Executive summary ifs.org.uk 

English councils saw big cuts to their funding during the 2010s, with spending on some services down between 40% and 70% over the decade. And although like virtually all public services, funding for local government was increased during the 2019–24 parliament, councils’ finances are still under significant pressure. This reflects increases in demands and costs for key services that have often far outpaced economy-wide inflation, and has led to a growing number of councils requiring exceptional financial support.

Despite this, the main parties’ manifestos were virtually silent on their plans for council funding post-election. This means there is significant uncertainty about exactly what to expect over the next five years. This report therefore looks at a number of scenarios for councils’ funding – and what these might mean for service delivery and financial sustainability given the spending pressures councils face. It finds that, given the current fiscal environment and overall spending plans implicit in the main parties’ manifestos, cuts to some council services are highly likely unless spending pressures abate – even with big increases in council tax, and particularly in poorer parts of the country. There is also a real risk of significantly more councils being pushed to financial breaking point, joining the likes of Birmingham, Thurrock and Woking. 

How might central government funding change?

The next government will have to decide how much grant funding will be provided to local government. None of the main parties has made commitments on this, unlike in 2019. 

Existing indicative spending envelopes for 2025–26 onwards imply that ‘unprotected’ spending – which in the 2010s included grant funding for councils – could see cuts averaging 2% to 3½% in real terms per year, if the next government wanted to fully fund the NHS workforce plan and meet existing childcare, defence and overseas aid commitments. However, this may not provide a good guide for how grant funding for councils will change in the next parliament. 

First, overall UK government spending totals are likely to be revised more significantly than suggested in party manifestos, when detailed plans are set at a post-election Spending Review; the trend since 2015 has been for budgets to be revised upwards. Second, the extent to which councils will share in any pain imposed is uncertain; in principle, they could fare better or worse than the average unprotected area. The public finance situation and major parties’ overall tax and spending plans mean that grant funding is likely to be more constrained in the coming parliament than over the last few years though.

Will reliance on council tax increase?

There is also uncertainty about the outlook for council tax, the biggest single source of funding for English councils. 

Councils have increased their council tax by an average of 4.4% per year since 2019. But this has barely been enough to keep up with inflation, leaving council tax at the same real-terms level as in 2019–20 and just 2% higher in real terms than in 2010–11. In future, 5% increases (the overall maximum allowed without a referendum over the last two years) would mean a 3% per year real-terms increase in bills over the next parliament, the fastest rate since the 2001–05 parliament (when they averaged 6% a year). 

Whether 5% increases in council tax are a good guide for the future is unclear though. On the one hand, both central and local government may feel uncomfortable with such above-inflation increases. On the other hand, an incoming government could decide to remove council tax referendum limits as part of devolution plans. Experience from Wales suggests that this could see bigger increases in council tax, especially by those councils that have traditionally set low tax rates.

Scenarios for funding changes

Uncertainty about both grant funding and council tax increases means that it is not possible to predict the funding councils will receive in the next parliament with confidence. However, it is possible to look at a range of more optimistic and more pessimistic scenarios using different assumptions about how both grant funding and council tax revenues may change over the next five years. This is done in Table A, which includes three scenarios for grant funding (flat in real terms; 2.7% real-terms cuts per year; 7.0% real-terms cuts per year), reflecting uncertainty about the priority placed on council funding by the next government, as well as two scenarios for council tax increases (5% and 3% per year). 

The table shows that, in any of these scenarios, overall funding will increase by less than the average over the 2019–24 parliament (2.9% per year in real terms). These scenarios also show that across the local government sector as a whole, the increases that are made to council tax will likely matter more for trends in overall funding than changes in grant funding. This reflects the much larger contribution that council tax makes to overall funding (57% in 2024–25) than grant funding (15%) (with retained business rates making up the remainder). 

Table A. Scenarios for English council funding

Real-terms change in grant funding each year	Increase in council tax bills each year	Average annual change in overall funding, 2024–25 to 2028–29
		Cash terms	Real terms
Freeze	5% (3%+2%)	4.2%	2.5%
Freeze	3% (2%+1%)	3.1%	1.3%
2.7% cut	5% (3%+2%)	3.9%	2.1%
2.7% cut	3% (2%+1%)	2.7%	1.0%
7% cut	5% (3%+2%)	3.3%	1.6%
7% cut	3% (2%+1%)	2.1%	0.4%

_{Source: Table 2 in the main text. The first figure in parentheses relates to the increase in council tax for general services, and the second the additional increase for social care services.} 

Potential impacts of these scenarios

Councils in more deprived areas can raise relatively less in council tax than those in more affluent areas and in turn rely more on grant funding. This means that unless grant funding were redistributed towards deprived areas, councils in such areas may fare financially worse. For example, with cuts to grants of 7% a year and 5% council tax increases, councils in the most deprived tenth of areas in England would see overall funding increases averaging 0.6% a year, compared with 2.6% a year for councils covering the least deprived tenth of areas.

