Thanks to rising energy prices, inflation, and National Living Wage pressures, there is set to be an increase of extra costs on council budgets in 2024/25, as revealed by new analysis by the Local Government Association.
The analysis has shown that the issues surrounding inflation, energy costs and projected increases to the National Living Wage are expected to add £2.4 billion in extra costs to council budgets this year alone, with them set to rise to £3.6 billion in 2024,25. This forces councils to change the financial plans that they set only three months ago due to the potential cutting of funding to local services. Bin collections, pothole filling, care for older and disabled people, early intervention, support for low-income households and homelessness prevention are all some of the services that are likely to face cuts so that councils can balance the books, which is a legal duty.
Chairman of the Local Government Association, Councillor James Jamieson, said:
“Soaring inflation, energy prices and National Living Wage pressures are putting council services at risk. Budgets are having to be reset with potential cuts to the essential services people rely on, in the middle of a cost-of-living crisis.
Inflation is not going to come down overnight. As out analysis shows, the impact on our local services could be disastrous. This will stifle our economic recovery, entrench disadvantage, and undermine government ambitions to level up the country.
Local government remains the fabric of our country, as has been proved during the hugely challenging few years we have faced as a nation. Only with adequate long-term funding – to cover increased cost pressures and invest in local services – and the right powers, can councils deliver for our communities, tackle the climate emergency, and level up all parts of the country.”
The LGA have said that the sharp spike in inflation is unprecedented and could not have been predicted by central or local government when the government finalised the local government finance settlement earlier this year, and when the councils set their budgets in March. They have also warned the extra costs can pose a risk to the future financial viability of some of the councils and the services they offer.
