Council chiefs warn companies face £3bn funding hole as inflation bites

Councils throughout England are dealing with a funding shortfall of just about £3bn over the following two years simply to maintain native companies at their present ranges, in keeping with a brand new report.

The Local Government Association (LGA) mentioned the price of delivering companies would exceed core funding by £2bn this yr and £900m in 2024/25.

And, if inflation continued to rise, the hole might enhance by an extra £2.2bn.

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They additionally warned there could be no monetary wiggle room for native authorities to handle present underfunding in areas equivalent to social care or homelessness, nor to enhance or increase present companies.

The LGA mentioned councils must think about making cuts to companies or spending their reserves with a purpose to steadiness the books this yr.

But it warned the latter was not a long-term answer to monetary pressures, as reserves “can only be spent once”.

Chair of the group’s assets board, Councillor Pete Marland, mentioned: “Inflation, the National Living Wage, energy costs and ongoing increasing demand for services are all adding billions of extra costs onto councils just to keep services standing still.

“Councils’ potential to mitigate these stark pressures are being repeatedly hampered by one-year funding settlements, one-off funding pots and uncertainty because of repeated delays to funding reforms.”

He mentioned the federal government “needed to come up with a long-term plan to sufficiently fund local services”, together with multi-year settlements and extra readability on monetary reform.

That means councils might “plan effectively, balance competing pressures across different service areas and maximise the impact of their spending”.

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A authorities spokesperson mentioned this yr’s monetary settlement would make virtually £60bn out there to English councils, which they mentioned was a rise of 9.4% on final yr.

And they mentioned the vast majority of funding was “un-ringfenced in recognition of local authorities being best placed to understand local priorities”.

The spokesperson added: “The government will look in the round at local government spending when finalising budgets at next year’s finance settlement, as we do every year to ensure councils can continue to deliver vital services.

“We have additionally offered multi-year certainty to native authorities, outlining spending over the following two years to permit councils to plan forward with confidence.”

The LGA’s report comes on the first day of its annual conference in Bournemouth, with Levelling Up Secretary Michael Gove and deputy Labour leader Angela Rayner both expected to address delegates – including senior council leaders from across the country.

Ms Rayner will promise to give residents a “greater stake” in their area, saying: “Decisions that create wealth in our communities – financial wealth and civic wealth – must be taken by native folks with pores and skin within the sport.”