Local services face almost £6.5 billion funding gap by 2025: New LGA analysis

9 Mar 2020 02:53 PM

Local services in England face an overall funding gap of almost £6.5 billion by 2025, new analysis by the Local Government Association ahead of the Budget reveals.

The Government responded to the LGA’s call to provide councils with desperately-needed new funding this year, alongside council-tax raising powers and the continuation of key government grants.

This has halved the funding gap councils face in 2020/21 compared to last year. It means councils will be able to meet extra demand and cost pressures they face this year.

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 - in particular adult and children’s social care and homelessness support - will see the funding gap facing councils in England rise again from 2021/22 before it reaches almost £6.5 billion by 2025.

By the middle of the decade the funding gap facing vital adult social care services supporting older and disabled people alone will reach £3.9 billion – making up almost two thirds of the overall gap.

It comes as the Budget marks 90 days since the General Election.

The LGA is calling for 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. 

It also needs to pave the way for the Spending Review to provide a long-term, sustainable funding solution for our local services. Every pound invested by government in council-run services will benefit communities, improve lives and relieve pressure on other services like the NHS and welfare.

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.

Business rates account for around a quarter of all council spending power. Communities cannot afford one of the main methods of funding local services to be dragged through years of debate and wrangling. 

It is imperative that the Government works closely with local government as part of its review of the business rates system and that the impact on how local services are sustainably paid for must be one of its central considerations.

Cllr 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.”

Notes to editors

1. The LGA’s Budget Submission sets out how it can unlock the ambitions of councils to further deliver high quality services, maximise the growth potential of their local areas and help the Government deliver on national priorities. It can be read here.
2. The LGA’s new report – The lives we want to lead; towards change, towards hope – sets out the main issues that need to be addressed to ensure that people can live the lives they want to lead, and the kind of action councils want to see from government. A copy is available on request. This includes making the case for the value of social care in its own right; funding to secure the short- to medium-term and pave the way for future reforms and more investment to support prevention and wellbeing. We also need changes from the NHS to further support a greater emphasis on prevention and wellbeing; and consideration of any long-term reform proposals against a set of key tests, such as their clarity, fairness and whether they pool the financial risk of care costs amongst the population at large.
3. By 2025, local government in England will face an almost £6.5 billion funding gap. The LGA methodology is available on request.

Individual service funding gaps	£000s	£000s	£000s	£000s	£000s	£000s
	2019/20	2020/21	2021/22	2022/23	2023/24	2024/25
Adult social care	-1,344,947	-805,782	-1,483,911	-2,212,643	-2,958,413	-3,900,513
Children’s services	-805,388	-478,468	-743,085	-1,013,268	-1,292,991	-1,574,311
Homelessness	-138,918	-184,172	-240,969	-301,192	-364,271	-432,018
All other services	0	190,581	22,760	-147,424	-318,228	-493,753
TOTAL	-2,289,253	-1,277,841	-2,445,205	-3,674,527	-4,933,903	-6,400,595