Council bosses say more money is needed despite £600m funding boost

A £600m boost for local authorities will not fix the long-term funding issues faced by town halls up and down the country, a council group has said.

It warned that more funding will be required to meet the demand-led pressures councils are facing.

Communities Secretary Michael Gove said he will raise the percentage by which councils’ core spending power increases each year, from 3 per cent to 4 per cent.

This boost to the Government’s funding guarantee amounts to a combined package of £600m and will increase councils’ core spending power up to £4.5bn in 2024/25.

The support package will primarily see an additional £500m added to the Social Care Grant to bolster budgets – a key concern raised by councils.

“We have listened to councils across England about the pressures they’re facing and have always stood ready to help those in need,” said Mr Gove.

“This additional £600m support package illustrates our commitment to local government. We are in their corner, and we support the incredible and often unsung work they do day-to-day to support people across the country.”

While council chiefs said the new emergency funding will help dozens of local authorities avoid falling into effective bankruptcy in the short-term, there remains concern over the longer-term financial issues that have resulted in budget cuts to many essential services.

“This increase in funding is welcome and will help councils in the short-term,” said Councillor Sir Stephen Houghton, chairman of the Special Interest Group of Municipal Authorities, which represents 47 urban councils.

“However, it won’t address the long-term funding gap or the need for reform of the broken local government finance model.”

Cllr Houghton added: “This unprecedented increase before the final settlement shows that there is a growing understanding within the Government about the crisis in local government finances. These pressures have been well-documented for some time, so it is disappointing that the funding has only been announced at this late hour.

“More funding will be required to match the current level of demand-led pressures and stabilise the sector.”

The Local Government Association (LGA), which estimates councils in England face a £1.6bn funding gap in 2024/25, also believes the bailout will not be enough.

Its chair, Councillor Shaun Davies, said: “All councils will be using any positive additional money to reduce frontline service cuts but it will not be enough to cancel out these cuts completely or the council tax rises.”

The new funding deal follows calls from more than 40 Conservative MPs – including seven former cabinet members – for the Government to bail councils out ahead of this year’s expected general election.

Earlier this week, a group of more than 50 councils warned the Government they fear bankruptcy without emergency funding as many are spending almost half their budgets on emergency accommodation for homeless people.

There are also concerns that the additional funding will not be enough to solve the social care crisis.

Cathie Williams, joint chief executive of the Association of Directors of Adult Social Services, said the extra money was “much needed” and would be welcomed by people who receive and provide support.

But she added the scale of the pressures on budgets means more needs to be done to enable independence at home, support unpaid carers and address workforce shortages.

“We need to move from treating the symptoms to addressing the cause of the challenges we see in adult social care, like long waiting times and people missing out on care altogether,” said Ms Williams.

The local government finance settlement for next year includes a £64bn funding package.

The Department of Levelling Up, Housing and Communities said this was an average real terms increase of 6.5 per cent for councils.

Finance bosses at seven councils have issued at least one section 114 notice since 2020, with three doing so last year.

The notices are an acknowledgment that the local authority cannot balance its books as required by law and lead to a freeze on non-essential spending on services.

Nottingham City Council became the latest authority to issue a Section 114 notice after forecasting a £23.4m budget deficit.

The county followed Birmingham City Council’s collapse in September.

As a result of the funding issues facing council across the country, households are expected to face large hikes in Council Tax bills.

Local Government sources have suggested that almost every council is likely to raise local taxes by 4.99 per cent, the largest hike permitted without seeking permission from the Government for additional rises.

Earlier this month, Somerset Council warned that it will be forced to issue a section 114 notice unless the Government permits it to increase council tax bills by 9.99 per cent.