Councils in England face a funding gap of almost £3 billion over
next two years just to keep services standing still, new analysis
by the Local Government Association reveals today.
The LGA – which begins its Annual Conference in Bournemouth today
(July 4) – is warning that inflation rates pose a further danger
to the financial sustainability of local services.
It is calling on the Government to ensure councils have adequate
resources to meet ongoing cost and demand pressures, protect
local services from cutbacks and invest in improving the services
our communities rely on.
It comes as new LGA analysis on the cost pressures facing
councils reveals that:
- The cost to councils of delivering their services at current
levels will exceed their core funding by £2 billion this year and
£900 million in 2024/25.
- If inflation fails to fall in line with the forecast at the
March 2023 Budget - and instead is in line with more recent
inflation projections from the Bank of England - this would add
an extra £740 million in cost pressures this year and an extra
£1.5 billion in 2024/25.
- This is just the funding needed to maintain services at their
current levels. It does not include addressing existing
underfunding in areas such as the adult social care provider
market, children’s social care and homelessness, nor does it
include funding to improve or expand council services.
The LGA said councils will need to consider options such as
making cutbacks to services or using reserves to meet their legal
duty to balance the books this year.
Councils hold reserves so they can plan for the future and deal
with known risks. They can only be spent once and the LGA is
warning that using reserves to plug funding gaps is not a
solution to the long-term financial pressures that councils
face.
The Government has confirmed some funding streams for councils
over the next two years. However, significant uncertainties
remain in the level of funding they will have in 2024/25 which is
hampering financial planning and their financial
sustainability.
Greater funding certainty for councils through multi-year
settlements and more clarity on financial reform is vital so
councils can plan effectively, balance competing pressures across
different service areas and maximise the impact of their
spending.
Cllr Pete Marland, Chair of the LGA’s Resources Board, said:
“Inflation, the National Living Wage, energy costs and ongoing
increasing demand for services are all adding billions of extra
costs onto councils just to keep services standing still.
“Councils’ ability to mitigate these stark pressures are
being continuously hampered by one-year funding settlements,
one-off funding pots and uncertainty due to repeated delays to
funding reforms.
“The Government needs to come up with a long-term plan to
sufficiently fund local services. This must include greater
funding certainty for councils through multi-year settlements and
more clarity on financial reform so they can plan effectively,
balance competing pressures across different service areas and
maximise the impact of their spending.”
Notes to editors
The three-day LGA Annual Conference begins in Bournemouth today
(July 4). Speakers include Levelling Up Secretary MP, Deputy Labour
Leader , Education
Secretary MP and Liberal
Democrat Leader .
The LGA has also published a series of Make it Local briefings,
setting out how local government can solve the challenges we face
as a nation and radically reset of the culture of Whitehall.