Projects to build schools, swimming pools and libraries are earmarked for urgent cuts in funding, as town halls have been hit by an unexpected £ 1.7bn hole in their budgets, the Guardian may reveal.
Frenzied inflation and rising energy bills mean council leaders have been forced to thwart financial plans several months ago, with higher-than-expected employee payments also contributing to their newfound deficits. Without help from Whitehall, this will leave them no choice but to cut services and pay a municipal tax next April.
It is believed that local government leaders have already turned to ministers for additional financial support to mitigate the impact of rising costs, which they say will reduce their capacity to support residents facing a cost-of-living crisis.
Georgia Gould, leader of Camden’s council and chair of the London council, warned that without increased grants, the crisis would undermine the local safety net and force leaders to “cut services, affecting those residents who need it most.” them. “
There are fears that local government is facing the drastic financial pressure it last endured during the pandemic, when the government was forced to pump billions into council budgets to prevent what the Court of Auditors called “financial failure throughout system “.
“This is the worst collapse in terms of inflationary pressure on council budgets that we have seen in decades. The councils are facing really difficult decisions regarding services and capital projects, “said Rob Whitman, CEO of Cipfa, the local government’s treasury body.
The deterioration in the financial outlook is rapid and unexpected. In January, when budgets for 2022-23 were agreed, councils typically reported average wages and inflation costs of around 3%. However, inflation is currently 9%, with the Bank of England predicting it will reach 11% by October.
Most local authorities already have challenging plans for millions of pounds in savings this year, and some in particular fear they have to go back and find further spending cuts could bring them closer to effective bankruptcy.
“It is not yet clear that the government recognizes that this has the potential to have a major financial impact and will disrupt its equalization plans. This is not a routine whining of the board for funding from the board. This is a really serious problem that we are all facing, “said Sharon Taylor, Labor leader in Stevenage City Council and vice-chairman of the district council network.
The government acknowledges that inflation is higher than it was when the decision to review council spending was announced last autumn, but is not convinced that all areas of mayor’s spending are sensitive to inflation. He insists that some services can be isolated from cost increases through multi-year contracts with suppliers.
A government spokesman said he had given an additional £ 3.7 billion to British councils this year to ensure they could provide key services. “We are working with the sector to understand the impact of emerging challenges on local authorities and we are ready to talk to any council that has concerns about its ability to balance its budgets,” the spokesman said.
However, conservative local politicians believe that without additional funding, councils have no choice but to reduce services or impose a municipal tax. Tory leader of the North Yorkshire council and chairman of the district council network, Carl Les, said this week that the councils were preparing for a “winter of difficult decisions”.
Without additional funding, councils have no choice but to reduce services or pay municipal tax. Photo: Andrew Fox / Guardian
Major capital schemes are under threat, with an increase in construction costs of up to 25% threatening the viability of regeneration schemes and school and housing projects. Many will be preserved or canceled, councils fear, while potholes and other road repair programs will be reduced.
The councils believe that the effects of rising energy and fuel costs will be observed in every municipal service, from the price of fuel for medical workers’ cars, waste trucks and taxi services for school transport, to heating bills for care homes, swimming swimming pools and libraries.
A big problem is the bill for payment to the local government, which represents 50-60% of the expenses of the mayor’s office. Many councils have predicted a 2% pay rise for 2022-23, but unions have announced a 10% pay rise this month, and additional costs are expected to increase the “national wage for life”.
Paying the projected increase in the national wage for only the lowest paid Soviet staff could cost the councils at least £ 400 million over the next two years, the Association of Local Governments said. Without the support of the central government to cover these costs, councils will be forced to cut jobs and services, he added.
The councils also expect an increase in demand for services as people struggle with the cost of living crisis. Some expect the aftermath of a sharp rise in private sector rents to lead to an increase in evictions, increasing pressure on homeless services, especially the cost of temporary accommodation.
The Sigoma Group, which represents 47 city governments and covers about a quarter of all British council spending, including the cities of Sheffield, Manchester, Liverpool and Leeds, has warned that inflation will create a financial shortfall of £ 570 million in its members’ budgets this year.
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The group of London Councils, which is lobbying for the 32 districts of London, believes that its members will have to find additional savings of £ 400 million from now until next April. The network of district councils, which represents 183 councils, has not calculated a figure, but warned that the councils face serious challenges.
A study of the network of county councils of its 40 members, from Kent, Essex and home counties to Durham and Cornwall, revealed a collective unfunded cost of £ 730 million this year, calling it “exceptional extra costs at a time when budgets were already under pressure”. .
Although the British councils had a headline increase in the real conditions of basic consumer capacity for 2022-2023, they argue that this is eroded by inflation and growing demand for services caused by the cost of living crisis.
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