Inflation and National Living Wage pressures to add £3.6 billion extra costs onto council budgets - LGA analysis

"Soaring inflation, energy prices and National Living Wage pressures are putting council services at risk. Budgets are having to be reset with potential cuts to the essential services people rely on, in the middle of a cost-of-living crisis."


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Rising energy prices, spiralling inflation, and National Living Wage pressures are set to add £3.6 billion in unforeseen extra cost pressures onto council budgets in 2024/25, new analysis by the Local Government Association reveals.

As more than 1,500 local government leaders, councillors and ministers gather at the start of its Annual Conference in Harrogate today, the LGA warns that these extra cost pressures pose a serious risk to the future financial viability of some services and councils.

The LGA said the sharp spike in inflation and energy prices is an unprecedented crisis which could not have been predicted by either central or local government when the Government finalised the local government finance settlement earlier this year and councils set their budgets in March.

Its analysis shows that:

  • Inflation, energy costs and projected increases to the National Living Wage will add £2.4 billion in extra cost pressures onto council budgets this year alone, rising to £3.6 billion in 2024/25.
  • This is forcing councils to rip up financial plans set just three months ago with the potential of funding cuts to local services - such as collecting bins, filling potholes, care for older and disabled people, early intervention, support for low-income households and homelessness prevention – just to meet their legal duty to balance the books. 

It comes as councils face a perfect storm from demand for services continuing to rise just as the price of providing them is also escalating dramatically. This risks hampering council efforts to help level up communities and support residents through the cost-of-living crisis.

The LGA said the Government needs to ensure councils have the resources they need to meet these unpredicted costs and protect the services that are helping communities recover from the pandemic and residents cope through the cost-of-living crisis.

Cllr James Jamieson, LGA Chairman, said: “Soaring inflation, energy prices and National Living Wage pressures are putting council services at risk. Budgets are having to be reset with potential cuts to the essential services people rely on, in the middle of a cost-of-living crisis.

“Inflation is not going to come down overnight. As our analysis shows, the impact on our local services could be disastrous. This will stifle our economic recovery, entrench disadvantage, and undermine government ambitions to level up the country.

“Local government remains the fabric of our country, as has been proved during the hugely challenging few years we have faced as a nation. Only with adequate long term funding – to cover increased cost pressures and invest in local services - and the right powers, can councils deliver for our communities, tackle the climate emergency, and level up all parts of the country.”

Notes to editors

  1. The Local Government Association will host its in-person annual conference between June 28-30 in Harrogate. Speakers will include Levelling Up Secretary Michael Gove, Education Secretary Nadhim Zahawi, Shadow Levelling Up Secretary Lisa Nandy, Liberal Democrat leader Sir Ed Davey and crossbench peer Baroness Lola Young.

Please visit our Annual Conference website to view the full programme. To book your place, contact greg.burns@local.gov.uk for a media promotion code to obtain a complimentary pass.