Severe funding and demand pressures, which have been exacerbated by inflation, mean council finances are under pressure like never before. In particular, they face acute pressures in children’s services, and housing and homelessness services.
The local government family has long warned of the growing financial challenges facing councils. Through savings and efficiencies, councils have done everything they can to deliver balanced budgets and ensure vital local services are saved from being cut. Yet for many of our members, they are now approaching or already at the point where their financial sustainability is at risk.
Today we unite to call on the Chancellor in the Autumn Statement to address the significant financial challenges faced by councils, and to protect the vital local services that our residents rely on every day.
But this is not just about ensuring local services survive for our communities. Councils share the Government’s ambition to level up, tackle climate change, build more houses, and support the NHS. To do this it needs to invest in local government. It is through councils that key government agendas can be delivered. Yet the threat of financial difficulty is grave for councils. They have been firmly in the eye of the recent inflationary storm, whilst at the same time grappling with mounting funding and demand pressures.
No council is immune to the risk of running into financial difficulty, and some have already warned of being unable to meet their legal duty to set a balanced budget and are close to being forced to issue Section 114 notices.
Councils in England face a funding gap of £4 billion over the next two years. This is a £1 billion increase since the initial analysis in July, because inflation has not come down as quickly as forecast.
This illustrates that 2024/25 cost and demand pressures will have added £15 billion (almost 29 per cent) to the cost of delivering council services since 2021/22.
Councils are working proactively with each other to share and transform their services to ensure they continue to provide high-quality services to their communities.
Yet funding, cost and demand pressures are putting the sector at risk, with some councils warning that the rising demand and costs previously caused by inflation are threatening their financial sustainability. This is on top of having had to absorb a 27 per cent real terms cut in core spending power since 2010/11.
In this week’s Autumn Statement, we are urging the Chancellor to ensure all councils have sufficient resources to set balanced budgets next year without having to make drastic cuts to local services. We are also clear that extra resources cannot come solely from hard-pressed council taxpayers. Increases in council tax are not the long-term solution to the financial challenges facing councils, especially when many households are already struggling.
Councils can also not be expected to continue to plug funding gaps using their financial reserves. Councils hold reserves so they can plan for the future and deal with known risks. They can also only be used once and would be rapidly diminished if used to meet councils’ unfunded day-to-day spending.
We want to work with the Government on a long-term plan for greater funding certainty for councils. Local government is currently on its fifth one-year financial settlement.
Just like any household would want to know what their financial situation was going to look like over the coming years, to help with budgeting, so do councils. Councils need multi-year financial settlements to help with longer-term planning for the future of local services that support residents, as well as more clarity on financial reform.
This is not just about money either. We would like to see existing funding devolved locally and councils given the powers and responsibilities they need to join up different pots and projects.
Councils have already made a wide range of savings through innovation and shared services. They are now at the point of having to make tough decisions about further cutting valued services and increasing council tax and fees and charges.
Therefore, when the Chancellor steps up to the despatch box on 22 November, he needs to set out a package of financial measures that ensures the future financial sustainability of the sector, throwing a lifeline to the vital local services that people depend upon every day.
Cllr Shaun Davies, Chair, Local Government Association
Cllr Tim Oliver, Chairman, County Councils Network
Cllr Sam Chapman-Allen, Chairman, District Councils Network
Cllr Claire Holland, Acting Chair, London Councils
Cllr Sir Stephen Houghton CBE, Chair, Special Interest Group of Municipal Authorities
Cllr Jason Brock, Chair, Unitary Councils Network