Further reductions in council spending would be disastrous
The 2024 Autumn Budget (on 30 October) and the Spending Review are taking place in the context of challenging fiscal conditions.
The LGA’s submission on these key events is aimed at improving the lives of our councils’ residents and helping the Government deliver its missions in the context of these financial challenges.
However, with councils facing a funding gap of more than £2 billion next year (2025/26), the LGA has warned that further cuts would be disastrous for councils and their communities. They would also prevent councils from making any meaningful contribution to the Government’s agenda – from social care and housing to economic growth and tackling climate change.
In our submission to the Treasury, we have said that the Government needs to take immediate steps to stabilise council finances and protect vital local services.
With 18 councils already relying on exceptional financial support from government to balance their books this year, we are warning that there is a growing risk of systemic financial failure.
LGA analysis shows that, because of inflation and wage, cost and demand pressures, English councils face a £2.3 billion funding gap in 2025/26, rising to £3.9 billion in 2026/27 – a £6.2 billion shortfall across two years.
Key drivers include soaring costs in children’s social care because of the rising complexity and cost of placements, while home-to-school transport costs for children with special educational needs and disabilities (SEND) have surged because of a 62.7 per cent rise in education, care, and health plans from 2018/19 to 2023/24. There is also growing pressure on councils’ dedicated schools grant budgets because of increased demand for services for children with SEND, with the deficit here forecast to reach £5 billion by 2025/26.
Rising costs and demand in adult social care have driven a £3.7 billion (18.1 per cent) increase in budgeted spend from 2019/20 to 2024/25, while homelessness service costs have increased by £604 million (77.4 per cent) since 2019/20, driven by asylum and resettlement issues, housing shortages, and record spending on temporary accommodation.
The National Living Wage has increased by nearly 10 per cent in this financial year and the last, and there could be a further substantial increase in 2025/26. Supporting those on the lowest pay is not only fair, but also improves the motivation, loyalty, productivity, and retention of hardworking council staff – especially when more than nine in 10 councils are struggling to fill essential roles. However, these unfunded increases add to pressure on budgets.
Councils are increasingly having to draw on their financial reserves to manage these cost pressures and balance their budgets – which is not a sustainable solution.
While the Government has warned that the Autumn Budget will be “painful”, with Whitehall departments tasked with finding savings, we are warning that any further local government funding cuts would tip many more councils towards financial ruin and leave them unable to deliver key local services.
New LGA analysis shows that service spending in 2022/23 was 42 per cent lower than it would have been had service spend moved in line with cost and demand pressures since 2010/11. This means that councils have made £24.5 billion in service cuts and efficiencies over this period. There is simply no more capacity for further cuts to council budgets.
Council tax-raising powers have also been too heavily relied on by government in recent years to boost local government core spending power.
While council tax is an important funding stream, the significant financial pressures facing local services cannot be met by council tax income alone.
Instead, the Government must provide adequate funding to sustain the vital services on which our communities rely every day, and the LGA is clear that there needs to be immediate action to support the sector in the short term.
The LGA’s submission – which sets out eight priorities for local government (see right) – also looks ahead to next spring’s Spending Review, setting out the benefits of investing in preventative services rather than having a reactive, demand-led model to service spending.
Services that intervene earlier in people’s lives reduce the need for later acute and reactive spend, and are vital to addressing the drag on our economy from socioeconomic inequality and poor health.
The LGA wants to work with the Government to improve outcomes and increase the efficiency of public spending by intervening at the earliest opportunity to minimise preventable disadvantage.
Local government priorities
Sufficient and sustainable funding
Councils need:
- a significant and sustained increase in overall funding that reflects current and future demands for services
- multi-year and timely finance settlements
- a cross-party review of the local government funding system, including of council tax and business rates retention.
A new focus on prevention
The Government should:
- ensure the potential long-term benefit of spending on prevention is routinely considered in Whitehall
- work with councils to strengthen cost-benefit analysis, enhance understanding of social return on investment, and better track long-term outcomes
- increase investment in the public health grant
- ensure NHS spending on prevention at ‘integrated care system’ level increases annually by at least 1 per cent over the next five years.
Building the houses we need
The Government should:
- strengthen housing revenue accounts via a long-term rent settlement
- reform Right to Buy to support one-to-one replacement of existing social housing
- increase temporary accommodation housing benefit subsidy rates so that councils have more resource to invest in homelessness prevention.
Supporting our children and young people
The Government should:
- produce a cross-government strategy for children
- provide sustainable funding for preventative and early help services across children’s services and SEND provision
- introduce a children’s workforce plan
- reform the SEND system, as set out in research commissioned by the LGA and the County Councils Network (see first 697)
- write off all dedicated schools grant deficits
- provide more funding for home-to-school transport, particularly for children with SEND.
Reforming and sustainably funding adult social care
The Government should:
- provide immediate funding to alleviate the worst consequences of the current challenges
- end the reliance on council tax and the social care precept for funding adult social care
- commit to reviewing NHS continuing healthcare
- provide new funding to kickstart a more preventative model of care and support
- take action on care worker pay.
Backing local climate action
The Government should:
- revitalise partnership with local government through a local green energy mission delivery programme
- ensure every area is covered by a local climate action plan agreed by central and local government, with long-term funding certainty
- rapidly retrofit social and fuel-poor homes
- bring forward and devolve all funding for retrofitting such homes to councils
- rewire current proposals to extend the Emissions Trading Scheme so that the costs are passed onto manufacturers and retailers, not councils.
Delivering economic growth
The Government should:
- ensure all councils, including in mayoral combined authorities, can play a full and meaningful role in delivering inclusive growth
- introduce a simplified, consolidated and long-term approach to growth and infrastructure funding
- progress current levelling up-funded projects and provide an additional year of fully flexible UK Shared Prosperity Fund revenue funding
- work towards a fully devolved and integrated employment and skills offer
- introduce a reformed funding package for local bus services.
Safer streets
The Government should:
- invest in communities hardest hit by recent violence, including in youth hubs and diversionary activities for young people
- ensure community safety partnerships are equipped with the powers, resources and partners to deliver
- ensure community safety partnerships have the intelligence and data-sharing capabilities to prioritise local responses.
- This is an edited version of the LGA’s ‘Autumn Budget and Spending Review Submission 2024’.
