LGA Survey Highlights Funding Challenges for Local Councils

The Local Government Association (LGA) has released findings from its recent survey indicating significant budgeting challenges for councils in England as they prepare for the fiscal year 2025/26. The survey underscores the growing difficulty in achieving balanced budgets and the looming funding gap that could impact local services critically.

Detailed Findings from the LGA Survey

The LGA's survey showed that nearly three-quarters of councils find it challenging to maintain financial balance, signalling an ongoing struggle with financial management. About 25% of these councils are considering or have already applied for Exceptional Financial Support (EFS) for the fiscal year 2026/27, demonstrating a need for emergency financial measures. This is an increase from 18 councils last year to 30 this year receiving EFS, reflecting worsening financial conditions.

Significance of the Upcoming Spending Review

The Spending Review holds particular importance this year as councils face a forecasted funding shortfall of over £8 billion by 2028/29. The interim support from the government has partially addressed demands in critical areas such as social care and homelessness prevention. However, the survey indicates that many councils remain uncertain about their ability to fund all statutory duties in the coming years.

Councils' Financial Confidence and Cost Implications

The survey highlights a low level of confidence among councils regarding their financial capabilities, with only 20% confident in fulfilling their statutory duties without additional support in 2025/26. This figure is expected to rise significantly in the subsequent year. Additionally, councils are bracing for increased service costs passed on by external providers due to changes in employer National Insurance Contributions, estimated to cost an extra £1.13 billion this year.

LGA’s Recommendations for Funding Reforms

The LGA advocates for substantial reforms to the local government finance system to enhance its sustainability and response to community needs. It also calls for adequate government funding to manage the costs associated with the National Living Wage increase and employer NICs. Recommendations include securing long-term funding commitments for sectors like transport, housing, and local economic development. The LGA emphasises the need for a strategic and well-funded approach in the upcoming Spending Review to equip councils adequately for their critical roles in community support and economic development. The complete findings and recommendations from this survey are detailed in the LGA's report, Local Government Budget Setting Survey. Full survey - Local Government Budget Setting 2025/26: Survey of chief finance officers.

Kerry Booth, Chief Executive, Rural Services Network "This latest survey from the LGA clearly illustrates the critical need for a fair funding review. Rural councils are at the forefront of delivering essential services, and without a balanced and fair funding model, our rural communities face disproportionate challenges. It is imperative that the government takes these findings into account and establishes a funding system that genuinely reflects the needs of all communities, urban and rural alike".