Chancellor facing call for extra council funding

In a submission to Rachel Reeves ahead of her autumn budget set to be delivered on October 30, the Local Government Association (LGA) has told the Labour government that the financial predicament facing councils up and down the country is “unprecedented”.

The LGA has identified eight priorities for a potential reset of relations between local and central government, with reform to “out of date” funding systems top of the list.

“Our submission is aimed squarely not only at improving the lives of our councils’ residents but also at helping the Government deliver its missions in the context of these financial challenges. Councils will be a key partner for Government in delivering its objectives,” said a spokesman.

“Inflation, wage pressures and growing demand and complexity of need mean that councils face a funding gap of £6.2 billion over the next two years. And this needs to be seen in the context of the estimated £24.5 billion in cuts and efficiencies in service spending that councils made between 2010/11 and 2022/23.

“We recognise that providing additional financial support to councils when public resources are tight is challenging, but as demonstrated throughout our submission the potential return on this investment is substantial. Councils do not spend money for its own sake, every penny goes on providing services that are at the heart of local communities’ priorities and the Government’s missions.”

The submission also calls for an increased focus on preventative services against a backdrop of rising social care costs, along with enabling councils to build more homes – a move it says will reduce temporary accommodation costs to local authorities.

It adds that “immediate funding” is required to address shortfalls in adult social care budgets, which in Shropshire led to an extra £15million of inflationary cost pressures last year alone.

“The Labour Manifesto rightly identified adult social care as being vital to ensuring that everyone can live an independent and prosperous life. Immediate investment to stabilise the here and now, and pave the way for longer-term reform, is needed,” the submission adds.

“When overall cost pressures are compared with modelled change in core revenue funding for councils we estimate that councils face a £2.3 billion funding gap in 2025/26 rising to £3.9 billion in 2026/27. This is a £6.2 billion shortfall across the two years. These funding gaps relate solely to the funding needed to maintain services at their current levels. The implication here is that councils do not have enough funding simply to stand still.”

At the beginning of August, the chancellor asked the Office for Budgetary Responsibility (OBR) to prepare an economic and fiscal forecast, describing the scale of the challenging fiscal picture she had inherited as an “unwelcome surprise”.

The OBR forecast will be delivered alongside the budget on October 30.