Rising inflation and the mounting cost of delivering services have added a further £1bn to local authorities’ budget gaps over the next two years, a new analysis by the Local Government Association (LGA) has found.
In July, the LGA revealed that councils faced a funding gap of almost £3bn by 2025, however an updated analysis, published today (20 October), has outlined that this budget pressure has increased to £4bn.
The LGA, which is the national membership body for local authorities in England and Wales, stated that the additional funding pressure is due to an “inflationary storm”, which is adding “unsustainable costs” onto councils’ budgets. This is on top of authorities’ core spending power since 2010/11 experiencing a real terms cut of 27%.
Its analysis also showed that by 2024/25 cost and demand pressures will have added £15bn to the cost of delivering council services since 2021/22.
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Pete Marland, chair of the LGA’s Resources Board, said: “Councils remain firmly in the eye of the inflationary storm and severe funding and demand pressures mean that council finances are under pressure like never before.
“None are immune to the risk of running into financial difficulty and others have already warned of being unable to meet their legal duty to set a balanced budget and are close to also having to issue section 114 notices.”
Over the past few months, a mounting number of local authorities have come forward suggesting that they face issuing s114 notices in the future, including Coventry and Kent.
In a submission to chancellor Jeremy Hunt, the LGA stated that the government needs to provide immediate funding to councils so that they can deliver their 2023/24 budgets and meet ongoing cost and demand pressures.
The LGA also warned that council tax increases and biting into reserves are not “long-term solutions to the financial challenges facing councils”.
“We urge the chancellor to act to address the acute financial challenges faced by councils,” Marland added.
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