Briefing on the LGA’s Autumn Budget 2024 and Spending Review submission

• Councils face a funding gap of more than £2 billion next year (2025/26). The LGA is warning against any disastrous further cuts in the Autumn Budget.
• In our submission to the Treasury ahead of the October 30 fiscal event, we have said that the Government needs to take immediate steps to stabilise council finances and protect vital local services.
• With 18 councils already relying on Exceptional Financial Support from the Government to balance their books this year, we are warning that there is a growing risk of systemic financial failure.

• LGA analysis shows that due to inflation and wage pressures alongside cost and demand pressures, English councils face a £2.3 billion funding gap in 2025/26 rising to £3.9 billion in 2026/27. This is a £6.2 billion shortfall across the two years. 

  Key cost pressure drivers include: 

• Councils are increasingly having to draw on their financial reserves to manage these cost pressures and balance their budgets. Councils’ un-ringfenced reserves fell by £1.7 billion in 2022/23 and £1.1 billion in 2023/24. Some 42 per cent of councils drew on their reserves in both years. The LGA is clear that the use of reserves is not a sustainable solution to current budget pressures – reserves can only be spent once. 
• While the Government has warned that the Autumn Budget will be “painful” with departments being tasked with findings savings, we are warning that any further local government funding cuts would tip many more councils towards financial ruin and leave them unable to deliver key local services. 
• New LGA analysis shows that service spending in 2022/23 was 42 per cent lower than it would have been had service spend moved in line cost and demand pressures since 2010/11. This means that councils have made £24.5 billion in service cuts and efficiencies over this period. There is simply no more capacity for further cuts to council budgets.

• Council tax-raising powers have also been too heavily relied on by Government in recent years to boost local government core-spending power. While council tax is an important funding stream, the significant financial pressures facing local services cannot be met by council tax income alone.  

  Instead, the Government must provide adequate funding to sustain the vital services that our communities rely on every day. The LGA is clear that there needs to be immediate action to support the sector in the short-term. In particular, the Government should give councils: 

• The LGA submission also looks ahead to the Spending Review, next Spring, setting out the benefits of investing in preventative services rather than a reactive, demand-led model to service spending. The LGA also wants Government to convene a cross-party review of, and debate on, options to improve the local government funding system.

The 2024 Autumn Budget and the 2025 Spending Review are taking place in the context of challenging fiscal conditions. At the same time the new Government has set out an ambitious programme to reform and restore key elements of our public services. Our submission is aimed squarely not only at improving the lives of our councils’ residents but also at helping the Government deliver its missions in the context of these financial challenges. Councils will be a key partner for Government in delivering its objectives.

But we cannot shy away from the fact that councils are under severe financial strain. Inflation, wage pressures and growing demand and complexity of need mean that councils face a funding gap of £6.2 billion over the next two years. And this needs to be seen in the context of the estimated £24.5 billion in cuts and efficiencies in service spending that councils made between 2010/11 and 2022/23. If councils’ net service spend had grown in line with inflation, wage growth, demographics and demand drivers since 2010/11 it would have been a full 42 per cent higher in 2022/23 than actual service spend in 2022/23. Councils have had to absorb these huge pressures through service cuts or efficiencies.

Given the scale of the financial challenges councils have already overcome, and of those they face going forward, it is not surprising that the financial sustainability of some councils is being severely tested. This is clearly demonstrated by the fact that 18 councils, 16 of them with social care responsibilities, are reliant on Exceptional Financial Support from Government in order to secure their financial sustainability for 2024/25. This is unprecedented. While the underlying reasons for this support vary across these councils, the sheer scale of this intervention by the Government indicates the risk of financial failure is potentially becoming systemic. The sector needs immediate financial support to head this off.

Despite councils’ best efforts, financial pressures are affecting the scale, range and quality of council services provided to local residents. The clearest evidence of this is that councils’ service spending is increasingly focused on adult and children’s social care; on average social care councils allocated 65.6 per cent of their 2024/25 service budgets to social care. Ultimately spending is increasingly concentrated on fewer people, so councils are less able to support local and national agendas on key issues such as housing, economic growth, and climate change.

It is reassuring to hear that the Government recognises the financial challenges facing the sector. At an LGA event on 18 July, the Deputy Prime Minister acknowledged that, “the biggest crisis facing local government is financial”. She committed to provide financial stability and certainty through long-term integrated funding settlements, and to ending the “bidding wars” between councils for grant funding. The Deputy Prime Minister was also clear that local government funding was in need of reform.

Following through on these commitments, alongside providing sufficient funding for councils, will provide councils with the financial stability and certainty they need to make their full contribution to public service delivery and help the Government deliver its ambitions. The return to local communities and the Government on this investment will be substantial. This was recognised by the Deputy Prime Minister who was clear that councils sit at “the very heart” of the Government’s five missions. Councils are “key partners to deliver the 1.5 million homes, as well as the secure affordable council and social homes we will deliver, the key partners in delivering safer streets and bringing our high streets back into life. And of course, [councils] are key partners in delivering that critical frontline social care. These are the foundations of a good life”.

