The future financial sustainability of councils is on a cliff-edge. Without Government action, they will have no choice but to significantly cut the local services our communities – and economy – rely on.
What are the numbers?
Over the past decade, councils have already done more than their fair share of the heavy lifting when it comes to putting public finances on a more sustainable footing, with a £15 billion real terms reduction, almost 60p in every £1, to core government funding between 2010 and 2020.
The pressure on council budgets is mounting…
Spiralling inflation, increases to the National Living Wage and higher energy costs have added at least £2.4 billion in extra costs onto the budgets councils set in March this year. Since then, inflation has risen further.
…whilst the demand for services continues to rise.
Recent announcements on the energy cap and national insurance rise are helpful, but these only go a small way to bridge the gap this year.
If nothing changes, as well as financing these extra costs, councils are facing a funding gap of £3.4 billion in 2023/24 and £4.5 billion in 2024/25.
What is the consequence?
Local government is the fabric of our country. It provides more than 800 services, many of which they are legally required to provide, and positively impacts the daily life of every person in every community.
Councils have worked hard to protect their budgets, but many now face the prospect of having to make severe cutbacks to vital services that communities rely on, including bin collections and filling potholes, social care for adults and children, support for low-income households and preventing homelessness.
Cuts to council services will not only damage our communities but massively undermine Government ambitions to boost economic growth, level up the country and help residents through the cost of living crisis. With adequate funding and devolved powers, councils can deliver more for our residents.
We need a long-term plan from Government
The scale of the pressures councils are facing cannot be met by reducing costs, making efficiencies or raising council tax.
Rather than cutting vital support to the most vulnerable in our communities, councils urgently need adequate funding, in line with inflation and the demand for services.
Just as important, councils need certainty to plan their budgets to minimise service disruption.
The Government used last year’s Spending Review to rightly ensure councils had enough funding to meet the extra cost pressures they were expecting to face this year and keep services standing still at least. Since then inflation and forecasts of the National Living Wage have continued to increase adding over £2.4 billion to councils’ budgets.
Now the Government needs to come up with a long-term plan. Inflation is not going to come down overnight; reserves can only be spent once; a local service cannot be cut twice.
We cannot carry on like this.
We are calling on Government to provide adequate funding for councils and a move away from one-year financial settlements, so councils can continue to keep our communities running.