Councils in London would need to make cuts of more than £200 per resident in order to balance their books over the next two years if they did not raise taxes, research published on Friday revealed.
Local authorities across the country are “in historically unprecedented territory” with an increasing number being pushed to the brink of bankruptcy by the cost of services, a report by Cambridge University’s Bennett Institute for Public Policy warned.
London and the South East, where housing costs have spiralled, are the worst affected in the country and are facing collective shortfalls of £3.9 billion by 2026-27, the Mapping the Gaps report found.
It means the capital’s town halls need to make cuts to services or increase their income and taxes by an average of £209 per person by 2026-27. The South East would need an extra £189 per resident.
This compares to £103 per person in the South West under the current Government funding model.
Jack Shaw, affiliated researcher at the University of Cambridge’s Bennett Institute and co-author of the report, said: “Councils are in historically unprecedented territory, with many of them now forced to provide skeleton services to meet their legal responsibilities and even then are still at risk of falling over.”
The report, which comes ahead of the Chancellor’s Budget on October 30, highlights the significant challenges facing the UK’s economy and government.
It found that of all the 317 councils in England, just 14 would be able to balance their budgets or be in surplus by 2026/27, according to data collected from their Medium Term Financial Strategies (MTFS).
The remaining 303 are expected to increase taxes, raise other revenue sources and cut services over the next two years.
In London, several local authorities have warned they are teetering on the edge of bankruptcy over soaring social care and homelessness bills.
Newham council has proposed a raft of extreme cost cutting measures and requested emergency government funding in a bid to find £20.3million of immediate savings.
It is predicting a budget gap of £175million over the next three years with £100million of this down to spiralling temporary accommodation costs due to increasing rents and homelessness in the borough.
The Institute for Fiscal Studies has suggested that Chancellor Rachel Reeves may decide in her Budget to allow town halls to ramp up council tax by 5 per cent a year, despite inflation falling to around two per cent.
Professor Andy Pike, Henry Daysh Chair of Regional Development Studies at the University of Newcastle’s Centre for Urban and Regional Development Studies and co-author of the report, said: “The Conservatives bear substantial responsibility for the situation England’s councils are having to confront following over a decade of austerity, but it is the Labour Government that is now responsible for addressing those challenges.
“Nothing short of radical change will protect critical services for local residents and taxpayers.”
