New LGA analysis: councils face almost £8 billion funding black hole by 2025

Local services in England face a funding gap of almost £8 billion by 2025, the Local Government Association has warned.

As more than 1,400 local government leaders, councillors and ministers gather at its Annual Conference in Birmingham today (Tuesday), the LGA is launching its campaign ahead of the Spending Review to build the case for investment in local services.

The LGA said that the Government’s next Spending Review will be “make or break” for local services, already under huge funding pressure. It presents the opportunity for long-term, sustained investment in local government that would improve the lives of residents and reduce the pressure on other parts of the public sector, such as the NHS.

By 2020, local authorities will have faced a reduction to core funding from the Government of nearly £16 billion since 2010. That means that councils will have lost 60 pence out of every £1 the Government had provided to spend on local services. Next year, 168 councils will receive no more core central government funding at all.

In a new report on local government funding, published today, new LGA analysis estimates councils in England face a funding gap of £7.8 billion by 2025. Plugging this gap would just keep services standing still and does not include any funding needed to improve services or reverse any cuts made to date.

Councils have responded to the financial challenges they face by finding new and innovative ways of operating, such as sharing services, while still delivering the vital services their residents rely on. Despite the best efforts of local government, the LGA is warning that this is no longer enough to protect the local services which are “on the brink of collapse” and facing huge and increasing demand pressures.

Local authorities are currently housing 79,000 homeless families in temporary accommodation, including more than 120,000 children. Last year saw the biggest annual increase in children in care since 2010 and councils are now starting 500 child protection investigations every day. Councils are receiving almost 5,000 requests for social care every day. Over the last six months, more than 8,000 people have been affected by care homes or home care providers either pulling out of contracts or closing completely.

In his 2018 Spring Statement, Philip Hammond committed to increasing public spending if public finances continue to improve. Local government leaders say the Chancellor’s Spending Review must recognise the urgent need to focus on fairer funding for local services.

LGA chairman Lord Porter said: “We’ve reached a point where councils will no longer be able to support our residents as they expect, including our most vulnerable – let alone help the country to prosper. Councils have shouldered more than their fair share of austerity and have tried to reduce any impact on residents. But there is only so much they can do and the financial challenges they face are growing.

“Councils now spend less on early intervention, support for the voluntary sector has been reduced, rural bus services have been scaled back, libraries have been closed and other services have also taken a hit. More and more councils are struggling to balance their books and others are considering whether they have the funding to even deliver their statutory requirements.

“If the Government allows the funding gap facing councils and the local services to reach almost £8 billion by the middle of the next decade then our councils and local services will be damaged beyond recognition. The impact on society – all places, all generations, every person – will be hugely damaging. Millions of people will be deprived of the vital local services that help improve quality of life and bind communities together.

“But by properly funding local services and giving councils the powers to work on behalf of their communities, local government can be the driving force for a new chapter in our country’s history. It would ensure residents can live with dignity, achieve their goals and aspire to do more than just get by, as well as helping to reduce pressures on the rest of the public sector.”

Rochdale Borough Council Leader Allen Brett said: “The government money we receive has reduced drastically and the demand for our services has increased.  We are still having to make some very tough decisions about the services we provide.

“We have already delivered significant savings while protecting the services that matter most to our residents but the task of making further cuts while setting a balanced budget gets tougher each year. 

"Rochdale continues to face the major challenge of reducing costs, maintaining services for an ageing population - all at a time of increasing uncertainty. Innovative thinking about how services are delivered is now more important than ever to ensure essential council services remain sustainable.”