Local councils across England, Scotland, and Wales are grappling with significant financial challenges, with a projected funding gap of £7.1 billion by 2028.
Local authorities across the United Kingdom are facing significant financial challenges, with new research revealing a growing funding gap. Unison, a public service union, has highlighted the struggles of councils in England, Scotland, and Wales to balance their books despite modest improvements in local government finances.
The study, based on responses to Freedom of Information requests and financial plans from 368 local authorities, paints a stark picture. Councils are forecasting a combined funding gap of almost £4 billion in 2027/28, which is expected to rise to £7.1 billion by the following year.
This financial strain is exacerbated by rising demand for critical services such as adult social care, special educational needs and disabilities (Send), and housing.
Regional Financial Strains
The financial pressures are not evenly distributed. Unison’s research indicates that London faces the largest collective funding gap, amounting to £851 million.
The South East follows closely with a £785 million shortfall. These figures underscore the urgent need for sustainable funding to ensure the provision of essential public services.
At least 35 councils required more than £1.5 billion in emergency support during the 2026/27 financial year to set balanced budgets. While setting a balanced budget is a legal requirement, emergency support often involves borrowing, which must be repaid. This creates a cycle of financial instability that councils struggle to escape.
The Call for Fair Pay and Sustainable Funding
Unison has emphasized the need for fair pay for staff and sustainable funding for local government. The union argues that these are not competing priorities but rather interconnected needs. Andrea Egan, Unison’s general secretary, stated, “The figures suggest councils are moving in the right direction, but stabilisation is not recovery.”
Egan highlighted that four out of every five local authorities are still struggling to balance their books. She noted that Prime Minister Andy Burnham’s Government has rightly focused on devolution and stronger local services as part of national renewal plans. However, councils need certainty about their future and long-term funding to invest in prevention and support workers delivering services.
Staff in local government have experienced years of pay restraint while helping communities through austerity, the pandemic, and the cost-of-living crisis. Egan stressed that fair pay for staff and sustainable funding for local government are essential for recruiting and retaining the skilled workforce that communities depend on.
The Path Forward
The financial challenges faced by local authorities are multifaceted and require a comprehensive approach. Unison’s research underscores the need for long-term funding solutions to address the growing funding gap. This includes investing in prevention and support services to reduce the demand for emergency support.
Additionally, ensuring fair pay for staff is crucial for maintaining a skilled workforce. As Egan noted, “Fair pay for staff and sustainable funding for local government are not competing priorities. Councils now need both if they’re to recruit and retain the skilled workforce communities depend on.”
The 2026 London local elections saw millions of voters across the capital head to the polls, highlighting the importance of local governance. As councils continue to navigate financial instability, the need for sustainable funding and fair pay for staff becomes increasingly urgent. The path forward requires a collaborative effort between local authorities, the government, and the community to ensure the provision of essential public services.