In order to offset this pattern, the government would need to redistribute grant funding from less deprived to more deprived areas. For example, under the scenario just described, councils in the most deprived tenth of areas would need to see their grant funding increase slightly in cash terms over the next four years, while those in the least deprived areas would need to see cuts averaging two-thirds, to equalise the cut in overall funding in 2028–29. 

The impact of any future funding scenario on councils’ service provision and financial sustainability will depend crucially on the cost and demand pressures councils face. Recent Local Government Association analysis suggests that if recent demand and cost pressures continued, real-terms increases of 4.5% a year would be needed to maintain services – far outpacing the funding increases in even our optimistic scenario. Even with a significant slowdown in cost and demand growth, councils in more deprived areas could struggle under even our most optimistic funding scenario, given that they can raise less from council tax than those in richer areas. If grants are cut significantly and/or council tax increases are closer to 3%, councils across the country would need to cut back service provision and could potentially face severe financial stress, even if cost and demand pressures ease. 

Several public services are at risk of suffering “sharp cuts” under either a future Labour or Conservative government, according to the Institute for Fiscal Studies (IFS).

Richard Wheeler www.independent.co.uk

The IFS said the manifestos of the major parties provided little information about the funding outlook for individual services, which makes it easier for them to stay silent on the cuts to unprotected budgets.

The IFS said it did not expect the parties to conduct comprehensive spending reviews for a potential five-year Parliament in their manifestos.

But it added parties could have provided more details on their priorities and rough minimums or totals for different areas of spending in a bid to “give a sense of what we can realistically expect from them” in the next Parliament.

Existing government departmental spending plans run until the end of March 2025.

The IFS noted the two main parties have provided costings for specific policies, such as Labour’s commitment to free breakfast clubs and the Conservatives’ bid to modernise GP services.

But it said the broad priorities of each party “do not tell us anything about overall spending on each public service”.

In a new briefing note, the IFS said: “At the time of the March 2024 Budget, the baseline day-to-day resource spending envelope for all government departments was growing at 1% in real terms per yearafter this year.

“Neither main party has changed overall resource spending plans in significant ways with their manifestos: Labour’s £5 billion top-up in 2028–29 means real-terms resource spending will now grow at 1.2%, rather than 1%, on average per year.

“The Conservatives left total spending plans virtually unchanged, topping up total departmental spending in 2029–30 by around £500 million.

“We have already discussed the fact that the lack of department-by-department plans after this year means that we are uncertain about the path of spending on particular public services, andthat we are unable to evaluate the ‘cost’ of committing to a given path of spending.

“But the lack of department-by-department plans also means that parties can commit in their manifestos to overall spending plans that imply sharp real-terms cuts to a range of areas, without spelling out where those cuts will fall or how they are to be achieved.”

IFS research economist Bee Boileau, an author of the report, said: “Both the Conservative Party and the Labour Party have made a lot of their fully funded pledges in the manifestos this election campaign.

“But, in practice, these pledges mean almost nothing for the funding that individual public services might expect in the next Parliament.

“We do not know how total spending will be allocated between public services after next March, and, with a few exceptions, neither manifesto offered much light.

“The manifestos did tell us that neither party is planning to top up total public service spending by enough to avoid very difficult choices for many public services in the next parliament.

“But the manifestos provided no information on which areas would actually bear the brunt of these choices, continuing the main parties’ conspiracy of silence when it comes to public service spending plans.”

Mark Franks, director of welfare at the Nuffield Foundation, said: “The public should be informed about whether the parties aiming to form the next government have credible plans for funding the essential public services that people rely on.

“In this election, voters are being asked to make their decision without adequate and clear information on this critical issue.

“This lack of clarity should be addressed, both in the remaining two weeks before the election and in future electoral processes.”

I hear the Mediterranean is revolting this time of year. It certainly will be for some this summer. A growing anger, from Barcelona to the Balearics, is threatening to turn the most popular holiday hotspots into hostile ground for the tourists they once welcomed.

