Andy Burnham headache as cash-strapped councils 'face £7billion funding black hole'

Cash-strapped councils in England face a £7billion funding black hole within three years, according to a grim analysis.

In a headache for PM-in-waiting Andy Burnham, the Local Government Association (LGA) warned the gap is so large it is more than the current spend on roads, transport, homelessness and housing services combined.

The body, which represents councils across the country, estimates that local authorities already face a funding gap in 2026-27. It said this could grow to £4.3 billion in 2027-28 before reaching a staggering £7billion in 2028-29 and risks leaving residents facing cuts to vital services including libraries and parks.

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The LGA is now calling on Mr Burnham, who is expected to become Prime Minister on July 20, to “lay out a new path for local services that is not reliant on council tax rises, short-term fixes and unsustainable emergency bailout arrangements”.

LGA Chair Cllr Louise Gittins said: “The cost and demand pressures facing councils are unrelenting. In just three years, councils will need around 25 per cent more money simply to stand still. Without action, the services people rely on every day, from social care to safe streets, will be eroded.

“Whoever takes up the keys to Number 10 will have a lot of competing priorities. But fully funded, sustainable public services will need to be at the heart of any plans to improve lives and inspire hope in the future. Councils want to get on with supporting people, boosting local economies and delivering local priorities. But they can only do that with the long-term funding they need, and public service reform.”

An MHCLG spokesperson said: “We’re making £78 billion available to councils across the country through our fair funding settlement and compared to 2024-25, by 2028-29 core spending power will have increased over 24% for councils across England.”

The analysis comes after it emerged this week there was also a £5billion funding shortfall in military spending plans unveiled by Keir Starmer earlier this week. The Prime Minister clashed with Kemi Badenoch at PMQs over funding for the long-awaited defence investment plan (Dip), after it emerged that billions of pounds would need to be found in the next Budget.

Mr Starmer argued that “any Labour Prime Minister would stand behind” the plan, when pressed on whether Mr Burnham knew about the shortfall. But the Makerfield MP is understood to have been blindsided by the funding gap, which economists said could leave him forced to consider tax rises, spending cuts or more borrowing to drum up the cash.