Lambeth sets out impact of inflation and government funding challenges on council finances

25 July 2023

Written by: Lambeth Council

Council statements and updates - News and announcements - Post Type - Spending and transparency - Topic area

Lambeth Council has called on the government to properly fund local services in the face of rising prices and increasing demand, as it laid bare the impact of high inflation and the cost of living crisis is expected to have on the borough’s finances over the next five years.

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Lambeth sets out impact of inflation and government funding challenges on council finances

The challenges faced by Lambeth over the coming years were set out in an extensive report discussed at the council’s Cabinet meeting on Monday, 24 July. The Medium Term Financial Strategy (MTFS) report outlined the risks posed by rising costs, as the council plans how to balance its budget amidst increasing demands for vital services.

Call on government

Cllr David Amos, Cabinet Member for Finance and Cost of Living, has called for the government to provide extra support to help councils, recognising the additional demands caused by inflation and increasing costs for delivering essential services.

He said: “Lambeth has been able to support our residents because we have managed our finances well through austerity, covid-19 and the continuing cost of living crisis – but councils across the country face an increasingly challenging future. Persistently high levels of inflation are putting massive pressures on delivering local services.

“Central government have continuously failed local government in not addressing long term funding and reforms, particularly for areas of increasingly high demand and spend such as social care and temporary accommodation, which we are seeing councils up and down the country struggling with.

“When inflation soars, the poorest families struggle the most. In Lambeth, they have a council that is on their side – but the government need to fund local councils sustainably to be able to help people through the crisis.”

Inflation, rising costs and uncertainty.

The council put forward a balanced budget earlier this year, including detailed plans to direct millions of pounds extra to support those residents worst impacted by the cost of living crisis.

However, in the face of high inflation, rising costs and increased demand for essential services, the latest report estimates that the council will need to make overall savings of over £38m over the extended MTFS period.

The report states: “Due to the high level of uncertainty facing local government, we have looked at a range of potential funding gaps over the next five years with a likely case scenario of a funding gap of around £38 million.

“As a council, we believe it important to manage our finances prudently, thus preparing for the worst of our assumptions and we will now be identifying options for savings and income generation proposals for our funding scenarios.”

The MTFS report set out the scale of increased demand for key services: some £23.3m of pressures include £14.1m extra for temporary accommodation and £9.18m for Children’s Services. Under the council’s likely case scenario, inflation is predicted to add more than £19m to the council’s spending over the period.

The demands on temporary accommodation are being felt across the country and most severely in London, with a homelessness crisis caused by a chronic shortage of affordable housing, rising rents and fewer properties available in the private rented sector. Latest figures from London Councils suggest the numbers needing to access temporary accommodation are the highest nationally since 2005 – and the impact is being felt acutely in Lambeth as an inner-London borough with high demand for housing.

Cost of living crisis

The rising pressure on the council’s budget comes at a time when the most vulnerable in society are being hit hardest by the cost-of-living crisis – and demand for services, including social care and temporary accommodation for homeless families, is on the increase.

In May, Lambeth Council launched a Cost of Living Crisis Response Plan, with £10m of support to help the poorest residents in Lambeth, with measures including expanding our Emergency Support Scheme and Free School Meal eligibility.

Cllr Amos added: “As a council we’ve supported our residents through a pandemic which has given way to a cost of living crisis, made worse by the government’s chaotic handling of last year’s mini-budget and Brexit.

“Throughout thirteen years of austerity, with unprecedented cuts in core funding from government, we have managed to maintain our front-line council services and stay on a sustainable financial footing throughout. But this report lays bare the challenges ahead.

“We will continue to work in collaboration with local stakeholders and residents to deliver essential services at this challenging time, identifying savings or income generation where required equitably, and adapt our services so that they’re the best and most efficient possible, as we ensure that Lambeth’s books are balanced over the coming years.”