As first was going to press, we were expecting an emergency fiscal package from the Government, announcing tax cuts.
Alongside previously announced help with energy bills, this is a key plank of the new Prime Minister’s economic agenda for recovery in the face of high inflation and the rising cost of living.
However, local economies each need different interventions to ensure they can thrive in the future. Understanding the exact nature of an effective and sustainable stimulus can only be carried out locally – something the LGA’s political group leaders and I pointed out in our welcome letter to PM Liz Truss.
In it, we also reiterated our belief that greater fiscal freedom for all councils – including the power to raise more money locally and greater local control over how it is spent – is crucial to ensuring all parts of the country are able to prosper.
Councils could also provide better value for money for the taxpayer by making longer-term investments that deliver savings, if they have adequate, certain, sustainable and long-term funding.
Last November, when councils were setting their budgets, the forecast was that consumer price index (CPI) inflation would be 4.4 per cent in 2022/23.
Since then, energy prices, spiralling inflation, and National Living Wage pressures have added significantly increased costs to councils’ budgets.
At the point when CPI was expected to be 8 per cent in 2022/23, our analysis showed this led to £2.4 billion in extra cost pressures this year, and a funding gap of £3.6 billion in 2023/24 rising to £4.5 billion in 2024/25, based on inflation coming down to much lower levels in future years.
While inflation dipped slightly in September to 9.9 per cent, the Bank of England predicts the rate will be 13 per cent in the autumn.
It is only by ministers addressing this significant funding gap that councils can protect services, invest in local services, employ the necessary skilled and motivated workforce, deliver for our communities and level up all parts of the country.