Local authorities have warned they face an “existential crisis” caused by massive funding shortfalls and any attempt by ministers to patch up budgets by allowing increased council tax is doomed to failure.
The multibillion “black hole” in England’s municipal finances – which has pushed a number of councils to the brink of bankruptcy – could not be fixed by local ratepayers alone, who would face unrealistic council tax increases of up to 20%, the Local Government Association (LGA) said.
Privately, many in local government believe few authorities would take the political risk of raising council tax even marginally above current cap levels when many of their residents are struggling in the middle of a brutal cost of living crisis.
Reports earlier this week suggested the government would attempt to head off the financial crisis by announcing in Thursday’s autumn statement that it would lift the long-established cap limiting annual council tax rises to 2.99% plus 1% for social care.
Local government insiders believe that even relatively small council tax rises above current cap levels would be unfair on ratepayers and unlikely to raise the sums needed to address the crisis. Each 1% rise would generate £309m for English councils, barely touching the sides of the shortfall, the LGA estimates.
Two true-blue Tory county councils, Kent and Hampshire, sent shock waves through Westminster this week when they told the prime minister, Rishi Sunak, that they were “sleepwalking into financial disaster”, with the crisis enveloping local government putting them and other authorities at risk of bankruptcy in the coming months.
They called for emergency help for councils alongside a clear plan for “long-term sustainability”. However, there is speculation ministers will announce this year’s council funding allocation will be “rolled over” to next April, leaving town halls to cut local services or raise council tax to try to balance their budgets.
There are concerns that any reliance on council tax to meet rising costs is unequitable because the most deprived areas of the country – where demand for services is highest – are least able to raise the funds they need.
The LGA chair, James Jamieson, said: “Local government remains the fabric of our country but many of the vital services we provide face an existential crisis.” Failing to provide long-term funding certainty would force councils to make significant cuts to services next April, including care for older and disabled people, child protection, homelessness prevention, leisure centres and bin collections, he added.
“While council tax is an important funding stream, it has never been the solution to the long-term pressures facing councils, raising different amounts in different parts of the country – unrelated to need – and adding to the financial pressures facing households,” he said.
The LGA estimates that English councils face a collective £2.4bn shortfall in budgets this year because of unexpectedly high inflation in staff pay, energy costs and contract prices. Without government intervention, the shortfall will rise to £3.4bn in 2023-24 and £4.5bn in 2024-25.
In a further sign of the bleak financial environment facing councils, local authority adult social care bosses said on Tuesday they had neither the funding nor the workforce to meet the needs of older and disabled people this winter.
The annual autumn survey carried out by the Association of Directors of Adult Social Services found nine out of 10 directors would struggle to cope with existing resources. One in 10 care worker posts were vacant, while collectively they were making an additional £113m of cuts on top of £597m savings already announced.
Cathie Williams, the association’s chief executive, said: “This is the bleakest autumn survey we have ever had. Only a handful of directors have any confidence they may be able to get through the winter with the funding they have and the care workers available locally.
“We were fearful in the summer; we are fearful now. This affects all of us.”
