The English local elections have seen a huge turnover in
councillors. But while the political make-up of England's
councils has changed significantly, the financial challenges they
face remain the same.
Councils' funding has increased significantly in recent years –
by around 12% above economy-wide inflation between 2019 and 2024,
and a further 8% since then. But cuts during the 2010s and rapid
population growth mean overall funding per person is still around
15% lower in real terms than in 2010. And big above-inflation
increases in costs – such as from increases in the National
Living Wage – and increased demand for many of the most costly
services have put significant pressure on budgets despite the
recent funding increases.
Looking ahead, some of these pressures seem to be slowing down
but they are unlikely to abate in full. And there are new
pressures – such as a rise in inflation associated with the Iran
war – and new uncertainties, including how a big fall in
immigration will play out: will it increase costs by reducing the
supply of workers for social care services, or reduce them by
reducing pressure on housing services?
With limits on revenue-raising, and a range of statutory duties
constraining the spending side of their budgets, councils' room
for manoeuvre in addressing these challenges is limited. Those
councils losing out from a redistribution of grant funding as
part of the ‘Fair Funding Review' will face particularly tough
trade-offs, likely needing to make cuts to services even if they
implement large council tax rises. Councils gaining may find it
easier to hold down increases in council tax, or expand service
provision. But across most of the country, councils will still
face very tricky trade-offs between council tax and spending and
between spending on different services.
David Phillips, head of devolved and local government
finance at the Institute for Fiscal Studies, said:
‘The local elections brought a raft of new councillors and
changes in the leadership of many English councils. New
leadership teams may have different priorities, but neither new
councillors nor their electorates should expect changes to be
easy, or for a rapid reshaping of councils' budgets, taxes or
services to be possible. Despite increases in overall funding,
rising costs and higher demand have meant big pressures on many
areas of spending. Councillors hoping to increase revenues to
expand services will be constrained by councils' limited
revenue-raising powers. On the other hand, those wishing to cut
taxes or reshape spending will be constrained by the big
pressures and statutory duties linked to services such as social
care, homelessness prevention, and special educational needs
services and transport.
‘New people may be in charge in many places. But they face the
same challenges and constraints as the old guard.'
Read the briefing
here.
