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LGA warns of £8bn 'black hole' in council finances

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The Local Government Association has warned of an £8bn ‘black hole’ in council funding by 2025 without “long-term, sustained investment” from central government.

In launching its lobbying campaign ahead of next year’s spending review, the LGA warned it represents a “make or break” opportunity for local government.

LGA chairman Lord Porter (Con) said: “We’ve reached a point where councils will no longer be able to support our residents as they expect, including our most vulnerable – let alone help the country to prosper.

“Councils have shouldered more than their fair share of austerity and have tried to reduce any impact on residents. But there is only so much they can do and the financial challenges they face are growing.”

In a report published Tuesday, the LGA warns councils are “close to exhausting all efficiencies”, ensuring that all but the most essential services have been cut.

“In spite of all the best efforts of local government, the reality of £16bn of funding reductions and increasing inflation are having a negative impact and residents are starting to see the consequences of these cuts,” the LGA said in its report.

New LGA analysis of total council tax shows English councils raised £23.1bn in 2017-18, which was less than the net total budget for adult and children’s social care alone - totalling £23.7bn.

The Funding Gap by 2025 

ServiceForecast Funding Gap by 2025
Adult social care £3.5bn
Children’s services £3bn
Public health £638m
Homelessness £426m
All other services £188m
TOTAL £7.752bn

Source: LGA Analysis

County Councils Network finance spokesman Nick Rushton (Con) said: “With rising demands and costs on our services outside our control, confidence is dropping dramatically. Just one in three county leaders say they will be able to deliver a balanced budget from 2020. Without extra resource, the consequences could be dire.

”We are calling on the new communities secretary to lobby the Treasury for badly-needed extra resource for councils before the spending review, and a sustainable four-year solution after that.”

In an LGC interview in May, local government minister Rishi Sunak said councils have “shouldered a disproportionate share of the burden” on austerity and promised to use the spending review to “have that conversation with the Treasury… to make sure that the aggregate quantum of funding is sufficient to meet needs” for the foreseeable future.

The LGA previously warned a year ago that the total funding gap for local government - the difference between forecast cost pressures and council income - was expected to be £5.8bn by 2020, with a funding gap for children’s services alone expected to total around £2bn. That difference is expected to rise even further by 2025, with total council income increasing only marginally compared with total cost pressures.

The largest service demand isolated in Tuesday’s LGA report remains in adult social care however, with a £3.5bn deficit forecast for 2025 if additional resource is not found. The LGA cited a 2017 analysis from Newcastle University, when it warned that an additional 350,000 people will require “high levels of social care from 2025”.

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