Local government leaders from cities outside of London have warned that councils will be forced to raise council tax to cover the spiralling costs of adult and children’s social care, including SEND, while rising homelessness and a lack of temporary accommodation continue to push local budgets to breaking point.

The findings come from the second annual Leaders’ Survey by Key Cities, a national cross-party network representing 12% of the UK’s urban population outside London and contributing more than £150bn to the national economy.

Adult and children’s social care continue to be highlighted as the most acute financial pressures for the coming year, accounting for over a third (36%) of all cited financial pressures.  This was closely followed by homelessness, temporary accommodation and housing (22%), forming the next critical pressure point.

This year, more than 70% of the councils surveyed said that they would be forced to increase council tax in 2026 to combat financial strain across local government services. 60% said that they planned to sell off assets to stay afloat, while only 40% are considering service redesigns.

The results highlight a distinct shift from 2024, when the majority (60%) of local leaders said they would prioritise service redesigns and utilising financial reserves to weather increasing financial challenges.

The trend follows warnings from the Local Government Association that a substantial £8.4bn is required by 2028-29 just to maintain services at their current level. According to city leaders, the Government’s proposals under the spending review will not address this gap.

According to the English Indices of Deprivation (IMD) 2025, many Key Cities members are among the most deprived in England across multiple indicators. Member cities like Hull, Bradford, Stoke-on-Trent, Sunderland and Wolverhampton rank in the top 30 nationally under the IMD measures. While only one Key City is among the top 10 for deprived neighbourhoods nationally, urban areas are far more likely to be in the most deprived fifth of England. The data highlights the scale of challenges facing local leaders across Key Cities in the coming year.

The findings also stated that a fifth of councils have already made compromises to social care provision in the past 12 months, including budget cuts and service reductions. They have also been forced to divert funds from non-essential services to meet adult and children’s social care requirements. Meanwhile, 40% of city leaders said they are not on track to meet 2050 net zero targets, citing a lack of funding (93%), policy uncertainty (47%) and infrastructure challenges (47%) as the main barriers to success.

Councils were also divided on whether new devolution legislation will have a meaningful impact on housing delivery in their local areas. Only 33% said that the English Devolution and Community Empowerment Bill would lead to an increase in housing delivery.

Councillor Michael Mordey, Leader of Sunderland City Council and Deputy Chair of Key Cities, said:

“Local government leaders have been clear about the need for a fair and sustainable funding system that reflects and responds to the real levels of deprivation and demand. Without this, councils will continue to face impossible choices around which essential services to allocate spend to, and which to cut, to the detriment of their communities.

It is vital that local authorities, who operate closely with communities and have the mandate to achieve better outcomes for their constituents, and be seen as essential delivery partners as we work towards greater service provision and delivery alongside the government. “

With the challenges faced by many local governments, the survey pointed to a clear need for city and central Government collaboration, ensuring that fast growing cities within the network are given the opportunity and support by the Government to deliver on its growth agenda.

A third of leaders said that increasing government grant funding should be the Government’s main priority for the next 12 months. Other priorities, included progressing the fair funding review (20%), building new council and social homes (20%), and reforming social care and SEND systems (20%).

Cllr Kevin Guy, Leader of Bath & North East Somerset Council and Deputy  Chair of Key Cities, said:

“Councils are reaching the limits of what they can do with the resources available to them. Every year we are asked to do more with less, and the pressures on essential services are mounting up.

The survey has highlighted the need for reform, and the importance of our network as a strong collective calling for changes to a broken system.  What we need is a fair, long-term funding settlement that will give councils the confidence to plan ahead, invest in prevention, and protect vital community services.”