LGA warns of £8 billion funding black hole

The Local Government Association (LGA) has warned that councils could face an £8 billion funding black hole by 2028/29 without urgent action in the upcoming Spending Review.

New analysis from the LGA has highlighted that councils in England should be a major driver to boost local growth, but a funding gap is a risk without adequate funding.

In a submission to The Treasury ahead of the Spending Review, the LGA has outlined how councils have a vital role to play in the Government’s reform and growth agenda but will only be able to deliver on this with adequate financial support.

The submission underlines how not investing in council services will have a major impact - this includes SEND provision, home-to-school transport and temporary accommodation.

This year, councils received the seventh one-year settlement in a row, which has hindered how councils can plan and deliver services. The LGA has welcomed the government commitment to provide councils with three-year settlements over this coming Spending Review period.

The LGA's submission reveals that if current cost and demand trends continue, by the end of 2028/29 cost and demand pressures would add £21.4 billion to the cost of delivering council services since 2024/25. This is 29.8 per cent in additional service costs. Furthermore, if these new pressures and funding streams are taken into account, councils would face a £1.9 billion gap in 2025/26 rising to £4.0 billion in 2026/27, £6.0 billion in 2027/28, and £8.4 billion in 2028/29.

Cllr Louise Gittins, chair of the Local Government Association, said: “Councils hold the key to public sector reform which is a clear ambition of government. As leaders of their communities and major local employers, they must play a critical role in promoting sustainable and inclusive growth.

“We know that there are huge financial challenges ahead for government. However sufficiently funding councils in the Spending Review would enable them to fully play their part in leading local growth priorities and unlock the full potential of their local people, businesses and places.

“Local government has made huge savings and efficiencies over the past decade and continues to innovate and transform services to get the best for residents and provide greater value for money.   However, without adequate investment now we risk not being able to deliver crucial services that so many depend upon and our desire to help government fulfil its ambitions for the future are severely hindered.”