Councils warn of ‘disastrous’ austerity and viability threat as inflation costs rise

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local authorities have warned of “disastrous” cuts in emergency funding for local services due to rising inflation and other pressures threatening their financial viability.

Many municipalities have been forced to abandon their financial plans drawn up just three months ago due to the “unprecedented crisis,” with costs rising, leaving many struggling to meet their legal obligation to balance the books this year.

A new analysis by the Conservative-led Local Government Association (LGA) has found that inflation alone will cause £800m of additional cost pressures on budgets in 2022-23.

Inflation won’t drop overnight… the impact on our local services could be catastrophic

The combined effect of headline inflation, energy costs and projected increases in the National Living Wage brings that total to £2.4 billion, rising to an estimated £3.6 billion in 2024-25.

The LGA called on the government to provide “adequate” long-term funding ahead of its annual conference in Harrogate this week, warning the LGA that there was “serious risk to the future financial viability of some services and councils”.

The LGA said the impact of inflation and energy prices could not be predicted when ministers finalized the local government financial settlement earlier this year and when councils adopted budgets in March.

Rising demand for services at a time of dramatically escalating costs had created a “perfect storm,” undermining councils’ efforts to address inequalities and support communities through the cost of living crisis, the LGA said.

(PA images)PA graphics

The organisation’s conservative chairman, James Jamieson, said the threat to essential services would amplify the impact of declining living standards in communities.

He added: “Inflation will not fall overnight. As our analysis shows, the impact on our local services could be disastrous.

“This will stifle our economic recovery, embed backlogs and undermine the government’s ambitions to take the country to the next level.”

Councilor Jamieson said only “adequate” long-term funding to cover costs and that “the right powers” would enable municipalities to deliver vital services, tackle the climate emergency and improve communities across the country.

A government spokesman said: “This year we have made an additional £3.7 billion available to municipalities to help them continue to deliver important services, and we are working with the sector to understand the impact of new challenges.

“As many families face cost-of-living challenges, the record rise in the national living wage means someone who works full-time takes home £5,400 more a year than in 2010, while our package of financial aid of £37 billion the most vulnerable in society.”

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