A key ask of our Local Government White Paper published in June 2024 was a fundamental reset of the relationship between local and national government. It is time for a new, equal and respectful partnership between local and national government, drawing on the best international practice. We are an outlier in the OECD, heavily reliant on national decisions for funding and powers. As a result, at a time when people are struggling to afford the basics, millions of pounds of taxpayers’ money is spent by local government to chase down new sources of investment from Whitehall.

If we are to meet the challenges of the coming decade, we need a joined-up and strengthened system of governance that has a sharper focus on outcomes for the people we serve. We want to work with government to create a non-bureaucratic and agile forum for local and national government to discuss forthcoming legislation, aggregate expenditure levels and emerging areas of joint priority. This would ensure local government is able to bring its frontline expertise and experience to the heart of national policy development, drawing on the experience of systems which do this well. This would also provide an opportunity to build on and expand the highly successful programme of sector support that the LGA provides, and which is currently funded by government.

Priority 1: Sufficient and sustainable funding 

Councils need a significant and sustained increase in overall funding that reflects current and future demands for services. In addition, the system for funding councils is out of date, opaque and urgently in need of reform. Councils need multi-year and timely finance settlements, and greater certainty over financial reforms, to enable them to plan ahead and make meaningful financial decisions. Financial certainty and stability will improve the value for money of local spending and enhance councils’ ability to drive public service reform and key government agendas and missions. 

Key proposals include that Government should: 

• Provide councils with a significant and sustained increase in overall funding that reflects current and future demands for services. 
• Provide councils with multi-year and timely finance settlements. 
• Lead a cross-party review of options to improve the local government funding system. This should include a fundamental review of council tax alongside other council funding sources. The review also has to include consideration of whether business rates retention represents a viable future funding model. 

Priority 2: A new focus on prevention and services for the wider community 

Preventative services – those that intervene earlier in people’s lives and reduce the need for later acute and reactive spend - are vital to people living fulfilled, happy and productive lives. They are also vital to addressing the drag on our economy from socioeconomic inequality and poor health. The LGA wants to work with the Government to improve outcomes and increase the efficiency of public spending by intervening at the earliest practical opportunity to minimise preventable disadvantage. We are asking the Government to enable greater local flexibility and to take a more long-term, broad-based approach to spending decisions to ensure that short-term savings do not impair more enduring social and economic outcomes. 

Key proposals include that Government should: 

• Ensure that the potential long-term benefit of spending on prevention is routinely considered in both Treasury and departmental spending decisions. 
• Work with councils to strengthen cost-benefit analysis with an enhanced understanding of social return on investment and better tracking of long-term outcomes. 
• Increase investment in the public health grant and in other vital areas of public health and prevention. At a minimum, funding should be restored to the public health grant, which has suffered a cut of 27 per cent in real terms since 2015/16. 
• Implement the Hewitt report recommendation that the share of total NHS budgets at Integrated Care System level going towards prevention should increase annually by at least 1 per cent over the next five years. This should include commissioning strategies overseen by Integrated Care Partnerships.  

Priority 3: Building the houses we need 

Councils share the Government’s commitment to build more homes and are ready to play their part in addressing the national housing and homelessness crisis. By enabling councils to deliver more affordable, high-quality homes, the Government can alleviate homelessness and support our communities. This will ultimately improve public finances through reduced temporary accommodation costs and housing benefit expenditure, and support the Government's mission of kickstarting economic growth. 

Key proposals include that Government should: 

• Strengthen Housing Revenue Accounts via a long-term rent settlement of at least 10 years and restoration of lost revenue due to rent cap/cuts, to give councils certainty on rental income and support long-term business planning. 
• Reform Right to Buy to support 1:1 replacement of existing social housing to avoid continued net loss of stock. This should include: allowing councils to retain 100 per cent of sales receipts; permanent flexibility to combine receipts with other government grants; and the ability to set the size of discounts locally; and exempting new build homes. 
• Realigning temporary accommodation housing benefit subsidy rates to 90 per cent of 2024 Local Housing Allowance rates, so that councils have more resource to invest in homelessness prevention. 

Priority 4: Supporting our children and young people 

The Government has stated that “every child should believe that success belongs to them” – and we agree. Councils play a key role in building great places for children to grow up and in breaking down the barriers to opportunity. That includes through the delivery of children’s services and as co-leaders of local education systems, making sure that every resident, from babies through to adults and whatever their background and needs, has what they need to thrive. 

