Councils in England are facing a £7 billion funding ‘black hole’ within three years opening a gap so large it is more than the current council spend on roads, transport, homelessness and housing services combined.
New analysis by the Local Government Association (LGA) shows councils face a £2 billion funding gap this year (2026/27), rising to £4.3 billion in 2027/28 and reaching £7 billion by 2028/29, with transport making up £432 million of the deficit.
Ahead of its Annual Conference in Bournemouth next week, the LGA said this risks leaving residents facing longer waits for adult social care assessments, rising homelessness, and cuts to neighbourhood services including road maintenance, libraries, parks and waste collections.
New LGA analysis warns that by 2028/29, councils will face extra cost pressures equivalent to 22 per cent of their current spending just to stand still.
This is driven by rising demand for homelessness support, children’s services, adult social care, home to school transport and new national requirements such as Simpler Recycling and the Emissions Trading Scheme.
Councils have received some funding growth in recent years, and a much-needed multi-year funding settlement has improved councils’ financial certainty. However, some councils have done better than others from new funding allocations. Local government also has a strong track record of innovation and continues to drive efficiency, such as through shared service provision and digital transformation programmes.
However, ongoing pressures on local government finances are illustrated by an unprecedented 36 councils having been granted exceptional financial support (EFS) by government to set balanced budgets this year (2026/27).
Only a significant increase in resources can protect the financial sustainability of councils and empower them to unleash growth and service reform at scale.
The LGA is calling on the next Prime Minister and their government to lay out a new path for local services that is not reliant on council tax rises, short-term fixes and unsustainable emergency bailout arrangements.
It said government also needs to commit to deeper, long-term reform of local government finance, including a cross-party review of council tax, business rates retention and other funding sources.
LGA Chair Cllr Louise Gittins said:
“The cost and demand pressures facing councils are unrelenting. In just three years, councils will need around 25 per cent more money simply to stand still. Without action, the services people rely on every day, from social care to safe streets, will be eroded.
“Whoever takes up the keys to Number 10 will have a lot of competing priorities. But fully funded, sustainable public services will need to be at the heart of any plans to improve lives and inspire hope in the future.
“Councils want to get on with supporting people, boosting local economies and delivering local priorities. But they can only do that with the long-term funding they need, and public service reform.”
(Picture: Highways News)
