Nottingham Castle was built nearly 1,000 years ago, designed as an impregnable Norman fort.

Today it is a tourist attraction – but just as inaccessible.

The castle, owned by the council, has been closed since November, when its trust went into liquidation.

It is a symbol of a city and of a council that has struggled financially in the two years since it lost £38m on a failed company – Robin Hood Energy.

But it tells a bigger tale, of a local government system which is creaking – stripped of cash by Westminster and shaped by incentives and pressures that can lead councils to financial disaster.

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Just down the road from Nottingham Castle is a centre called Base 51 that works with vulnerable young people.

Its funding from Nottingham City Council has been completely cut so it’s launched a crowdfunding campaign. But as things stand, it will have to vacate its premises in six months.

Three teenagers were there when Sky News visited.

“Before I started coming here I was going out and getting into trouble,” Deyarni Beedy-Lamonte said.

“But since I’ve started coming here I’ve been offered counselling. And obviously that’s helped get me onto a better path.”

Quinn Vahey says there’s little else on offer for teenagers in Nottingham. “If I weren’t here, I’d be getting in trouble every day basically. I’d probably get arrested by now.”

Nottingham City Council told Sky News: “Like all councils, the City Council has been receiving less and less in government grants over the past 13 years to pay for local services, which has forced us to cut services that we would prefer not to.”

Not all councils have launched an energy company, though, and seen it go quite spectacularly bust.

But the council is right about government funding – grants from central government have fallen nearly 90% since 2014.

During roughly the same period, councils have cut back on discretionary spending.

Take roads, for instance – fixing things like potholes. Around £1bn was spent across all councils in 2013.

Today, that’s fallen to £690m, even after adjusting for inflation. Or street lighting, which has lost £100m in funding.

One of the most famous councillors in the country (not a crowded field) is Jackie Weaver.

She went viral after a chaotic Zoom meeting of a parish council, in which she was told: “You have no authority here Jackie Weaver. No authority at all.”

But Weaver is chief officer at Cheshire Association of Local Councils and knows the subject inside out.

“As money has got tighter over, I would say, the last 10 years, probably, we’ve seen the district and county councils in Cheshire disappear, the county council disappeared altogether, contract so much that now they only perform their statutory functions,” she told Sky News.

“Now, that means all the kind of community stuff that is visible, that makes us feel good, doesn’t happen anymore. They don’t have any money to do it. They only focus on statutory obligations.”

Statutory obligations are services that councils are legally obliged to provide and the most important, and the most expensive, is social care.

Councils are spending an ever greater share of their budgets on social care, as the population ages and care demands become more complex.

Total council spending has gone from £26bn 10 years ago to £30bn today, again adjusted for inflation.

If you look at social care as a proportion of councils’ total spending, you can see just how much it’s eating up – from 57% in 2012 to 62% last year.

Three councils – Nottinghamshire, Staffordshire and Halton in Cheshire – spent more than three quarters of their total 2021/22 budgets on providing social care.

So: add a massive cut in central government funding to a huge increase in demand for services councils are legally obliged to provide and spending cuts in other areas seem inevitable.

This isn’t just a tale of austerity, though, but a deliberate redesign, dating back to changes to the system made back in 2010.

“Councils were told to be innovative, entrepreneurial – to act like any other company, and this involved investments, property, other sorts of investments, maybe outside their own local authority area,” Jonathan Werran, CEO of thinktank Localis, told Sky News.

“But the reason they were doing this was to earn revenue to fund the local public services upon which people depend and rely upon – trying to plug the gap.”

That “entrepreneurial” model may have suited some councils – but it has led others, like Nottingham, into choppy financial waters.

Nottingham issued a Section 114 notice – a formal declaration of financial problems – in 2021.

But it’s far from the only one.

Thurrock, Slough and Kent have all issued Section 114 notices within the last year.

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Woking, which has racked up £2bn in debt investing in property, has said it is in danger of doing the same.

“There’s definitely more and more councils that are in challenging financial positions – a number of councils over the last five years or so particularly have borrowed quite heavily to fund investment in property,” Tim Oliver, chairman of the County Councils Network, told Sky News.

The person who changed the system was Lord Pickles, secretary of state for communities and local government in David Cameron’s coalition government, in 2010.

The idea behind the reforms was “essentially, to give [councils] more power and give them more say of how they spent things”, Lord Pickles told Sky News.

“And it’s called localism. And it really was designed to give power right down to the lowest level in local government.”

Sky News asked him about the councils that have issued Section 114 notices and whether it was a good idea to ask councils to be more entrepreneurial with public money.

“I want to say so, I think a lot of it boils down to a lack of due diligence,” he said.

“But the ones that we talk about, I think that there’s been a kind of a real problem when they’re sort of moved into this without properly thinking it through.”

Every council Sky News spoke to said they need more money from central government.

A spokesperson for the Department for Levelling Up, Housing and Communities told Sky News: “We are making an additional £5.1bn available for councils in England in the next financial year.

“We are also providing multi-year certainty to local government, outlining spending over the next two years to allow councils to plan ahead with confidence.”

Sky News understands that around £2bn of that new money is intended for social care.

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But that represents just a 6.67% increase on the total amount spent by councils – at a time when inflation is significantly higher.

Councils will still struggle to afford social care, which means they will struggle to provide other services.

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And that may ultimately end up costing even more. Take Base 51 for example. As non-statutory spending, it can be cut.

But if those teenagers get into trouble and enter the social care or criminal justice system, that ends up costing more down the line.

“That’s the challenge we’re trying to work through now,” Mr Oliver told Sky News.

“You need to sort of double run it.

“So you need to have sufficient money to deliver the services to the people that are already in the system. But then equally you need to put funding and investment into prevention and early intervention.

“It is a false economy, not to invest in that early prevention. But that is the challenge around finding the funding to do both.”

Local government can be an unglamorous subject but it has a huge impact on people’s lives: the fabric of our society is made up of many threads.

Many of them are small: street lights, bin collections, pot holes, community centres.

Some are huge, like social care.

And pick at those threads, year after year, and it adds up to the sense that the social fabric, the deal between citizens and state, is fraying.

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