IFS report shows that further council cuts are likely

New analysis by the Institute for Fiscal Studies (IFS) researchers shows that if demand and above-inflation cost pressures continue to grow in line with recent history, councils could be forced to cut back some areas of service provision. 

More deprived areas, which rely more on central government funding relative to council tax, will face the biggest squeeze unless there is a "significant redistribution of central government grants" towards them. 

A combination of statutory duties to vulnerable residents and big cuts to more discretionary services during the 2010s means some councils, at least, would struggle to cut back services further – putting them at risk of severe financial distress.

The report, funded by the Financial Fairness Trust and the Nuffield Foundation, sets out scenarios for English councils’ funding and spending.

One finding was that existing overall spending plans imply that ‘unprotected’ services could be cut by 1.9–3.5 per cent a year in real terms between now and 2028–29. 

They said that manifestos give no indication of whether the next government would prioritise council funding (as has been the case since 2019) or cut it by more than average (as was the case in the 2010s).

Kate Ogden, a senior research economist at IFS and an author of the report, said: "Many councils are under clear financial strain. They are struggling to meet the surging demand and cost for services such as children’s and adults’ social care residential placements, special educational needs support and temporary accommodation for the homeless. 

"Unless these pressures slow down significantly and quickly, or the next government gives a big injection of funding to local government, councils will likely need to make cutbacks to some areas of provision. Given that more discretionary services have often seen cuts of 40 per cent or more since 2010, councils may struggle to do this. More could be pushed to the financial brink, like Birmingham, Thurrock and Woking. 

Ahead of the general election, she said it is "remarkable that the main parties have been silent on how they would address these challenges."

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