A leading think tank and the largest association of local councils say that the funding from central government that has been announced this week is still not enough to deal with steepling increases in costs faced by town halls across the country.
With Croydon’s annual budget meetings less than a week away, the Labour government has confirmed its settlement for local authorities nationally, with £69billion allocated funding for England’s councils.
The funding package provides an above-inflation 6.8% increase in councils’ spending power compared to 2024-2025, although the increase in costs faced by councils has risen even more steeply.
In the House of Commons, Angela Rayner, the Deputy Prime Minister, said, “With increased demand and running costs rising, this money is a lifeline and will guarantee no council sees a decrease in their core spending power.”
The government has allowed a clutch of councils to increase Council Tax in April by more than the 4.99% maximum. Council Tax will increase by 10% in Bradford, by 9% in Newham and in Windsor and Maidenhead, and by 7.5% in Birmingham, Somerset and Trafford. Birmingham’s Council Tax increased by 10% last year, too.
In Croydon, having hiked Council Tax by an eye-watering 15% in 2023, Tory Mayor Jason Perry will be hitting residents with another 5% increase this April, meaning that Council Tax has risen by 27% in two years since he took over at the Town Hall.
Rayner’s Commons speech was hardly full of hope and bright, sun-lit uplands… “Change will not happen overnight, but this settlement marks the beginning of the government’s commitment to rebuild and stabilise local government and run services that taxpayers can rely on.”
‘Change will not happen overnight’: Angela Rayner announced the council funding settlement in the Commons
Rayner claimed that this year’s settlement is the first “multi-year settlement” – with spending plans laid out over more than a 12-month period, in a decade, something that local council chiefs have been calling for.
“We will begin introducing an up-to-date assessment of councils’ funding needs and financial resources, allowing local government to plan for the long-term and deliver best value for taxpayers’ money,” Rayner said.
But as the think-tank the Institute for Fiscal Studies noted, this coming financial year, “… will continue the trend of substantial above-inflation increases in funding for English councils. Unfortunately, their costs have also been outpacing inflation, and with a tighter outlook for funding from central government looming from 2026–2027 onwards, tackling the demand and cost drivers impacting councils’ budgets is becoming increasingly urgent.”
In Croydon under Conservative Mayor Perry, the council is predicted to overspend its budgets by £130million across the 2024 to 2026 financial years.
The government’s settlement confirmed this week includes some compensation for employer National Insurance contributions increases, “but still falls short of what is desperately needed to cover them all”, the Local Government Association said.
“This financial year therefore remains extremely challenging for councils of all types who now face having to increase Council Tax bills to bring in desperately needed funding next year yet could still be forced to make further cuts to services.”
The LGA says that the £515million allocated towards increase National Insurance costs “still falls short of the £637million we have estimated it will cost councils next year due to directly employed staff”.
The LGA warned that indirect National Insurance cost increases, through outsourced service providers, will cost councils up to an extra £1.13billion next year.
“While we are pleased that councils will receive extra social care funding, which will help towards these indirect costs, it is hugely concerning that employer NICs costs have not been fully funded,” the LGA said.
“This will exacerbate the already unsustainable pressures facing vital services.”
Read more: Labour accuse Perry of ‘mismanagement’ of Town Hall finances
Read more: ‘Mayor and CEO are respected and provide strong leadership’
Read more: Croydon In Crisis: budget overspend now close to £100m
Read more: Cash-strapped council’s Mayor wants to give himself a pay rise
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The Starmer administration is proving to be incredibly uninspiring and it’s main protaganists such as Rayner are uninspired machine politicians who fit the Westminster criteria of conformity, but do not have the imagination to ever to get to grips with the deep seated problems they have inherited. Labour have a parliamentary majority in excess of one hundred, but again like the Blair years they choose to act within the framework of the Conservative administrations that preceeded them. If a right wing government had this power they will act far more radically in their own interests. Look at Cameron and the billions he wasted on welfare reforms that were to cut the welfare bill, but just ended up increasing administration costs and welfare costs.
They are beginning to look as hopeless as the inept Biden who just created the conditions for Trump to be electable. It is a bleak future where there is a realistic chance that an extremist such as Farage and his collection of assorted nutjobs are now electorally attracive.
The Labour Party has gone on record as saying that the IFS has come to the ‘wrong assumption’ about their fiscal plans. As for the LGA, well – it’s their job to maintain that central government needs to spend more on local government. Presumably, that means spending more regardless of local councils p***ing money up the wall on bogus IT schemes (Birmingham £80m, Brighton £51m on the i360 or, heaven forfend, Brick by Brick’s gazillions. If local government can show can be prudent with tax-payers’ money, maybe we’d think they should get it.
Local Government has a set of statutory duties imposed by Central Government. They have an obligatory legal duty to provide these. Central Government increased these statutory duties from the period of 2010 onwards while simultaneously drastically reducing the direct Central Government grant. This Government further curtailed financial monitoring of Government expenditure by eliminating the Audit Commission and privatising local audit functions. Under the Localism Act, 2011 it provided Councils the opportunity to make up for it’s funding shortfalls with borrowing public money without the oversight of the Treasury scrutiny of their borrowing requests. This incentivised Councils to speculate with high risks. Many took the bait and some were successful in reducing their reliance on direct funding, but as per normal with gambling more are not. This is the Christopher Myers formulation of prudent Public Finance.
You can’t blame me for local government’s financial incompetence Derek. Nothing prudent about ‘gambling’ in my world. IC has covered Croydon’s abandonment of prudency in great detail and places blame and responsibility on our doorstep
We also reported how Croydon and other local authorities were actively encouraged into more commercial activities by Big Eric Pickles’ Localism Act, which removed district auditors, as Gideon Osborne’s austerity passed responsibility for tax increases down the line to councils through malign austerity policies.
That’s the doorstep right there.
Put down your HateMail, Excess and Torygraph for a minute and consider how much in billions of our money that your Conservatives “spaffed up the wall” on dodgy PPE during the pandemic.
Then think about the fact that between 2009/10 and 2019/20, your Tory governments reduced grants to local authorities by £18.6 billion . That’s nearly a two-thirds cut.
After that, cast your mind back to Lettuce Liz and Kamikazi Kwarteng’s budget fiasco.
Then don’t forget the ballooning costs of HS2 and the cash splashed on the Garden Bridge by some pillock who later went on to be Prime Minister.
Nor should you overlook the fact that Croydon Tories put us £800m in debt before Newman and his Numpties took over.
You’re right Chris. We can’t blame you for “local government’s financial incompetence”. But we can and will castigate you for fanatically supporting the Conservative party that gave us austerity, corruption, ineptitude, waste and cuts. And Brexit
Lot of assumptions here Arfur – My news sources are wide and include Inside Croydon. IC regularly criticises Tory and Labour local government, but that doesn’t make it partisan. Or Marxist, or Corbynist.
I’m not, never have been and never will be a Tory. Or a member of any of our useless political parties. I am a massive believer in local government – but ashamed of the state it’s in and its competence. Seems a bit rich to brand me as a Conservative fanatic just because I highlighted examples of local government incompetence.
You never seem to understand that Local Government follows the guidance and incentives set down by Central Government. The policy of sound money in Local Government was undermined by your beloved Tory Governments of Cameron, May, Johnson, Truss & Sunak (Not forgotten the contributon of Mr Clegg to start it all off). It is called a policy. You always seem to miss out Woking in your diatribes, but then of course their recklessness was conducted entirely by a Tory Council.
Good to clear that one up, Comrade Myers. Your party membership card and deluxe hand-coloured copies of Das Kapital and The Little Red Book are in the post