New Inflation Figures Increase Pressure on Council Budgets

New Inflation Figures Increase Pressure on Council Budgets

Council tax would need to rise by 20% to save urgently-needed public services, but how will Jeremy Hunt respond in his autumn statement?

Local authorities would need to increase council tax by 20% to cover the funding shortfall caused by inflation and the cost of living crisis, experts have warned, as new Chancellor Jeremy Hunt prepares to announce his autumn financial statement.

Inflation – which has now reached 11.1% – is set to add an estimated £1.5 billion to costs for the 40 largest councils in England. As this paper has reported, councils are facing rising energy bills for statutory services such as children’s care homes. 

Hunt has hinted that changes to council tax may form part of his fiscal plans tomorrow, either by allowing councils to increase the tax or by scrapping the manifesto commitment that all rises above 2.99% must go to a referendum. 

However, the Local Government Association (LGA) has cautioned that the scale of the funding gap faced by councils is simply too large to be met with an increase to council tax, with leaders from both Kent and Hampshire County Councils already saying they face bankruptcy due to soaring inflation and an increasing need for children’s and adult’s social care. Northamptonshire, Croydon and Slough Councils have previously declared bankruptcy. 

“Rising demand for services – and the extra costs to provide them – means that even having the same funding next year as they had this year would leave councils having to make significant cuts to services, such as care for older and disabled people, protecting children, homelessness prevention, leisure centres and bin collections,” said Cllr James Jamieson, LGA Chairman.

The LGA has suggested a council tax rise of 20% would be needed to meet the gap but cautioned that such a rise is neither possible nor desirable, as households already struggle to make ends meet due to rising energy, housing and food costs. 

The funding shortfall comes after austerity policies which saw central government funding for local government reduced by an average of 49% between 2010 and 2017. This led to councils having to make difficult decisions, with funding cuts for services linked to public health such as smoking cessation and drugs and alcohol support, as well as parks and green spaces being sold off, libraries closing, and reduced funding for domestic abuse refuges.  

Now, with councils facing continued budgetary pressures, more services are at risk. 

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The Social Care Squeeze

One of the biggest pressures on local government budgets continues to be social care. 94% of council directors have warned they do not have sufficient money to fund care over the coming months, and the same number said there were not enough social care staff locally to meet needs this winter.

The data comes from a survey carried out by the Association of Directors of Adult Social Services (ADASS). It found that three-quarters of directors were concerned they would not be able to cope if a large care provider collapsed over the winter. 

While the survey focused on adult social care, this is also of concern to children’s services, with more than 80% of children’s residential care in private hands. 

Social care has been in crisis for decades, with successive governments struggling to resolve a combination of growing need, a poorly-paid and under-resourced workforce, and a staffing shortage. A National Insurance rise which was intended as a levy to fund social care was scrapped by Truss’ short-lived Government, while Hunt has said he will delay reforms to the sector that were slated to come in next year. 

There has been a 55,000 rise in social care vacancies and a 50,000 drop in filled posts in 2021-22, while waiting lists for assessments, care packages and reviews topped 540,000 in April 2022, a rise of 37% on six months previously, according to a previous ADASS survey.

The lack of social care has a knock-on effect on the NHS, as healthy patients who need care cannot be safely discharged from hospital. Figures published in the Guardian this week found that up to one in three hospital beds were occupied by patients fit for discharge. NHS waiting lists have reached a new record high, at more than six million.

A £500 million social care discharge fund was promised by the former Health and Social Care Thérèse Coffey in order to prevent so-called ‘bed-blocking’. But health experts warned it did not go far enough, and it has yet to be distributed. 

“This is the bleakest autumn survey we have ever had,” said Cathie Williams, ADASS Chief Executive. “The £500 million discharge fund will not solve this, when it is finally distributed – and it is urgently needed. We desperately need another significant injection of emergency funding to provide more help for people at home”.

“Only with long-term funding certainty to cover increased cost pressures and invest in local services, can councils make innovative and meaningful decisions over their finances, change lives and communities for the better, alleviate pressures on other parts of the public sector, support growth and save local services,” said Jamieson.