Local authorities need £10 billion to plug the funding gap and meet the increase in demand for services, the Local Government Association has warned.

Ahead of the Spending Review, the LGA says that councils in England will face a funding gap of more than £5 billion by 2024 to maintain services at current levels. This figure could double given the economic and societal uncertainty caused by the COVID-19 pandemic.

Cllr James Jamieson, LGA Chairman, said: “The pandemic has shone a light on the highly valued services councils provide - including public health, adult social care, children’s services, homelessness support, and help for those in financial hardship.

“Councils are focused on supporting communities through this crisis and beyond as we look to rebuild our economy, get people back to work and level up inequalities. That is why the first Comprehensive Spending Review in more than a decade will shape the direction of this country for years to come,” he added.

Many local authorities were in a difficult financial position before the pandemic hit after a decade of central government funding reductions. They will continue to face increasing demand for day-to-day services - some pre-existing and others made more significant by the impact of COVID-19 – amid substantial income losses, such as from local taxation, fees and charges.

Significant challenges remain

The LGA states that while government has provided some much-needed support, significant challenges remain as a result of COVID-19.

The LGA’s submission to the Treasury outlines how with the right powers, sustainable funding, and enhanced flexibilities, local authorities can continue this vital work. The submission sets out the need for the Chancellor to use the CSR to provide an additional £10.1 billion per year in core funding to councils in England by 2023/24. This is made up of:

• Plugging the £5.3 billion funding gap that councils in England face by 2023/24. This is just to maintain services at today’s level. This gap, which could double due to the uncertainty resulting from the continued impact of COVID-19, assumes annual 2 per cent council tax increases and inflation-linked growth in grants.
• £1.9 billion for services such as children’s social care which are struggling under increased demand. In children’s social care and homelessness services, councils have had to overspend on budgets in recent years to try and cope.
• A further £2.9 billion could be used by councils to help improve services and reduce inequalities. This includes investment in early intervention and prevention, reforming adult social care pay, boosting connectivity, improving parks and green spaces and more.

The LGA is urging the government to commit to a three-year local government finance settlement this year to cover general grant funding, specific funding such as the public health grant and council tax flexibilities. This needs to be accompanied by a four-year settlement for consolidated capital investment to match the Chancellor’s timeframe for investment.

Cllr James Jamieson, LGA Chairman, said: “Securing the immediate and long-term sustainability of local services must be the top priority.

“The ambition of councils goes way beyond just maintaining services the way they are today. We want to create new hope in our communities. With the right funding and freedoms, councils can improve the lives of their residents, address the stark inequalities the pandemic has exposed, develop a green recovery, address skills gaps and rebuild the economy so that it benefits everyone,” he concluded.

Rethinking public finances