Councils are facing a £1.5bn black hole in their budgets for
next year, according to local government leaders.
The Local Government Association said the deficit would lead to
massive council tax hikes in 2006-7 unless the Treasury provided
emergency funding to meet the gap, as it had done for 2005-6.
The claims came alongside a survey revealing that the £637m of
extra funding, announced in December, alongside capping threats,
had kept council tax rises in England down to an average of 4 per
The annual poll by the Chartered Institute of Public Finance and
Accountancy means most councils should escape capping, which
ministers threatened they would enforce against councils that
increased taxes by more than 5 per cent.
LGA chair Sir Sandy Bruce-Lockhart said: “With the help of late
one-off funding from the chancellor, councils have done everything
in their power to keep the lid on tax rises this year, but we are
left with a funding black hole next year.”
The LGA said councils were facing increased demand and provider
costs for adult services and ongoing pressures in budgets for
looked-after children, while there remain concerns that the
Children Act 2004 will not be fully funded.
But its claims followed news of increased costs for providers, as
the government announced two rises in the minimum wage last
With many care staff earning on or just above the minimum wage,
providers said the increases – from £4.85 to £5.05 this
October, and £5.35 next October – would significantly inflate
their cost bases.
English Community Care Association chief executive Martin Green
said: “The knock-on effect of further rises may be unsustainable
for many independent care homes, especially for the smaller
Frank Ursell, chief executive of the Registered Nursing Home
Association, said it would be “cynical hypocrisy” for the
government not to fund the rises through increased funding to
The furore comes against the backdrop of the Wanless review of
older people’s funding, commissioned by the King’s Fund, which is
due to be published in time to influence next year’s comprehensive