Councils are forced to ‘rip up financial plans’ as inflation adds £800m to costs Business

The LGA’s analysis has revealed that soaring prices will increase council costs by £800m this year. He estimates inflation, rising energy bills and increases to the National Living Wage will combine to add £2.4billion in additional costs this year, rising to £3.6billion by 2024/25.

“Budgets need to be reset with potential cuts to essential services people rely on, amid a cost of living crisis,” Mr Jamieson said.

“Communities face the real potential of funding cuts to local services – such as bin collection, pothole filling, care for the elderly and disabled, early intervention, support for households at low income and homelessness prevention – just to fulfill their legal obligation to balance the books this year.

Carl Les, finance spokesman for the network of county councils, said local authorities “face a winter of tough decisions”.

He said: “Without funding to offset this crisis, councils may have to scale back building projects or cut services during the year.”

Compression of council budgets by inflation comes on the heels of the pandemic.

Several councils, including Luton, Nottingham and Peterborough, have sought Covid support through so-called funding guidelines, accounting relaxation to allow them to transfer funds and borrow to cope with day-to-day spending pressures .

Ministers were forced to take control of Slough Borough Council after it declared bankruptcy last year amid growing concerns over risky investments by local authorities.

In an effort to supplement budgets squeezed by the austerity era, a number of local authorities have borrowed to fund commercial property investment, including sites outside council boundaries. There are fears that bets made before the pandemic on the high street and offices could turn sour, leaving taxpayers on the hook.