£25bn funds gap fear for local government

LOCAL government will face a £25bn funding gap in the coming years as reforms mean grants are being cut to “almost zero”, a new report warns.

A few ring-fenced grants will account for less than a 10th of local authority expenditure by 2025, said the TUC and New Economics Foundation (NEF).

Councils will keep a higher proportion of business rates, but the report said there are major problems with the funding reforms, including greater exposure to the economic harm from a no-deal Brexit.

The report said around half of local government funding came from central government in 2010, but by 2024/5 this will have been cut to zero, apart from a small amount of ring-fenced funding.

The funding gap will continue to increase, especially as demand for services will grow as people live longer, said the report.

The TUC and NEF said poorer areas are at greater risk of bigger funding shortfalls.

They also warned that a no-deal Brexit could lead to an even bigger funding gap, as business rate revenue could be hit.

TUC general secretary Frances O’Grady said: “This Government’s changes to how councils are funded leaves a colossal hole in local budgets, and it’s the poorest communities that will face the biggest shortfalls.

“We need a local government funding system that helps rebuild local services and closes the funding gap between poorer and richer areas.”

The report was published on the opening day of the TUC Congress in Brighton. Unison’s head of local government Jon Richards said councils were at breaking point and the report highlighted the “jaw-dropping scale of austerity cuts”.

A Local Government Association spokesman said: “This report highlights the significant funding reductions and demand pressures councils have faced in the past decade.”