Local authorities could be pushed into bankruptcy as inflation rises, council leaders have warned.
The Local Government Association said local services that were seemingly secure just three months ago were now at risk of closure or cuts as councils scramble to manage an unforeseen £2.4bn rise in energy and pay costs.
The LGA estimates that without adequate long-term funding – in effect a revisiting of the spending review settlement agreed last autumn – the collective increase in inflationary costs faced by English councils this year will be £2.4bn, growing to £3bn in 2023-24 and £3.6bn in 2024-25.
It argued that these pressures, coming on the back of more than a decade of austerity cuts to local authority funding, pose a “serious risk to the future financial viability of some services and councils”.
Councils are required by law to balance their books each financial year, meaning that fixing financial shortfalls cannot be put off. This is likely to lead to job losses, the abandonment or delay of building projects such as new schools or regeneration schemes, and cuts to services, including planning.
