Inflation could add £3.5bn to local authorities’ costs this year and next, more than double the expected rise, according to research from the County Councils Network (CCN).
The CCN’s analysis predicts the inflationary costs for 40 county and unitary authorities in England. It reveals that rising costs of delivering day-to-day services due to inflation make up £2.86bn of the predicted £3.5bn, whilst projected increases in demand for these services are set to add £647m to costs.
The research also found that inflation is projected to add £700m to councils’ capital costs, such as the construction of new roads and refurbishments to buildings, over the two-year period.
Cllr Tim Oliver, CCN’s chairman, said: “Considering inflation and demand is set to add £3.5bn to our costs, this would be worse than the period of austerity and devastating for local services.
“We will be left with unpalatable decisions, with many likely to have to resort to a very basic ‘core offer’ level of services, despite this ultimately being a false economy and adversely hitting the most vulnerable in our society.”
The rising costs are much larger than previous estimates by the CCN and PwC, which predicted that pressures would rise by £1.5bn over the same two-year period.
This comes as chancellor Jeremy Hunt announced on 17 October that areas of public spending will need to be cut and for all government departments to look for further efficiency savings. The CCN warned that moves to cut budgets next year would result in “devastating” reductions in local services.
“I know the new chancellor faces some very difficult decisions, but our message is unambiguous: with inflation causing multi-billion black holes in our budgets, we need more help, not less.
“There is simply no longer any easy ‘efficiency savings’ or low-hanging fruit to cut from councils,” Oliver added.
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