is £2,134 and puts it in, arguably, the most precarious financial position in the county. However, it points out that it still carries £27m of debt inherited from KCC when it split to become a unitary in 1998.
Vince Maple, the leader of the administration, explains: “Like councils across the country, Medway is under financial pressure due to the rise in cost and demand for providing essential services like social care and housing alongside more than a decade of reduced government funding.
“The borrowing we undertake is to fund long-term capital investments – such as housing projects, infrastructure improvements and regeneration – to help support Medway’s future growth. However, achieving financial stability whilst protecting the services our residents rely on remains our top priority – with our One Medway Financial Improvement and Transformation Plan underpinning all of the work we do.”
That plan was ushered in as a consequence of the ‘exceptional additional funding’ condition granted it by the government. Under normal circumstances, councils are not allowed to borrow to fund day-to-day spending. However, special dispensation has been granted to about 30 authorities to do just that – on the condition they provide evidence of how they intend to turn their financial fortunes around.
Sarah Culkin, editor of the Local Government Chronicle, a title aimed at local authority officers, explains: “I would argue that it’s not that exceptional because 30 councils received it this year, and it’s limited financial support because what it actually does is allow councils to borrow to fund their day-to-day spending.
“The theory behind this is it helps those councils in the most financial difficulty. So those that might otherwise have issued what’s called a section 114 notice or effectively declared themselves bankrupt, it kind of helps them transition to become more sustainable organisations that can live within their means.
“But ultimately, that debt will still have to be repaid in the future. So it is not really supporting that council. It’s ultimately going to contribute to making them poorer in the long run.
“It is pretty controversial because there is a longstanding accounting principle that you should borrow to fund capital assets, not just to fund your day-to-day spending. And most of us would apply that in our lives as well, wouldn’t we? If you’re putting the food shop on a credit card, it’s not great, but if you’re buying a new sofa, then that’s probably OK. It’s the same principle.”
Meanwhile, Kent County Council, which carries by far the greatest financial burden, had debts of £732.6m by the end of the 2024/25 financial year. However, that is down £39.3m on the year before. That’s the equivalent of just £454 debt per head of the county’s population.
Ashford Borough Council is second only to Medway Council for its debt per head – at £1,886. It owes a total of £260.8m – much of which is a result of taking on debt to acquire a sizeable chunk of housing stock, as well as £75m on regeneration through its Elwick Place development in the town centre.
It highlights how important it is for these major projects to prove a commercial success in order to both service the debt and deliver additional revenues into the public purse.
Swale Borough Council’s overall debt level is a relatively modest £13m (which is about £83 per head of its population) but has increased by 160% over the 12 months, rising from £5m the year before.
It disputes the scale of the increase, but a council spokesman explained: “At the end of 2023/24 we had £10m of borrowing that was split as £5m short term (less than 12 months) and £5m long term (more than 12 months). By the end of 2024/25 borrowing had gone up to £13m, which was all held on short-term loans, which helps us to manage our interest liability in a time when interest rates are falling.
“The overall increase in borrowing is due to an increased capital spend, primarily on new homes to provide temporary accommodation to local families facing homelessness, which reduces our reliance on more expensive private rental properties. It also included investing in the new waste collection fleet, where it was more cost-effective to buy them ourselves for the new contract.”
That fleet comprises more than 25 bin lorries, which can cost north of £200,000 each.
Thanet District Council’s debt rose by £17.5m (or 89.25%) over the year – increasing from £19.6m to £37.1m.
But, like other authorities, the sharp increase should deliver long-term financial gains.
A spokesperson for the authority explained: “The increase is a result of the £20m Housing Revenue Account (HRA) loan taken out by the council in January 2025. This borrowing is specifically linked to our HRA acquisition and development programme, which is significantly funded from prudential borrowing.”
HRA relates to housing stock owned and operated by the council – alleviating waiting lists and cutting down on money spent on private rented accommodation provision.
The spokesperson added: “We have a hugely ambitious housing development programme as a result of the demand for social and affordable housing in the district. Realistically, the council has to borrow to deliver those homes, and we’ve been upfront about that.
“Not all local authorities in Kent have a Housing Revenue Account, so straightforward debt per head of population won’t give a meaningful comparison.”
Thanet’s debt per head, according to the BBC Shared Data Unit figures, was just £264 – one of the lowest in the county.
They added: “Having higher levels of debt is not inherently a bad thing if the borrowing either brings in a revenue stream, as is the case of HRA borrowing, or avoids or reduces revenue costs, as is the case of our temporary accommodation acquisition scheme.”
Yet, remarkably, two councils – Tonbridge & Malling and Tunbridge Wells – carry no debt at all. They are among just 32 in the UK which remain in the black.
Matt Boughton, leader at Tonbridge & Malling, explains balancing the books has been no easy task and is a result of sound, long-term financial planning.
“It’s tough, of course,” he explains, “there’s absolutely no denying that.
“Because of our 10-year budget cycle, we’ve been able to plan for the future really well. We’ve been very careful to mitigate against challenges the economy might bring, and it’s worked in terms of keeping us out of debt.”
However, he admits the council is likely to have to borrow some money to finance the building of the replacement to the Angel Leisure Centre. It is expected to cost about £20m, with funds coming from a combination of the authority’s financial reserves, contributions from operators and borrowing.
Jonathan Carr-West is the chief executive of the Local Government Information Unit – a worldwide, not-for-profit organisation with about 300 membership authorities. It works to strengthen local democracy.
He explained: “We’ve known for some time that a lot of councils across the country carry fairly high levels of debt and that a small number of councils carry very, very high levels of debt. That picture hasn’t changed much over the past few years.
