Local Authorities Crying Out for Billions as U.K. Austerity Ends

Andrew Atkinson

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Local authorities in England will require billions of additional pounds if they are to meet the rising cost of adult social care, according to new research.

A growing gap is emerging between the tax income that councils receive and what they need to deliver services to help elderly and disabled adults live independently, the Institute for Fiscal Studies said in a report published Monday.

The findings underscore the mounting pressure on the public purse as years of belt-tightening wind down. With Britain heading for a general election next month, both the ruling Conservative Party and the Labour opposition are promising to plow billions more into austerity-ravaged public services.

Local authorities are largely dependent on two property-based taxes: the council tax, which is levied on households, and business rates paid by firms. These revenue sources are failing to keep up with the demands of a growing elderly population, more disabled adults and increases in wage costs, according to the IFS.

Even if the council tax rose by 4% every year -– double the rate of inflation -– local jurisdictions may need an additional 1.6 billion pounds ($2.1 billion) in real-terms by 2024–25 to maintain services at current levels, the IFS warned. This figure would be augmented if pledges made during the election campaign are implemented, such as Labour’s promise of free personal care for people over age 65.

Local Income Tax

“The long-term funding gap could be closed by giving councils additional tax raising powers, such as via a local income tax; or they could be provided with additional grant funding from Westminster,” the IFS said. “The former would give councils and their residents more discretion over how much to tax and spend, and stronger financial incentives to grow the local economy. But the latter would more easily allow money to be targeted at places where spending needs are the highest and/or local revenue-raising capacity is the lowest.”

An extra 1.3 billion pounds has been allocated to councils for the coming financial year, and authorities with social-care responsibilities will be allowed to increase council tax by up to 4%. However, this will only undo around one fifth of the cut to public-service budgets since austerity began, the IFS said.

To contact the reporter on this story: Andrew Atkinson in London at a.atkinson@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Steve Geimann

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