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Departmental funding cuts to the Ministry of Housing, Communities and Local Government will pile pressure on non-urban authorities which already stand to lose out under changes to the way council funding is distributed, the County Councils Network said.
Those authorities face a funding gap of £2.2bn next year on the back of surging demand and costs, on top of an estimated £2.7bn deficit in special educational needs provision due to hit budgets in March when the current statutory override comes to an end.
Further funding reductions will potentially trigger a wave of fresh applications for exceptional financial support as councils struggle to avoid financial collapse, the network said.
A major shake-up of council funding announced by the government last year will see resources shift towards areas of high need, including deprivation, with only three non-urban councils qualifying for a share of the new £600m recovery grant announced in the settlement.
Tim Oliver, the network’s chair, said the chancellor’s announcement next week could spell disaster for authorities in a year in which unprecedented savings were already being made.
“It is almost unthinkable to imagine the situation getting worse, but a real-terms cut in the Spending Review for the MHCLG’s budget would be just that,” he said.
“For county and rural councils, it could be a double whammy, with any unfair changes to funding distribution leading to further reductions in their income.”
Given the uncertainty over their funding, it was unsurprising that so many councils feared they would be unable to set a balanced budget next year, said Oliver.
“Funding reductions would undoubtedly make it worse for these authorities and lead to more service cuts and councils applying for exceptional financial support,” he said.
“It is therefore essential county and unitary councils receive a significant increase in funding and long-term financial certainty in the Spending Review and Review of Relative Needs and Resources.”
The government has already come under pressure from councils to tackle the “astronomical” cost of care placements driven by a failure to support children and young people with complex needs.
According to research for the Local Government Association, the number of placements costing £10,000 or more per week increased from 120 to 1,500 between 2018 and 2023.
“The astronomical costs of care placements mean there is less money available for councils to spend on the earlier help children so desperately need,” said Arooj Shah, chair of the association’s children and young people board.
In its pre-Spending Review analysis, the Institute for Fiscal Studies said “uncomfortable trade-offs” would be inevitable as the government sought to balance decisions on health and defence funding with potential cuts in unprotected areas.
The chancellor will need to confront the consequences of last year’s decision to frontload spending for the course of the Parliament, with large boosts in the first two years giving way to much slower growth, the institute said.
IFS research economist Bee Boileau said the government faced “unavoidably tough choices” as the flow of additional funding slowed to a trickle.
“Simultaneously prioritising additional investments in public services, net zero and growth-friendly areas within this envelope will be impossible,” she said.
“Decisions here, and elsewhere at the Spending Review, will give us a clear sense of the government’s true priorities.”
