LGA warns against funding cuts for councils

The Local Government Association (LGA) has warned that further funding cuts for councils would be disastrous.

In its submission to the Treasury ahead of the Autumn Budget, the LGA has called for urgent funding and reform.

LGA analysis has shown that due to inflation and wage pressures alongside cost and demand pressures, English councils face a £2.3 billion funding gap in 2025/26, a figure which will rise to £3.9 billion in 2026/27. This represents a £6.2 billion shortfall across the two years.

Financial pressures are coming from rising costs in children's social care due to rising complexity and placement expenses. Transport costs for children with SEND have surged due to a 62.7 per cent rise in Education, Health and Care Plans from 2018/19 to 2023/24.

At the same time, 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.

Homelessness service costs have surged by £604 million (77.4 per cent) since 2019/20, driven by asylum, resettlement issues, and housing shortages and record spend on temporary accommodation.

Furthermore, the National Living Wage (NLW) has increased by nearly 10 per cent in both 2023/24 and 2024/25, while at the same time local government recruitment and retention issues are being exacerbated by pay gaps between local government and other sectors.

The LGA has called for significant and sustained increase in overall funding that reflects current and future demands for services alongside multi-year and timely finance settlements.

It is also calling for general rather than ring-fenced grant funding, reduce the fragmentation of government funding and end the use of competitive bidding to allocate grant funding.

LGA Chair Cllr Louise Gittins said: “Councils are the key to delivering the Government’s priorities, but the risk of financial failure across local government is potentially becoming systemic. Councils already face a funding black hole of more than £2 billion next year.

“Having already delivered £24.5 billion in cuts and efficiencies, any further cuts on top of this would be disastrous.  
 
“The Government needs to take action to provide councils with financial stability and certainty in order to unlock their full potential.
 
“Immediate financial support and long-term funding reform and certainty – alongside a focus on preventative spending - are essential to protect services and enable councils to fully contribute to the Government's agenda, from social care to housing, economic growth and tackling climate change.”