Key proposals include that Government should: 

• Introduce a cross-government strategy for children that clearly articulates the role that each department plays in delivering the best possible start for children. 
• Provide sustainable funding to enable a move towards preventative and early help services across children’s services and special educational needs and disability (SEND) provision – making sure that children and families get the help they need, when they need it, and before situations deteriorate. 
• Introduce a children’s workforce plan to make sure that babies, children and young people have the right professionals supporting them to achieve their potential. 
• Introduce long-term reform to the SEND system, as set out in the LGA/CCN-commissioned research, which improves outcomes for all children with special needs and is also financially sustainable for councils.  
• Write-off all Dedicated Schools Grant deficits to relieve the associated financial pressures that councils are currently facing. Ahead of this, Government should provide councils with certainty on the future of the statutory override for these deficits.  
• Provide funding to address the substantial and growing cost pressures of home to school transport, particularly for children with SEND, or work with councils to identify ways to manage demand for, and access to, this service. These immediate measures should be accompanied by longer-term reform of home to school transport. 

Priority 5: Reforming and sustainably funding adult social care 

The Labour Manifesto rightly identified adult social care as being vital to ensuring that everyone can live an independent and prosperous life. Immediate investment to stabilise the here and now, and pave the way for longer-term reform, is needed. But investing in care and support must also be seen as a key enabler of delivering the Government’s mission to build an NHS that is fit for the future, particularly the move to a more preventative model of health and care. More broadly, given its scale and size, adult social care can play an important part in helping to the deliver the Government’s mission on economic growth.

Key proposals include that Government should: 

• Provide immediate funding to alleviate the worst consequences of the current challenges, with the exact amount identified through a collaborative process across the care and support sector. 
• End the reliance on council tax and the social care precept as a key means for funding adult social care. 
• Commit to review NHS Continuing Healthcare. 
• Provide new and dedicated funding to help kickstart a concerted effort to shift to a more preventative model of care and support. 
• Take action on care worker pay. 

Priority 6: Backing local climate action 

Climate change is an urgent and mounting threat to human wellbeing and the health of the planet. Its impacts risk upending every ambition we hold for people, places and services. Its solutions demand action from everyone at every level and in every place. Only local government can lead, mobilise and connect action in places; councils demonstrate this every day. We hold influence to drive down a third of every place’s carbon emissions efficiently and effectively. In the context of wider funding pressures, a continuation of the status quo risks threatening the future of local climate action at a time that it is most needed. 

Key proposals include that Government should:

• Revitalise partnership with local government through a Local Green Energy Mission Delivery Programme with responsibility to move forward local government’s contribution to accelerating action. 
• Ensure that every area is covered by a Local Climate Action Plan agreed by central and local government, with long-term funding certainty to build scale and accelerate project delivery. 
• Rapidly retrofit social and fuel poor homes. Bring forward and devolve all funding for retrofitting social and fuel poor homes to councils. 
• Rewire current proposals to extend the Emissions Trading Scheme so that the cost are passed to manufacturers and retailers of fossil-based content rather than councils, with the aim of accelerating decarbonisation investment. 

Priority 7: Delivering economic growth 

We are pleased that the Government wants councils to be at the heart of its Kickstarting Growth mission and that devolution is to be deepened and widened across the whole country. For all councils to play a full and meaningful role, they need long-term certainty of funding and the flexibility to make investment decisions that reflect local economic priorities. This includes skills and employment, transport and digital connectivity. 

Key proposals include that Government should: 

• Work with LGA on the English Devolution Bill so that all councils, including in mayoral combined authorities, can play a full and meaningful role in delivering inclusive growth. 
• Introduce a simplified, consolidated and long-term approach to growth and infrastructure funding, giving local leaders flexibility over where and how investment decisions are made locally. 
• Take immediate action to stabilise the existing growth funding landscape by progressing current Levelling Up funded projects and providing an additional year of fully flexible UK Shared Prosperity Fund (UKSPF) revenue funding to remove the funding cliff edge for many projects and organisations delivering growth. 
• Work towards a fully devolved and integrated employment and skills offer so business and public sector can respond faster, better and inclusively, to the needs of local people and employers. 
• Introduce a reformed funding package for local bus services that removes bureaucracy and ensures that tax-payers money goes to supporting people and routes where it’s needed the most.  

Priority 8: Safer streets 

The Government has clear ambitions to “take back our streets”. Mission objectives include: cracking down on antisocial behaviour with more neighbourhood police; tough new penalties for offenders; a plan to get knives off our streets; a specialist rape unit in every police force; and a new network of Young Futures hubs. This area also has an added focus due to recent violent disorder. The Government recognises the mission and its stated aims cannot be achieved without local authorities acting as delivery partners. To do so, councils need resources and not just duties, as well as a radical reform of the partnership landscape. 

Key proposals include that Government should: 

• Invest in communities hardest hit by recent violence to ensure extremism does not thrive. This includes Youth Hubs and diversionary activities for young people. 
• Reform the duty and partnership landscape to ensure Community Safety Partnerships are equipped with the powers and partners to deliver. 
• Ensure Community Safety Partnerships are adequately resourced to deliver. 
• Make sure Community Safety Partnerships have the intelligence and data sharing capabilities to prioritise local responses. 

For more information on this briefing, contact:

Arian Nemati, Public Affairs and Campaigns Adviser

Email: [email protected]
Mobile: 07799 038403