‘Tough times ahead’ for council finances

London Councils warns that further government action is needed to stabilise local authority budgets and support local services – especially with the unforeseen impact of the Omicron variant of Covid-19 and the continuing loss of local tax income.

Responding to the local government finance settlement, the cross-party group highlights that even with £1.5bn of new grant funding coming to local authorities in 2022/23 – of which London boroughs will get around £240m – this won’t meet fast-rising pressures on town hall budgets.

Key cost pressures on boroughs include:

  • Covid-19’s ongoing economic impact. With London’s economy disproportionately hard hit by the pandemic, London Councils estimates boroughs face £400-500m of lost tax income over the next two years. The Plan B restrictions will have a further impact on business rates and fees and charges losses. London Councils is urging the government to immediately reinstate the sales, fees, and charges compensation scheme that ended in June. 
  • Public health spending. The onset of the Omicron variant and Plan B means boroughs anticipate additional spending on public health. London Councils is calling on the government to reinstate specific support for those self-isolating, which ended in September, and to provide continued Contain Outbreak Management Funding (COMF) to aid boroughs’ delivery of testing, contract tracing, and support for the vaccination programme.
  • Inflationary costs. The increase of national insurance contributions to London borough suppliers is estimated to be £40m in 2022-23 alone, which will impact on boroughs’ costs. Boroughs also need to budget for the National Living Wage increasing and the soaring rate of general inflation at over 5%.
  • Additional costs of social care. Adult social care is the largest single area of expenditure for boroughs. London Councils is concerned that the funding set aside by the government won’t be enough to meet the costs of reforming the sector in line with ministers’ ambitions, let alone meeting the huge increase in demand for social care due to the pandemic.

Given these pressures, London Councils expects many boroughs will have to take the difficult decision to increase council tax in order to shore up budgets and sustain local services.

Cllr Georgia Gould, Chair of London Councils, said:

“Boroughs are stepping up and doing whatever it takes in the face of an ongoing public health crisis, as seen through our support for the booster rollout. But we’re not receiving government funding for this crucial work – and the finance settlement won’t be enough to match skyrocketing pressures on local budgets.

“Extra grant funding is welcome but after a decade of reductions the government’s latest offering will continue to leave councils struggling to balance the books as they support residents through the tough times ahead.

“Councils have proved themselves essential in supporting communities through the Covid-19 pandemic. We also have a pivotal role to play in securing economic recovery. The government should be doing more to increase council resources and invest in the local services that are so important for getting us through this crisis.”


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