Cuts to some council services are likely unless spending pressures abate, even with big increases in council tax and especially in more deprived areas
The new analysis by IFS researchers shows that if demand and above-inflation cost pressures continue to grow in line with recent history, councils could be forced to cut back some areas of service provision.
This would be true even if funding from central government was frozen in real terms (rather than being cut alongside other ‘unprotected’ areas) and council tax was increased at 5% per year – equivalent to over 3% a year above inflation, its fastest real-terms rate since the 2001–05 parliament.
More deprived areas, which rely more on central government funding relative to council tax, will face the biggest squeeze unless there is a significant redistribution of central government grants towards them.
A combination of statutory duties to vulnerable residents and big cuts to more discretionary services during the 2010s means some councils, at least, would struggle to cut back services further – putting them at risk of severe financial distress.
Kate Ogden, a Senior Research Economist at IFS and an author of the report, said:
‘Many councils are under clear financial strain. They are struggling to meet the surging demand and cost for services such as children’s and adults’ social care residential placements, special educational needs support and temporary accommodation for the homeless. Unless these pressures slow down significantly and quickly, or the next government gives a big injection of funding to local government, councils will likely need to make cutbacks to some areas of provision. Given that more discretionary services have often seen cuts of 40% or more since 2010, councils may struggle to do this. More could be pushed to the financial brink, like Birmingham, Thurrock and Woking. It is remarkable that the main parties have been silent on how they would address these challenges.’