“I think it’s worth, as always, reminding ourselves why councils are in that position.
“There were a series of decisions taken in the years after 2010 that meant the government grant to councils reduced very dramatically and councils were encouraged to use their own resources, their own ingenuity, to be part of the local economy and to raise money themselves.
“That led to a lot of councils borrowing money, mainly from the Public Works Loans Board [the arm of the Treasury which provides loans to local authorities] in order to invest in commercial property in new developments. And councils took on quite a lot of debt to do that.
“For many of these councils, that has been a success. There’s been a decent payback from those investments; it’s been a key part of their revenue budget. Many of the councils with quite high levels of debt are councils that will, through the various complex funding formulas, have received nothing or almost nothing through central government. So it’s been, deliberately, quite a key part of the funding picture for local government.
“It would be a mistake to sort of see this story as being about some councils that have gone rogue and gone off to borrow loads of money.
“This has been a fairly consistent thing across the sector. There’s only about 30-something councils that don’t carry this sort of debt out of 400-odd councils across the country. So it’s a very consistent pattern.
The key question is not necessarily the council’s overall level of debt, but its ability to pay back that debt
“For me, the key question we need to look at is not necessarily the council’s overall level of debt, but its ability to pay back that debt and how that compares to the level of revenue those assets are bringing in.
“Where overall this has largely worked for local government, there are a few councils – and we know the famous examples like Thurrock, Woking – that have ended up with unsustainable amounts of debt.
“In those cases and with councils like Croydon also, they have all issued section 114 notices and have effectively gone bankrupt – and that level of debt has been a key element of that failure.”
Councils in the UK cannot technically go bankrupt given their commitment to provide key local services. A section 114 notice is as close as it will get – which means an immediate slamming of the brakes on any new spending and a commitment to draft a new budget within three weeks, and one which cuts their cloth accordingly. Such a move almost inevitably will mean significant cuts in services.
Thurrock, just over the Thames Estuary in Essex, borrowed to invest £1.5bn in a solar farm project but it backfired in dramatic fashion and left it with enormous debts it could not pay.
Woking, in Surrey, splashed out millions on a commercial redevelopment which left it £1.2bn in debt, while Croydon also found itself issuing a section 114 after a string of risky investments.
Added the LGIU chief: “I think the overall picture of local government finance is worrying and it should worry us a lot.
“We survey every council in the country and earlier this year, still one third of councils are telling us that if nothing changes in terms of how they’re funded, they are going to go bust within the next five years. Now that’s down from 50% of councils telling us that in 2024. So we have made some progress.
“There’s a sense that we’re slightly moving in the right direction, but overall it’s not just a debt issue, it’s also about the amount of funding they get from central government, it’s about their ability to raise council tax and business rates.
I think the overall picture of local government finance is worrying and it should worry us a lot
“Above all, it’s about unbelievable increases in the demand and the cost of statutory services like adult social care, children’s services, housing.”
Housing, in particular, puts a huge strain on our district and borough councils.
Tonbridge & Malling’s Matt Boughton says: “As a local council you are expected to provide services that the private sector would never touch and some of that is because you’ve got a statutory requirement to do so.
“For example, you have a statutory requirement to basically put a roof over everyone’s head as part of your housing service and that costs a lot of money. That’s our biggest financial pressure. But then there’s an expectation the council will provide leisure facilities to residents.
“That’s the sort of service you really have to look at from a risk management perspective in terms of how can we ensure we’re investing as much of our capital programming in that sort of service rather than trying to do stuff that either the private sector can do better or that isn’t the natural place of the local authority.”
Sarah Calkin explains: “The first thing to say is debt is not inherently bad. It depends what it’s for.
“Lots of councils borrow money to invest in things like improvements to roads, schools, new leisure centres. But it depends how that debt is structured.
“A lot of the councils that have got themselves into trouble with debt did so because they had done lots of short-term borrowing and then when they’ve had to come to refinance that borrowing, the interest rates have risen – the borrowing becomes more expensive and the business case for the project they borrowed for doesn’t stack up anymore.”
Yet another twist in this whole financial saga lurks around the corner.
The much-debated reorganisation of our local councils will be dramatic. Set to be ushered in over the coming years, it will see our existing council structure scrapped – ending the reign of the borough and district councils and kicking KCC and Medway Council into touch. Instead, there will be a smaller number of unitary authorities.
KCC has proposed the county is carved into three, where ‘north’ would comprise Dartford, Gravesham, Medway and Swale; ‘west’ Maidstone, Sevenoaks, Tonbridge and Malling and Tunbridge Well; and ‘east’ Ashford, Canterbury, Dover, Folkestone & Hythe, and Thanet.
But therein lies a challenge. Because Tonbridge & Malling and Tunbridge Wells both currently carry no debt. Sevenoaks, meanwhile, is £14m in the red while Maidstone carries £65m of debt. Plus they would have to shoulder their share of the existing county council and unitary authority’s debt burden.
Adds Cllr Boughton: “The government have said that effectively existing debts need to be accounted for within the new authorities. That’s existing debt across Kent and Medway and the 14 councils.
“Now that is an absolutely disastrous policy for places like Tonbridge & Malling, which have been so good in terms of how we manage our money.
“I’m incredibly concerned about this because it means that effectively on day one of the new authorities, whenever that is and whenever they look like, they will not start with a balance sheet of zero.
“They will start with a debt. They will also expect the new authorities to deliver all four of the services that are the biggest financial strain on local government; adult social care, children’s services, special educational needs transport and temporary accommodation. So straight away you’ve got a position of great financial difficulty for the new authorities and I really worry for a loss of services.”
For many of our existing authorities, the shake-up may well prove to be a case of out of the frying pan and into the fire.
