Projects to build schools, swimming pools and libraries have been earmarked for emergency funding cuts because councils have been hit by an unexpected £ 1.7bn hole in their budgets, The Guardian can reveal.
Rampant inflation and rising energy bills have forced city council leaders to break financial plans for months, with higher-than-expected staff pay bills also contributing to their new deficits. Without Whitehall’s help, he will have no choice but to cut back on services and raise the city tax next April.
It is understood that local government leaders have already approached ministers for additional financial support to cushion the impact of rising costs, which they said will reduce their ability to support facing residents. to the crisis of the cost of living.
Georgia Gould, leader of Camden council and chair of London councils, warned that without increased funding for the grants, the crisis would undermine the local safety net and force leaders to “reduce services, affecting residents who most they need them “.
There are concerns that the local government will face the kind of drastic financial pressures it last experienced during the pandemic, when the government was forced to inject billions into municipal budgets to prevent what the National Office of ‘Audit called’ system-wide financial failure ‘.
“This is the worst crisis in terms of inflationary pressures on municipal budgets that we have seen for decades. City councils are facing really difficult decisions in terms of services and capital projects,” said Rob Whiteman, Cipfa’s chief executive. , the treasury body of the local government.
The deterioration of the financial outlook is rapid and unexpected. In January, when the 2022-2023 budgets were agreed, councils typically took into account average wages and inflation costs of about 3%. However, inflation is currently at 9%, and the Bank of England expects it to reach 11% in October.
Most local authorities already have challenging £ 1m savings plans in place for this year, and some privately fear that having to go back and find additional spending cuts could lead them to effective bankruptcy.
“It’s not clear that the government still recognizes that this has the potential to have a significant financial impact and will disrupt its leveling plans. This is not uncommon for the council to complain about the council’s funding. This is a a really serious issue that we all face, “said Sharon Taylor, Labor leader of Stevenage City Council and vice president of the district council network.
The government agrees that inflation is higher than when the city council’s spending review agreement was announced last fall, but is not convinced that all areas of spending in the city council are sensitive to inflation. He insists that some services may be isolated from cost increases through multi-year contracts with suppliers.
A government spokesman said he had given an additional £ 3.7bn to English councils this year to ensure they could provide key services. “We are working with the industry to understand the impact of emerging challenges on local authorities and are willing to talk to any council that has concerns about their ability to balance their budgets,” the spokesman said.
Conservative politicians in local government, however, believe that without additional funding, councils have little choice but to cut services or put the municipal tax. Conservative North Yorkshire council leader and chairman of the County Council Network, Carl Les, said this week that the councils were preparing for “a winter of difficult decisions”.
Without additional funding, councils have little choice but to cut services or raise municipal taxes. Photo: Andrew Fox / The Guardian
Major capital schemes are under threat, with construction cost increases of up to 25% threatening the viability of regeneration schemes and school and house construction projects. City councils fear that many of them will be canceled or canceled, while pothole filling and other road repair programs will be reduced.
City councils believe the effects of rising energy and fuel costs will be seen in all municipal services, from the cost of fuel to carers’ cars, garbage trucks and transport taxi services. school, to the bills for heating residences, swimming pools and libraries.
A major concern is the local government bill, which accounts for 50 to 60 percent of city council costs. Many councils have assumed a 2% pay rise for 2022-23, but unions this month introduced a 10% pay raise and more additional costs related to the “national decent wage” increase are expected.
The Association of Local Governments said paying the projected increase in the national decent wage only for lower council staff could cost councils at least £ 400 million over the next two years. Without central government support to cover this cost, councils would be forced to cut jobs and services, he added.
City councils also anticipate an increase in demand for services as people struggle with the cost-of-living crisis. Some expect sharp increases in private sector housing rents to lead to increased evictions, increasing pressure on homeless services, especially spending on temporary accommodation.
The Sigoma group, which represents 47 city authorities and covers about a quarter of all English council spending, including the cities of Sheffield, Manchester, Liverpool and Leeds, has warned that inflation will create a financial deficit of £ 570 million in the budgets of its members this year. .
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The London Councils group, which is pushing for London’s 32 districts, estimates that its members will have to find an additional £ 400 million in savings by next April. The District Council Network, which represents 183 town halls, has not calculated a figure, but has warned that town halls are facing major challenges.
A survey by the County Council of its 40 members, from Kent, Essex and home counties to Durham and Cornwall, revealed £ 730 million in unfunded collective costs this year. the “extraordinary additional costs at a time when budgets were already under stress.”
Although the UK councils did see a real increase in basic spending power for the period 2022-23, they argue that this has been eroded by inflation and rising demand for services caused by cost of living crisis.