Report

Addressing the local authority financial crises

This report from UK think tank City-REDI seeks to provide local governments with the evidence to make better policy decisions.

There is increasing concern about the financial viability of some local authorities with estimates by the Local Government Association (LGA) suggesting that councils in England are facing a funding gap of £4 billion.

Councils have limited levers to pull to respond and address the funding shortfall. The main levers are to raise council tax, to cut spending on goods and services or to cut transfers to households.

This policy briefing analyses the distributional impact of the actions proposed by the Birmingham City Council in 2024/25 and 2025/26 to address its £300m budget deficit. It considers how different household groups will likely be impacted by the potential policy responses to address the deficit using an economic model – the SEIM-UK.

The briefing seeks to provide local governments with the evidence to make better policy decisions. The analysis finds that all actions tend to hit households on the lowest incomes the hardest. However, the impact of council tax rises is found to be the least regressive option.