London, (Parliament Politics Magazine) – Ahead of tomorrow’s Autumn Statement, the Local Government Association (LGA) has warned Chancellor, Jeremy Hunt, that councils are facing a huge black hole in their finances, equivalent to more than 20 per cent.
The representative body, say that local services will need to be drastically cutback due to spiralling costs caused by inflation and demand pressures.
The LGA is clear that the scale of the funding gap is “too big to be plugged by council tax increases alone”, saying that councils would need to put up council tax by up to 20 per cent over the next two years, which it argues is “neither sustainable nor desirable given the current cost of living crisis”.
It comes as councils are already battling to find an extra £2.4 billion this year to meet unforeseen extra inflationary cost pressures, energy prices rises and estimated increases to the National Living Wage since budgets were set in March.
Quantifying the scale of the crisis, the LGA are publishing a new analysis that shows councils face a £3.4 billion shortfall in 2023/24 rising to £4.5 billion in 2024/25.
According to the study more than nine in 10 (94 per cent) of Councils are experiencing additional financial pressure or risk from pay pressures, 96 per cent are battling energy price increases and 90 per cent are facing uplifts in contract prices or re-negotiations.
To combat this most councils are planning to use reserves and make cutbacks to services to plug funding gaps so that they can meet their legal duty to balance the books this year.
However, the LGA warn that there are not enough reserves to continue to plug funding gaps in future years, as they can only be spent once. Using up all revenue reserves would leave councils at high financial risk and will lead to even greater cuts.
They say that even if councils cut all spending on cultural and leisure services such as libraries, swimming pools, open spaces, waste collection and trading standards they would still not have saved enough money to plug this gap.
This will mean that councils will f have to make huge cuts to the services relied on by some of the most vulnerable – including children’s services and adult social care.
The LGA say that the Chancellor must use the Autumn Statement to ensure councils have adequate funding to meet cost and demand pressures and warns against exacerbating this dire financial outlook for councils and local services by imposing spending reductions on top of these existing pressures.
Cllr James Jamieson, LGA Chairman, commented: “Local government remains the fabric of our country but many of the vital services we provide face an existential crisis. Inflation is not going to come down overnight; reserves can only be spent once, and a local service cannot be cut twice.
“Rising demand for services – and the extra costs to provide them – means that even having the same funding next year as they had this year would leave councils having to make significant cuts to services, such as care for older and disabled people, protecting children, homelessness prevention, leisure centres and bin collections.
“The Government undeniably faces a challenge to get the public finances back on a stable footing, but it needs to urgently come up with a long-term plan to fund local services.
“While council tax is an important funding stream, it has never been the solution to the long-term pressures facing councils, raising different amounts in different parts of the country – unrelated to need – and adding to the financial pressures facing households.
“Only with long term funding certainty to cover increased cost pressures and invest in local services, can councils make innovative and meaningful decisions over their finances, change lives and communities for the better, alleviate pressures on other parts of the public sector, support growth and save local services.”
The snap survey of local authorities reveals: