Council leaders have expressed concern over the cancellation of this year’s spending review as it means many local authorities could face “difficult decisions this winter”.
During her Conservative leadership campaign, prime minister Liz Truss promised a spending review for this year. However, reports suggest that the government has backtracked on these commitments.
Cllr Sir Stephen Houghton, chair of the Specialist Interest Group of Municipal Authorities (SIGOMA), told Room151 that the cancellation of this year’s spending review “is very concerning”.
He said: “Inflationary pressure has severely impacted budgets this year and will result in many difficult decisions this winter for frontline services and regeneration projects unless significant support from the government is provided.
“So, the announcement that there will not be a new spending review, which recognises the impact of inflation on the cost of services, is very concerning.”
Public service funding
According to the Institute for Fiscal Studies, under the government’s October 2021 spending review, day-to-day public service funding was planned to grow by 3.3% per year between 2021-22 and 2024-25. However, inflation has been much higher than predicted, with the Consumer Prices Index standing at 9.9% for August 2022.
Houghton highlighted that the current support available to local authorities such as the Energy Bill Relief Scheme is not enough. The scheme plans to halve the cost of energy bills for non-domestic customers this winter, including councils.
“The announced energy scheme will only cover a fraction of the inflationary pressure for our members this year and will in no way relieve the pressure in the next financial year, which amounts to more than £20m on average for our member authorities,” Houghton added.
Jeffery Matsu, CIPFA’s chief economist, detailed that “abandoning plans” for a spending review later this year may “trigger a riptide that risks drowning an already fragile UK economy”.
He highlighted that rising inflation will put public service providers, such as local authorities, under pressure.
“High inflation and growing demand mean that public service providers will face difficult decisions about the size and scope of the essential services they provide,” Matsu added.
Inflationary pressure has severely impacted budgets this year and will result in many difficult decisions this winter for frontline services and regeneration projects unless significant support from the government is provided.
Two-year funding settlement
Matsu pointed out that reports of the cancellation of the spending review have also left local authorities unhopeful about the two-year funding settlement promised by the previous secretary of state, Michael Gove.
He said: “It remains to be seen what will come of the multi-year funding settlement and fair funding review that were promised to local government by year-end.”
Geoff Winterbottom, SIGOMA’s head of research and policy, said: “Our expectation is that the government won’t feel beholden to Gove’s commitments at all. The certainty to plan for the future is so key for our members and it is so important we get some clarity soon.”
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Adult social care pressures
The County Councils Network (CCN) predicted that costs for adult social care will rise by £3.7bn in 2023 compared to 2021 and said that a spending review this year is essential for local authorities’ funding levels.
A spokesperson said: “Whether the government undertakes a full spending review or allocates more funding via the local government finance settlement, without extra support this year to address these substantial new costs, councils face a winter of difficult decisions.”
In response to reports, the Treasury has since confirmed that they are “sticking to spending settlements for this spending review period”.
It remains to be seen what will come of the multi-year funding settlement and fair funding review that were promised to local government by year-end.
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