Paul Clements www.independent.co.uk 

The islands of Mallorca, Menorca, Ibiza and Formentera have already been hit by protests, with 10,000 locals marching through Palma. Earlier this month, sunbathing tourists on an isolated beach popular with Instagram influencers were jeered and forced off it so that residents could have it to themselves for a change. The Balearic president has declared that Mallorca’s 20 million tourists a year “is not sustainable”, and that measures to limit visitors can no longer be ruled out.

Then, last weekend, the mayor of Barcelona restated his opposition to the short-term letting site Airbnb – a lightning rod for protests about the “crime” of over-tourism – by pledging that there will be no rental apartments for visitors in his city by the end of the decade.

His refusal to issue new licences and not renew existing ones comes amid public outcries against the mass tourism that has seen a city of 1.6 million residents receive more than 30 million visitors a year.

In 2016, Barcelona became the first major European city to fine Airbnb for users letting out unregistered properties and, later, to ban short-term private room rentals altogether, as part of its campaign to crack down to dissuade tourists from using short-let booking apps and to push visitors back into hotels. Some 3,500 apartments are already said to have been returned to the city’s local housing market.

In clamping down, you might say Barcelona is taking back control of its private rental sector from the disruptor platform – and there are plenty of places in Britain that would like to follow their lead, too.

Since it launched across Europe in 2010, Airbnb has dramatically reshaped short-term lettings markets, depleting housing stock with a negative knock-on for residents’ rents. It has warped neighbourhoods, too. Family-run supermarkets that for generations have catered for locals have been inched out by tourist cafes, bike rentals and souvenir shops.

Yes, the app helped create new demand and enabled billions to flow into local economies. It has stretched the average tourist’s length of stay, which has only added to local incomes and enabled more than $10bn in tourism taxes to be generated around the world. But with hordes of visitors comes great irresponsibility.

The revolving door of tourists can shatter the peace, from the notorious “party pads” with hot tubs in quiet villages, to the unwelcome sound of wheelie suitcases being trundled down the corridor of a residential apartment block in the middle of the night.

Initially, Airbnb was sold as the place to find a room going spare or a sofa to surf. But the trouble with “democratising” travel is that everybody can do it. The freedom to live like a local and explore a neighbourhood like it’s your own means you can also misbehave like you own the place, too – to drive it like you stole it.

Just ask the residents of Britain’s prettiest seaside villages – if you can find them. Out of season, the likes of Robin Hood’s Bay in North Yorkshire, Whitstable in Kent and Mousehole in Cornwall are often pitch dark; nobody’s home, because few can afford to live there these days, thanks to all the holiday lets that no one much fancies in deepest February. These towns are becoming like a ghost town.

Meanwhile, in London, cash-strapped councils have accused holiday platforms of not doing enough to prevent local authority housing from being illegally sublet to tourists for vast profits – and at a time when thousands of people are on waiting lists for full-time accommodation. (One housing association tenant was reportedly found to have made £4,000 a week from subletting their property to tourists.)

There was a time when we used to love a market disruptor. In a similar way that the arrival of “no-frills” airlines in the 1990s rapidly brought down the price of return flights, and Uber ended black cabbies’ nice little earner, holiday rental app revolution – made possible by smartphones and sleek online booking interfaces – seemed to pull a rug from beneath hotels that could once overcharge for a bed for the night.

But there’s always a catch – and it’s not just the vast council tax shortfall involved. In my experience, Airbnb and its rival platforms are rarely fuss free.

Tim Dillon, a US stand-up and podcaster, has a nice line about the downside of staying in the spare rooms advertised on Airbnb, which has misanthropic echoes of Jean-Paul Sartre: “The problem is that people are terrorists – their homes are filthy and disgusting. There are 150 rules including ’Don’t wake the neighbour. She’s works nights!” Or dumb recommendations: ‘Try Claudia’s Pancake Hut – local fav!’ Just buy a van and sleep in that.”

I might do just that. These days, I am allergic to Airbnb, ever since I was kicked out of an apartment in Alghero in high season, for complaining about the gabba DJ broadcasting into the night at the open-air funfair next door, a facility unmentioned in the listing description.

You’d think I’d have learned my lesson, but this summer I’ve booked to go to Mallorca. I’ll be sure to pack an “Ocupem les Nostres Platges” T-shirt, just to throw the anti-tourist protesters off the scent.