Budget 2021: Local services face cuts as Sunak's Spending Review delivers real-terms fall in council funding

Asia's Tech News Daily

Council services such as social care, bin collection, sport centres and road repairs are likely to be cut following real-term reductions in funding to councils in Rishi Sunak’s Spending Review, the Institute of Fiscal Studies (IFS) will warn.

Analysis by the IFS shows that despite sharp rises in household council tax bills and £4.8bn of new grant funding for local authorities up until 2025, any additional revenue will be wiped out by rising costs, and councils will be forced to slash at least some essential services.

The IFS found that the expected average rise in council tax bills across all councils equates to 2.8 per cent increase each year until 2025. With the average council tax bill currently about £1,428, three consecutive years of rises would mean the average household would pay £39.92 more from next April, and £123.13 more from April 2024 than they paid this year.

However, even this additional income for councils, alongside Government funding, will be wiped out by inflation, according to the analysis.

Kate Ogden, an economist at the IFS, told i: “The Office for Budget Responsibility’s most recent forecast is for Consumer Price Inflation of 3.6 per cent between this year and next, and 8.3 per cent by 2024/25.

“That means a 2.8 per cent rise in bills equates to a small real-terms cut next year, and only a very modest real-terms rise in bills over the whole period.”

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Councils reacted with anger, warning that unless local authorities increase council tax bills by 3 per cent – thereby forcing a referendum in which local residents will vote on the rise – then services are likely to be cut.

Sam Chapman-Allen, chairman of the District Councils Network and Conservative leader of Breckland District Council in Norfolk said: “The Spending Review does not deliver the firm financial foundation district councils need to continue delivering essential frontline services and supporting local economies to grow. 

“We cannot see how the £4.8bn new grant funding announced by the Chancellor will come close to addressing the financial pressures district councils and the rest of local government are under.   

“Councils face a triple whammy of rising inflation, higher wage costs from the lifting of the public sector pay freeze, and continuing pressures from the impact of Covid. This leaves councils with an unpalatable choice between increasing council tax for hard-pressed local residents or cutting services that every local resident and business relies on.”

James Jamieson, chairman of the Local Government Association, which represents local authorities, and former Conservative leader of Central Bedfordshire Council, added that the Spending Review “will help meet some – but not all – of the extra cost and demand pressures they face just to provide services at today’s levels”.

He added: “It is disappointing that the Chancellor has not provided additional funding to address existing pressures on adult social care services, and not increased public health funding. We remain concerned that the money allocated to social care from the Health and Care Levy will be insufficient to fund reforms.”

A spokeswoman for the Treasury said: “It completely untrue that we are cutting council funding in real terms. Councils have received a real-terms increase in their core spending power of 3 per cent over the period of the Spending Review.

“This represents the largest increase in core funding in over a decade. That also follows real-terms year-on-year increases since 2019.”

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