Further funding cuts for councils would be “disastrous”, Local Government Association warns
The Local Government Association (LGA) has warned against any "disastrous" further cuts in the Autumn Budget following an analysis that shows English councils face a £2.3 billion funding gap in 2025/26, rising to £3.9 billion in 2026/27.
In its submission to the Treasury ahead of the October 30 fiscal event, the LGA said the Government needs to take immediate steps to stabilise council finances and protect vital local services.
It also warned that there is a growing risk of systemic financial failure with 18 councils reliant on being given Exceptional Financial Support by the Government in February to balance their books in 2024/25.
Its analysis showed that councils in England will be subject to a £6.2 billion shortfall across the two next years, noting that key cost pressures include soaring costs in children's social care and adult social care, alongside growing pressure on councils' Dedicated Schools Grant budgets.
It also said the 10% increase in national living wage in both 2023/24 and 2024/25 has burdened local authority budgets and warned that the pay gaps between local government and other sectors are also exacerbating recruitment and retention issues.
This has left more than nine in 10 councils struggling to fill essential roles, the LGA said.
The LGA added that, as a result of the pressures, councils are increasingly drawing on their financial reserves to balance their budgets, with un-ringfenced reserves falling by £1.7bn in 2022/23 and £1.1bn in 2023/24.
Some 42% of councils drew on their reserves in both years.
While the Government has warned that the Autumn Budget will be "painful" with departments being tasked with finding savings, the LGA said any further local government funding cuts would tip many more councils towards financial ruin and leave them unable to deliver key local services.
The LGA added that spending in 2022/23 was 42% lower than it would have been had service spend moved in line with cost and demand pressures since 2010/11, meaning that councils have made £24.5 billion in service cuts and efficiencies over this period.
LGA Chair Cllr Louise Gittins said: "Councils are the key to delivering the Government's priorities, but the risk of financial failure across local government is potentially becoming systemic. Councils already face a funding black hole of more than £2 billion next year.
"Having already delivered £24.5 billion in cuts and efficiencies, any further cuts on top of this would be disastrous."
She added: "The Government needs to take action to provide councils with financial stability and certainty in order to unlock their full potential.
"Immediate financial support and long-term funding reform and certainty – alongside a focus on preventative spending - are essential to protect services and enable councils to fully contribute to the Government's agenda, from social care to housing, economic growth and tackling climate change."
Adam Carey
