The Local Government Association (LGA) has warned that cash-strapped councils in England face a £7 billion funding black hole within three years, posing a significant challenge for Prime Minister-in-waiting Andy Burnham. The gap is larger than the current combined spending on roads, transport, homelessness, and housing services.
Funding gap timeline and impact
The LGA, representing councils across England, estimates that local authorities already face a funding shortfall in 2026-27. This is projected to grow to £4.3 billion in 2027-28 and reach £7 billion by 2028-29. The analysis warns that residents could face cuts to vital services, including libraries and parks.
Andy Burnham is expected to become Prime Minister on July 20. The LGA is calling on him 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."
LGA chair's statement
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.”
She added: “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.”
Government response
An MHCLG spokesperson said: “We’re making £78 billion available to councils across the country through our fair funding settlement and compared to 2024-25, by 2028-29 core spending power will have increased over 24% for councils across England.”
Context of wider funding challenges
The analysis comes after a £5 billion funding shortfall was revealed in military spending plans unveiled by Keir Starmer. The Prime Minister clashed with Kemi Badenoch at PMQs over funding for the defence investment plan, after it emerged that billions would need to be found in the next Budget. Mr Starmer argued that “any Labour Prime Minister would stand behind” the plan, but Mr Burnham is understood to have been blindsided by the funding gap, which economists said could force him to consider tax rises, spending cuts, or more borrowing.
