A new LGA survey reveals that nearly three quarters of responding councils felt that it will be very or fairly difficult compared to earlier years to set a balanced budget for 2025/26.
- New Local Government Association survey reveals that nearly three quarters of responding councils felt that it will be very or fairly difficult compared to earlier years to set a balanced budget for 2025/26.
- 1 in 4 responding councils already say they have applied for or are very / fairly likely to apply for Exceptional Financial Support to set a balanced budget in 2026/27. Thirty councils were granted EFS this year (2025/26) – up from 18 the year before.
Published ahead of the Spending Review, the new LGA survey lays bare the wide-ranging pressures that continue to push councils towards the financial brink and risk severely limiting their ability to deliver on the Government’s reform and growth agenda.
The LGA, which represents councils across England, said the Spending Review will be critical for the future of our local services with councils in England facing a funding gap of more than £8 billion by 2028/29.
The Government has provided extra money for councils this year which will help meet some, but not all, of the cost and demand pressures they face in adult and children’s social care, homelessness prevention, and support for children and young people with special educational needs and disabilities.
Significant pressure remains, with the LGA survey finding 2 in 10 responding councils were not very or not at all confident that they had sufficient funding to deliver all their statutory duties in 2025/26, and this more than doubles to 5 in 10 in 2026/27.
The LGA is warning that this is not just about numbers on a spreadsheet, but further budget cuts to plug growing funding gaps will affect the most vulnerable members of society and the services our communities rely on every day.
For communities, it would, for example, mean more older and disabled people struggling to access vital care, less support for families in crisis, more potholes on our roads, less frequent bin collections, cuts to vital bus and home-to-school transport routes and children left without access to vital special educational needs provision.
It is good that the Government has provided some funding to compensate councils for the NICs increase. However, only 3 per cent of councils responding to the LGA survey said this will cover the entire direct costs they face while almost 4 in 10 say half of their direct costs will not be covered.
All social care authorities responding to the survey said it was very or fairly likely that external service providers would pass the impact of changes to employer NICs back to their council through increased service costs in both adults’ and children’s social care and other contracted services. The LGA has estimated these indirect costs could cost councils up to an extra £1.13 billion this year.
The LGA said councils continue to embrace efficiency and innovation in a way that has not been replicated anywhere else in the public sector. Between 2010/11 and 2022/23, councils made an estimated £24.5 billion in cuts and efficiencies in service spending in order to manage funding reductions, inflation, wage growth, demographic pressures and growing service demand.
Despite this, councils desperately need a significant and sustained increase in overall funding in the Spending Review to meet the requirements being placed on them. This must include sufficient additional funding for increases in the National Living Wage and to compensate them fully for the costs of increased employer NICs, including indirect costs.
Funding pressures are also being exacerbated by a lack of reform of the local government finance system which has weakened the financial sustainability of councils and left them with a complex, outdated funding system. Creating an improved and a more sustainable funding system for local government is also critical to strengthen the value for money of local spending and, most importantly, improve services for communities.
Councils have a critical and unique role in delivering local growth across all sectors and communities, working closely with businesses, supporting jobseekers, planning regeneration, and improving infrastructure. It is clear that the Government’s ambitions for national economic growth are only achievable if every local economy is firing on all cylinders.
That is why the LGA’s Spending Review submission also sets out the measures and funding certainty needed to ensure councils can play a lead role in bolstering growth and successfully realising the ambitions set out in the Government’s Plan for Change.
For example, providing sufficient funding so that all councils, including in combined authority areas, can deliver local growth priorities, will unlock the full potential of economic development teams which have been diminished by budget cuts.
Long term consolidated funding settlements to all transport and highways authorities would empower them to invest in local transport and highways infrastructure so critical to supporting economic growth, while five-year local housing deals could support delivery of an additional 200,000 social homes in a 30-year period.
Cllr Louise Gittins, LGA Chair, said:
“Councils are the backbone of our country. Every day across the country, our dedicated councillors and officers work tirelessly to ensure our most vulnerable are kept safe. We help get our children to school, and work with parents to gain the extra help their child needs. We help those most in need to trying to secure a safe place to live and we strive to keep on top of road maintenance to keep our country moving.
“Every critical service a council provides needs to be funded properly. Without adequate funding the consequences for so many people who rely upon them could be devastating, but it will also be impossible for them to help the Government achieve its reform and growth agenda.
“The time for sticking plasters and emergency government bailouts needs to come to an end.
“While the economic landscape is clearly challenging for government, the Spending Review must provide a long-term plan to adequately fund councils so they can provide the services communities rely on, and for them to play their critical role in bolstering growth and turning the Government’s reform agenda into a reality.
“Councils stand ready to work with government to make real change happen for people in local communities. Only by working together as equal partners, can central and local government meet the fundamental long-term challenges we face as a country.”
