Councils warn of £6.5 million funding gap by 2025

Ahead of the Budget, the Local Government Association has warned that local services in England face an overall funding gap of almost £6.5 billion by 2025.

Council leaders claim that the funding gap facing vital adult social care services supporting older and disabled people alone will reach £3.9 billion by the middle of the decade, making up almost two thirds of the overall gap. Therefore, they are urging the government to use the Budget to urgently progress the cross-party talks on the future of adult social care, pledged by the Prime Minister to start within the first 100 days of his new government.

Having lost nearly £15 billion in central government funding in the last decade, many councils continue to face significant challenges when trying to set budgets this year and protect services from further cutbacks. After a reduction in the funding gap in 2020/21, LGA analysis shows that rising cost pressures and unprecedented demand for services will see the funding gap facing councils in England rise again from 2021/22 before it reaches almost £6.5 billion by 2025.

The LGA said councils also need urgent clarity about the timing and implications of the planned Fair Funding Review and how the government’s fundamental review of business rates will impact on reforms to allow local government to keep more of business rates income collected locally.

James Jamieson, chairman of the LGA, said: “This year’s positive funding settlement will help councils meet the rising cost and demand pressures they face this year. This means more older and disabled people able to live the lives they want to lead and more of our most vulnerable people can be supported.

“This is only a one-year settlement. Councils continue to face severe funding and demand pressures that continue to stretch local services to the limit and a funding gap that could reach almost £6.5 billion by 2025. The Budget and the Spending Review need to provide a sustainable, long-term funding settlement for councils which means they can improve services and not just keep them going. With long-term investment, councils can protect local services, improve the lives of their communities and meet the significant ongoing pressures they face both now and in the future.”