Phillip Woolley, Head of Public Sector Consulting, Grant Thornton UK LLP, said:
“The Chancellor did not, as many were expecting, bring down the spending cut axe on local government. Instead, he confirmed that the previously announced increases in the current Spending Round will be maintained for the next two years. Whilst this will provide some relief to the sector, the hard decisions look to have been deferred by the Chancellor until the next Spending Round in 2025/26. There was also no new funding announced for local government to reflect the impact inflation has had on budgets since the current Spending Round was announced.
“According to our analysis, the local government sector is facing a funding gap of c.£7.3 - £9 billion by 2025/26. Even with the referendum limit for council tax being increased, there will not be enough funding generated to fill the shortfall many councils are facing. If three quarters of all local authorities in England lift council tax to 4.99%, our data shows that it would reduce the sector’s budget gap by c.£2 billion by 2025/26. Raising council tax by an unprecedented level in a cost-of-living crisis is a hard but arguably necessary political choice in the face of a significant funding shortfall.
“But the amount of funding this would generate for local authorities will also greatly differ across the country. For example, when comparing increases in Band D properties, an increase in Nottingham would generate an additional £114.48 per Band D property, which amounts to significantly more than what would be generated in Solihull - £88.45 per Band D property. It will also depend on whether individual councils utilise the increase, which is by no means certain.
“Support for social care, on the surface, seemed to be boosted, but only some of the headline funding is actually new money. Of the £2.7billion additional funding announced for social care for FY23/24, £1billion is new funding, the rest comes from both delaying Charging Reform and allowing councils to increase the adult social care precept as part of council tax. Whilst the additional £1billion for next year is welcome, in percentage terms it is significantly below the rate of inflationary pressures every council is currently facing in delivering care to its residents, so could further increase the financial impact of delayed discharges on the NHS.
“The financial sustainability of many councils remains precarious, and there will be some very difficult decisions to be made when councils set their new budgets in February.”
Press Release
Autumn Statement 2022: local government response
17 Nov 2022
Phillip Woolley, Head of Public Sector Consulting, Grant Thornton UK LLP, said:
“The Chancellor did not, as many were expecting, bring down the spending cut axe on local government. Instead, he confirmed that the previously announced increases in the current Spending Round will be maintained for the next two years. Whilst this will provide some relief to the sector, the hard decisions look to have been deferred by the Chancellor until the next Spending Round in 2025/26. There was also no new funding announced for local government to reflect the impact inflation has had on budgets since the current Spending Round was announced.
“According to our analysis, the local government sector is facing a funding gap of c.£7.3 - £9 billion by 2025/26. Even with the referendum limit for council tax being increased, there will not be enough funding generated to fill the shortfall many councils are facing. If three quarters of all local authorities in England lift council tax to 4.99%, our data shows that it would reduce the sector’s budget gap by c.£2 billion by 2025/26. Raising council tax by an unprecedented level in a cost-of-living crisis is a hard but arguably necessary political choice in the face of a significant funding shortfall.
“But the amount of funding this would generate for local authorities will also greatly differ across the country. For example, when comparing increases in Band D properties, an increase in Nottingham would generate an additional £114.48 per Band D property, which amounts to significantly more than what would be generated in Solihull - £88.45 per Band D property. It will also depend on whether individual councils utilise the increase, which is by no means certain.
“Support for social care, on the surface, seemed to be boosted, but only some of the headline funding is actually new money. Of the £2.7billion additional funding announced for social care for FY23/24, £1billion is new funding, the rest comes from both delaying Charging Reform and allowing councils to increase the adult social care precept as part of council tax. Whilst the additional £1billion for next year is welcome, in percentage terms it is significantly below the rate of inflationary pressures every council is currently facing in delivering care to its residents, so could further increase the financial impact of delayed discharges on the NHS.
“The financial sustainability of many councils remains precarious, and there will be some very difficult decisions to be made when councils set their new budgets in February.”
Experts / Authors
Phillip Woolley
Phillip Woolley, Phil works in the Government and Infrastructure Advisory group and provides advice to public and private sector clients on infrastructure transactions.
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