Rising energy prices, spiralling inflation, and National Living Wage pressures are set to add £3.6 billion in unforeseen extra cost pressures onto council budgets in 2024/25, the LGA has warned.
These extra cost pressures pose a serious risk to the future financial viability of some services and councils, it added.
The LGA said the sharp spike in inflation and energy prices is an unprecedented crisis that could not have been predicted by either central or local government when the Government finalised the local government finance settlement earlier this year and councils set their budgets in March.
Its analysis shows that inflation, energy costs and projected increases to the National Living Wage will add £2.4 billion in extra cost pressures onto council budgets this year alone, rising to £3.6 billion in 2024/25.
This is forcing councils to rip up financial plans set just three months ago, and to consider potential funding cuts to local services to meet their legal duty to balance the books. It also risks hampering council efforts to help level up communities and support residents through the cost-of-living crisis.
Cllr James Jamieson, LGA Chairman, said: “Soaring inflation, energy prices and National Living Wage pressures are putting council services at risk. Budgets are having to be reset with potential cuts to the essential services people rely on, in the middle of a cost-of-living crisis.
“Inflation is not going to come down overnight. As our analysis shows, the impact on our local services could be disastrous. This will stifle our economic recovery, entrench disadvantage, and undermine government ambitions to level up the country.
“Local government remains the fabric of our country, as has been proved during the hugely challenging few years we have faced as a nation.
“Only with adequate long-term funding – to cover increased cost pressures and invest in local services – and the right powers, can councils deliver for our communities, tackle the climate emergency, and level up all parts of the country.”