The Local Government Association (LGA) has warned that authorities will need to increase council tax by more than 20% over the next two years to plug funding gaps, which is neither “sustainable nor desirable”.
This comes as chancellor Jeremy Hunt hinted that as part of the Autumn Statement on 17 November, he could make it easier for local authorities to increase council tax.
The LGA suggested that the scale of the funding gaps faced by councils were too big to be plugged by council tax increases alone.
LGA chairman James Jamieson said: “While council tax is an important funding stream, it has never been the solution to the long-term pressures facing councils, raising different amounts in different parts of the country – unrelated to need – and adding to the financial pressures facing households.”
The sentiment of the LGA was shared by the County Councils Network (CCN), which stated that the priority of the Autumn Statement should be to allocate authorities additional funding to address inflationary pressure, rather than to grant them the flexibility of setting higher council tax.
A CCN spokesperson said: “Local authorities are acutely aware that many of their households continue to be impacted by the cost-of-living crisis. Large-scale council tax rises are not the answer to the scale of the financial challenges councils face and would be unfair and unacceptable for residents.”
This comes as an LGA survey revealed that most councils are experiencing additional financial pressure or risk from pay pressures, energy price increases and uplifts in contract prices or re-negotiations, which were not included in their budget for this year.
It found that inflation increases to the National Living Wage and rising demand for services will lead to a £3.4bn funding gap in 2023/24 and a £4.5bn gap in 2024/25.
“Only with long-term funding certainty to cover increased cost pressures and invest in local services, can councils make innovative and meaningful decisions over their finances,” Jamieson added.
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