The wave of new councillors elected across England last week inherits a local government finance picture that is deeply constrained – and unlikely to improve quickly, financial experts have warned.
In a new briefing, the Institute for Fiscal Studies (IFS) notes that while council funding has risen by around 12% above economy-wide inflation between 2019 and 2024, with a further 8% increase since, overall funding per person remains around 15% lower in real terms than in 2010.
Rising costs – including above-inflation increases driven by the National Living Wage – and growing demand for expensive services have absorbed much of the additional money.
Looking ahead, the IFS identifies new pressures including a rise in inflation linked to the Iran war, and uncertainty around the impact of falling immigration on both social care staffing costs and housing demand.
The thinktank warns that councils have limited room to manoeuvre, with statutory duties in areas such as social care, homelessness prevention and special educational needs constraining spending decisions.
The forthcoming Fair Funding Review redistribution of grant funding is also expected to create stark winners and losers.
David Phillips, head of devolved and local government finance at the IFS, said new leadership teams may have different priorities, but should not expect rapid change to be possible.
‘New people may be in charge in many places,’ he said. ‘But they face the same challenges and constraints as the old guard.’
