Inflation and National Living Wage pressures to add £3.6bn of extra costs to council budgets – LGA analysis

“Soaring inflation, energy prices and pressures on the national living wage are putting city services at risk. Budgets need to be reset with potential cuts to essential services people rely on, amid ‘a cost of living crisis.’

Rising energy prices, soaring inflation and pressures on the National Living Wage are set to add £3.6billion of additional unforeseen pressures on council budgets in 2024/25, a researcher reveals. new analysis from the Local Government Association.

As more than 1,500 local government leaders, councilors and ministers gather at the start of its annual conference in Harrogate today, the LGA warns that these additional cost pressures pose a serious risk to the future financial viability of some services and advice.

The LGA said the sharp spike in inflation and energy prices is an unprecedented crisis which could not have been predicted by either the central government or the local government when the government finalized the financial regulations of the local government earlier this year and councils set their budgets in March.

His analysis shows that:

  • Inflation, energy costs and planned increases to the National Living Wage will add £2.4bn of further pressure on council budgets this year alone, reaching £3.6bn in 2024/25 .
  • It is forcing councils to tear up financial plans made just three months ago with the potential to cut funding for local services – such as bin collection, pothole filling, elderly care and disabilities, early intervention, support for low-income households and homelessness prevention – just to meet their legal obligation to balance the books.

It comes as councils face a perfect storm of demand for services which continues to rise, just as the price of providing them is also rising dramatically. This risks hampering the council’s efforts to help improve communities and support residents during the cost of living crisis.

The LGA said the government must ensure councils have the resources they need to meet these unforeseen costs and protect services that help communities recover from the pandemic and residents cope with the cost of living crisis.

Cllr James Jamieson, LGA Chairman, said: “Soaring inflation, energy prices and pressures on the National Living Wage are putting municipal services at risk. Budgets need to be reset with potential cuts to essential services people rely on, amid a cost of living crisis.

“Inflation is not going to come down overnight. As our analysis shows, the impact on our local services could be disastrous. It will stifle our economic recovery, entrench disadvantage and undermine government ambitions to level the country.

“Local government remains the fabric of our country, as has been proven over the extremely difficult few years we have faced as a nation. Only with adequate long-term funding – to cover the increased cost pressures and investing in local services – and the right powers, that councils can serve our communities, address the climate emergency and improve all parts of the country.

Notes to Editors

  1. The Local Government Association will hold its annual in-person conference June 28-30 in Harrogate. Speakers will include the upgrade secretary Michel Goveeducation secretary Nadhim ZahawiShadow Upgrade Secretary Lisa Nandyliberal democrat leader Mr. Ed Davey and peer cross Baroness Lola Young.

Please visit our Annual conference website to see the full program. To reserve your place, contact greg.burns@local.gov.uk for a media promotion code to get a free pass.

Michael A. Bynum