England’s largest councils need to make £1bn worth of savings despite council tax rises as local authorities grapple with ‘unprecedented’ financial pressures

New research shows that England’s largest councils will need to make at least £1bn in savings to balance their 2023/24 budgets, despite many of them reluctantly proposing council tax rises from next month.

It comes as new data shows council tax is set to rise to £2,140 on average for residents in county areas next month – a rise of over £98 for the typical Band D household.

But even after the rise,  county and rural councils has left  them needing to save £1bn over the next twelve months whilst spending £350m in reserves to balance their budgets, as they are legally required.

The County Councils Network (CCN) and the Society of County Treasurers (SCT) which carried out the analysis, said this was the one of the biggest annual savings targets their councils had ever faced due to ‘unprecedented’ financial pressures caused by high inflation and continued rising demand for services.

The savings target is almost double the amount of a typical year, with the research showing that inflation is set to add £1.6bn to these councils’ budgets next year and comes after high price rises last year increased council costs by £1.41bn in 2022/23. Demand for services and other running costs will add hundreds of millions more to council budgets, in particular children’s and adults social care and transport and highways.

Councils will deliver savings through efficiencies but also by reducing services, such as bus route subsidies, streetlights, recycling centres, and community health services, but county leaders vowed to ‘do all they can’ to protect frontline care services. It comes off the back of 10 years of austerity measures where council leaders say there is ‘little fat left to cut’.

However, this still will not be enough to balance their budgets and as a result, those local authorities will have to raise council tax from next month.

For the 40 county and rural councils in the CCN and SCT analysis, this will bring in an extra £820m, with the average Band D household in those county areas facing yearly bills of £2,140 in 2023/24 – an increase of 4.8%.

Across England Band D bills will be £2,065 on average from next April, a rise of £99 over the year and 5.1% in percentage terms. Council tax rates are higher in county areas due to those areas receiving historically lower funding. The average Band D household in London will be paying £1,789 from next month, up from £1,684 presently.

While councils said the additional funding provided by the government had helped to significantly reduce inflationary pressures, the analysis showed the ‘necessity’ of increasing council tax next year.

The network is calling on government to recognise the higher costs of delivering services in the Local Government Finance Settlement later this year, while setting out its plans to reform local government finance in the medium term.

CCN said the outlook for council finances looked ‘bleak’ unless councils are provided with greater financial certainty and government delivers long promised ‘fair funding’ reforms.

Cllr Carl Les, County Councils Network Finance Spokesperson, said: 

“The additional funding provided by the Chancellor at the Autumn Statement made a big dent in the unprecedented new costs councils face in 2023/24, but unfortunately it was not enough. This analysis shows the scale of the financial challenges facing county authorities to remain solvent, with councils having little option to raise council tax.

“We understand that residents are in the midst of a cost of living crisis, and many of us have reluctantly proposed maximum council tax rises. But even this is not enough, with councils in county areas having to make a further £1bn worth of savings and use ‘rainy day’ reserves just to balance the books.

“While councils will do all they can next year to deliver these savings whilst protecting vital care services, particularly care services, there is already little fat to cut.

“We must remember that while inflation is expected to reduce, these costs councils have incurred won’t just disappear from our budgets overnight – they are now embedded into the future. Councils in county areas have also been historically underfunded, inevitably leading to higher council tax rates.

“The medium-term outlook looks bleak unless these higher costs are recognised and councils are given longer term financial certainty, alongside delivering long promised fair funding reforms.”

Notes to editor

• Figures were derived from the Society of County Treasurers’ annual budget survey, for 2023-24. The 24 respondents make up 72% of the SCT when weighted by population. Non-respondent councils’ figures were calculated by aggregating up the data from this representative sample, and adjusting (based on population) to give a weighted estimate figure for the 40 local authorities.
• According to the survey, those councils will have to save £999.329m next year. This is almost double the savings target councils had in 2021-22 of £560m when the SCT carried out a questionnaire in February last year.
• The reference to ‘fair funding’ reforms in this press release is in reference to the ‘Fair Funding Review’, which has long been government policy. This review will look to address the funding levels of individual local authorities, updating the formulae used to allocate government funding.
• Figures on council tax are taken from this government dataset here. The table below shows the increase for Band D households on average from 2022-23 to 2023-24. The new rates begin on April 1^st 2023.