Councils risk being stripped down to the bare minimum and having to enforce fresh “draconian” cuts amid warnings of an estimated £50bn funding gap over the next six years.
Rising costs – particularly around social care – and increased demand for services hitting councils across England could trigger a need for £51.8bn in extra funding by 2025, analysis by PwC and the County Councils Network (CCN) found.
Tax rises, funding reserves and making services more efficient would not be “anywhere near enough” to make up the cumulative funding shortfall, the CCN warned, meaning local residents could see a reduction in services down to basic levels.
Even if worst-hit county councils increased taxes by almost 3% over the next five years and saw a slight rise in their tax base, it will add almost £250 to the average band D household’s bill – that is, homes worth between £68,000 and £88,000 in 1991.
“Even these draconian cuts won’t be enough for many well-run councils to balance the books and it will leave our finances in disarray with many of us struggling to deliver even the basic level of local services”
- Councillor Paul Carter, CCN chairman
That could see the majority of rural households facing a yearly average bill of more than £2,000 – twice the rate of some inner London councils.
Filling the funding gap would not even reverse an almost decade-long era of austerity, but simply keep services ticking over, analysis shows.
The funding shortfall for this year already stands at £4.8bn.
The figures have triggered fresh calls for fair funding given the “historic underfunding” of shire counties compared with urban areas.
County councils – which are the most exposed to funding pressures and financial risk – cover nearly half of England’s population and face a £21.5bn shortfall by 2025.
Meanwhile, metropolitan boroughs face a £13.3bn hole, and London boroughs £3.4bn.
Leaders of some of England’s biggest county councils hope the report will spark an announcement for more funding in the government’s next spending review.
Without this, council finances already on the brink risk being plunged into “disarray”.
Councillor Paul Carter, chairman of the County Councils Network, said: “Over the last decade councils have played a crucial part in reducing the deficit, but the yearly compounding effect of funding cuts and rising demand means that the situation is fast becoming untenable.
“Today’s report concludes that counties are most exposed and least able to address these financial pressures – local government is at the limit of its elasticity. Therefore, this Spending Review is crucial if we are to protect and enhance services.
He added: “Even these draconian cuts won’t be enough for many well-run councils to balance the books and it will leave our finances in disarray with many of us struggling to deliver even the basic level of local services.
CCN director, Simon Edwards, said: “It is county authorities that have the most limited choices in responding to future spending requirements. We now want to take our case to the Treasury and convince them of the need to invest in all of local government, while ensuring that the government implement the fairer funding review so that residents can be provided with a more consistent level of service based on genuine need.”
The government said in a statement: “We are investing in Britain’s future, and this year’s local government finance settlement includes extra funding for local services.
“Local authorities will have access to £46.4 billion this year, a real terms increase that will strengthen services, support local communities and help councils meet the needs of their residents.
“The government will be looking at funding for services as part of the spending review.”