An £8billion black hole caused by Rachel Reeves’s National Insurance hikes could force councils to impose inflation-busting tax rises for years to come, the Chancellor has been warned.
Elderly people needing social care are already suffering long delays, with 418,029 on waiting lists.
The Local Government Association (LGA) has now urged the Government to consider “alternative and additional forms of council funding”. These could include giving authorities more control over money collected from road pricing or taxes on workplace parking.
It said increases to employer National Insurance contributions and thresholds would cost councils £1.1billion. The Treasury has only provided £515million in compensation.
A cross-party letter signed by LGA chairwoman Louise Gittins, Labour leader of Cheshire West and Chester Council, as well as Conservative, Liberal Democrat and independent councillors, said authorities face a funding shortfall of £1.9billion next year – which will rise to £8.4billon by the 2028-29 financial year.
They said: “We cannot shy away from the fact that councils are under severe financial strain.”
Councils face “an ever-growing reliance on council tax” as they attempt to make ends meet and will be forced to increase charges to the highest level allowed, the LGA warned.
A paper submitted ahead of the Chancellor’s Spending Review in June said: “Councils will be reluctant to pass these costs on to their residents, but they have very little option as not doing so will widen their funding gap and place more services at risk.”
Deputy Prime Minister Angela Rayner announced earlier this month that most councils will be allowed to impose council tax hikes of 5% – double the rate of inflation, with a small number given permission for increases of up to 10%.
This is the maximum amount councils can charge without being required to hold a referendum of residents.
The LGA urged the Government to “fully localise sales, fees and charges, including road user charges and workplace parking levies”.
Councils can currently keep any profits from road pricing but usually have to spend the money on transport improvements rather than putting the cash into general budgets.
The alternative would be more cuts in services that are already struggling, said the LGA.
Highlighting a funding shortfall in adult social care, the councillors said: “The consequences of these and other pressures are significant. They include growing strain on unpaid carers, inadequate investment in prevention, recruitment and retention challenges in the workforce, providers ceasing trading or handing back council contracts, and over 418,000 people waiting for a care needs assessment, the commencement of their care package or direct payment, or a review of their care plan.”
It has also emerged that five million Britons face monthly bin collections, with 42 authorities looking at whether to reduce the frequency of one or more bin collections, including landfill and recycling.
The Government says it has given councils across England £69billion of funding, including more than £5billion announced in last year’s Budget.
A Ministry of Housing, Communities and Local Government spokesman said: “For too long councils have suffered from short-term solutions, which is why we are working hand in hand with councils to reform this outdated system and fix the foundations.
“Future funding decisions are a matter for the upcoming Spending Review.”